Running a business as a retailer is like running on a balance beam. You only have a finite amount of room for inventory and only a finite amount to spend on keeping everything going. You have to work at meeting the demand of your market, while trying not to empty your bank account on your supply. How do you budget for such a situation?

Risks
If you don't budget your retail stock it usually ends in a sob story for your business. You have to remember that you are in business not only to make a buck, but to remain relevant. Some retail business owners believe the more products they have to sell, the more profits they will bring in. Unfortunately, this mindset will send them running the wrong way, especially when sales are going through a slump and cash flow has slowed. You have to be ready to lose the money you invested in buying retail stock. If something does go wrong, such as shipping damages, closure of your store by property owners, or the demand for your goods has shrunk, are you ready to take a loss? If you said yes to this question and believe you will get your business back together, then you are already using solid budgeting principles.

Sales History
Take the time to look at a certain product and see how many sold on a weekly, quarterly, and yearly basis. You should use a barcode system to keep track of items in a database. If you are not using one already, create one so you have access to the finer details that will help you make critical budgeting decisions.

Sales Trends
When you look back at your sales history, watch out for sales trends. Do you see a product that sells well in a certain time of year? Have you noticed a product that collects dust on the shelf for the first three quarters of the year and suddenly flies out the door during the holiday season? It is mandatory that you know what sells so you can make sound buying decisions that keeps everything in order.

Buy Bulk
Buying stock in bulk will save you money. But how long will it take to resell the products? Does it help when it sits in storage or on your shelves for months at a time? Make sure you can sell it before you decide to buy it.

Drop Shipping
The perfect situation for any retailer is to not spend a dime on any product up front. Drop shippers may offer the service of shipping a product to your customer, and you only pay for the item when it finally sells. Even though this way of doing things may cost a bit more per product, you save money and keep your cash flow running as smooth as possible.

Teach yourself how to budget your retail supply, since overspending can be a killer. Make sure your spending is on the same level with your sales, and you will reap the rewards of a successful retail business.