Most entrepreneurs will tell you that supply and demand is one of the worst headaches they faced starting out. In short, supply and demand refer to the ability to supply a product according to the demand. Miscalculate, and you either over order and have too many products to sell. Or, you might under order, and leave yourself unable to fulfill demand in good time. Both realities are equally damaging at any stage, especially for a new business. While established businesses base supply and demand on past popularity and potential leads, you don’t have that luxury. Aside from guessing, which may affect your profit margin, the best thing do to is come up with solid supply and demand strategies.
Take Orders In Advance
When starting out, many businesses take orders in advance and then use that money to buy stock. This is something we see more and more often thanks to the rise of platforms like Crowdfunding. Of course, you don’t need to go to the extreme of not supplying until you’ve raised enough for an entire enterprise. But, you can put this to use in more subtle ways. By only ordering materials when someone’s already paid, you ensure you’re never out of pocket. What’s more, this allows you to achieve high-quality materials. Of course, there are downsides here. You would undoubtedly struggle to deliver fast when operating like this. But, if you’re honest about the fact your products are custom made, most people will be more than happy to wait. So, this may well be the best way to get your supply and demand off the ground.
Hire An Accountant
It’s also essential that you contact an accountant from day one. This is a step many of us hold off taking until we’re making decent amounts of money. After all, even an outsourced accountant will cost a percentage of your takings. However, accounting firms could more than pay for themselves by helping you get started (for example see this page). Having this support can be a huge help in getting a grip on supply and demand. By taking care of your bookkeeping, they can help you understand how much money you’re paying, compared with how much you have coming in. To put it bluntly; they can help you understand any discrepancies in your supply and demand strategy. Most accounting firms will also advise you how to close any gaps and manage a financial future. That’s invaluable advice which you need if you’re struggling.
Estimate Demand
Over time, you should start developing the ability to estimate demand. With the help of your accountant and your records, you should look out for trends and peaks in your orders. After six months to a year of trading, it’s likely you’ll have a pretty good idea of when and how much people will buy. Of course, this isn’t an exact science, but it’s not complete guesswork, either. If your product is seasonal, for instance, you’ll be able to see over a year which times are most fruitful. As such, you can rest pretty easy that you’ll need to supply a fair amount during those periods. Equally, it might be that interest drops at certain times of the year, regardless of your product. Most companies experience significant declines in January and February, for example. Spotting these small trends is essential when it comes to providing without wasting profits. What’s more, the longer you operate, the better chance you have of making informed estimates here. So, be patient. Patterns will soon start to emerge. All you need to do is keep one eye out for them, and use them to advance what you’re trying to do.
Take Control
If you’re experiencing heart palpitations at the idea of leaving things to estimates, fear not. The next step involves taking control to use those estimates to your advantage. Owning a business is not a passive pursuit, after all. And, you now need to take action. Using what you learned during the estimation stage, you need to do what you can to boost profits at certain times. Given you’re in the driving seat, you’ll then be able to take much firmer control over things like supply and demand. If you have a major marketing strategy launching at a certain time of year, for instance, you can be pretty sure that interest will rocket. As such, it makes sense to order more stock to keep up with that demand. Equally, promotional offers in less fruitful months could see supply soaring. Either way, you’ll be able to plan for and meet these demands with ease. Over time, you’ll also come to understand how much demand increases thanks to things like these. After a year or two, you’ll be a seasoned pro in ordering enough to keep you going without leaving yourself out of pocket with wasted stock.
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