***New Video Alert!
We all love the tax savings of depreciation.
But what about a small business that owns no equipment?
Does the fact that there is nothing to depreciate affect the value of the business?
That’s what we explore this week.
Check it out right here: https://youtu.be/otRV0SBzpR4
Cheers
See you over on YouTube
David C Barnett
Pricing Strategies to WIN in Business
New Livestream guest-> Belinda Rosenblum, CPA
I’m happy to have Belinda join me on a live broadcast.
Belinda is a pricing and money strategist for entrepreneurs.
Tune in and discover game-changing strategies to price your products and services for maximum profit and growth.
Whether you're a small business owner, freelancer, or aspiring entrepreneur, Belinda will share invaluable insights on how to overcome pricing challenges, boost your confidence, and increase your bottom line.
Tune in on January 13th to learn how to align your pricing with your true value and transform your business's financial future.
This is one conversation you can't afford to miss!
This is a ‘must see event’ for you and your friends, please let them know!
Be sure to join live so that you can ask questions, replay will be available.
Set yourself a reminder on YouTube here: https://youtube.com/live/i1N3WrEIOhM
We’ll be going live January 13, 2025 at 1PM Atlantic Time, 12 Noon Eastern Time
See you there!
David C Barnett
Exploring Investment Opportunities for Small Business Owners: On and Off the Balance Sheet
This week, we’re diving into a fantastic question from a YouTube commenter: What are all the different ways a small business owner can bring in outside investors to help their business grow?
This blog will serve as a comprehensive guide to understanding the types of investments available and how they impact your business, touching on both on-balance-sheet and off-balance-sheet options. https://youtu.be/K_y2ihtc95kWhether you're looking for a cash injection to grow or diversify your business, understanding your options can save time and money. Investors can contribute in different ways, which impact your financial statements and overall business structure.
Let’s break it down by examining the balance sheet, which organizes assets, liabilities, and equity.
Liabilities are obligations your business must repay. Here’s a breakdown:
Current Liabilities (Payable within 12 months):
Accounts Payable
Credit Cards
Short-term Loans
Long-term Liabilities (Due beyond 12 months):
Business Loans
Mortgages
Equipment Financing
These hybrid instruments often come from private equity firms or family and friends, providing flexibility in repayment and returns.
Represents ownership in the company. Typically held by founders, business partners, or close associates.
These options involve resources that don’t directly appear as debts on your financial statements:
Equipment and Vehicle Rentals
Renting instead of buying helps reduce upfront costs.
Leasehold Improvements
Landlords may invest in renovations in exchange for higher rent.
Supplier Financing
Key suppliers may offer extended payment terms or trade credit to support inventory growth.
Understanding these investment options can help you strategically grow your business while maintaining financial health.
If you want to dive more deeply into this topic, my Business Buyer Advantage: Online Training program was recently updated to include an entire new module just on raising private capital.
Be sure to join my email list if you’re not on it already at https://www.DavidCBarnettList.com and receive 7 FREE gifts
***New Video Alert!
Small business owners are busy.
Who has time to create and implement a disaster recovery plan?
This week, I’ll show you how to make one with very little time and effort and how you can help to rebuild the tourist economy of western North Carolina.
Check it out right here: https://youtu.be/xt8yVRKWYIw
Cheers
See you over on YouTube
David C Barnett
Moral alignment in employment?
New Livestream guest- Andrew Crapuchettes
I’m happy to have Andrew join me on a live broadcast.
He’s got a long career in the corporate world and in hiring and employment.
He has not liked what’s been going on out there and instead of complaining, he did something about it.
Tune in and as we’ll be discussing the alignment of values between organizations and their employees.
There are no public vs. private lives anymore. Or are there?
This is a ‘must see event’ for anyone who needs to hire or might be looking for a new job in 2025.
Be sure to join live so that you can ask questions, replay will be available.
Set yourself a reminder on YouTube here: https://youtube.com/live/hPq95lOM7w4
We’ll be going live Monday January 06, 2025 at 1 PM Atlantic Time and 12 Noon Eastern Time
See you there!
David C Barnett
Managing inventory effectively is critical for small businesses, yet many fall into the trap of carrying excess stock. While having a surplus of goods may seem convenient, it often comes at a high price. Excess inventory can drain working capital, inflate overhead costs, and even reduce the value of a business. As a business broker, I’ve seen firsthand how addressing inventory inefficiencies can transform cash flow and profitability.
In this article, we’ll explore why businesses accumulate excess inventory, the hidden costs involved, and actionable strategies to optimize inventory management—whether you’re preparing to sell or aiming to improve financial performance. https://youtu.be/vZSkM6aNgpQ
Why Businesses Accumulate Excess Inventory
Many long-running businesses unintentionally stockpile inventory as a way to simplify operations. A prime example comes from a wood-burning stove business I consulted for. The owner had over $150,000 worth of stove pipes and connectors stored in his basement. Why? Because as the business grew more profitable, he abandoned the just-in-time (JIT) ordering system that once worked so well.
Instead of placing smaller, regular orders, he opted for bulk buying to avoid frequent reordering. While this approach reduced the hassle of managing supply logistics, it tied up substantial working capital that could have been used to grow the business or generate returns elsewhere.
The Hidden Costs of Excess Inventory
Carrying too much inventory may simplify daily operations, but it also introduces several hidden expenses:
Tied-Up Capital
Every dollar invested in surplus stock is a dollar that isn’t generating returns. In the stove business example, that $150,000 could have been used to fund marketing, hire staff, or pay down debt.
Storage and Maintenance Costs
Inventory takes up valuable space and incurs costs for storage, utilities, and sometimes climate control. These overhead expenses can erode profits over time.
Obsolescence and Waste
In industries like electronics, fashion, or food, excess inventory risks becoming outdated or spoiled, leading to significant write-offs.
Reduced Business Value
When it’s time to sell, buyers often focus on cash flow, not inventory levels. Excess stock can signal poor management and inefficiency, potentially lowering the business’s perceived value.
Strategies to Address Excess Inventory
Liquidate Surplus Stock
One of the simplest ways to address excess inventory is to liquidate it. This can provide a financial boost without affecting the business’s valuation.
Example: A seller I worked with liquidated over $100,000 in excess inventory before listing their business, pocketing the proceeds while maintaining the business’s market value.
Adopt a Just-in-Time (JIT) System
Transitioning to a JIT inventory model ensures lean stock levels, freeing up capital and reducing the risk of obsolescence. In the stove business, adopting JIT would have been easy since suppliers were just an hour away.
Optimize Sales Strategies
Encourage customers to purchase older inventory by offering targeted discounts or bundling deals. One buyer successfully reduced excess stock by training staff to suggest available components that matched customer needs.
Inventory Management as a Value-Adding Strategy
For buyers, excess inventory can present an opportunity to negotiate better terms. In one deal I brokered, the buyer secured favorable terms by agreeing to liquidate the surplus and use the proceeds to make a balloon payment six months after closing.
For sellers, addressing inventory issues before listing the business enhances cash flow and demonstrates effective management, making the business more appealing to buyers.
The Bottom Line
Excess inventory may seem like a safety net, but it carries significant hidden costs. Whether you’re buying or selling, understanding and optimizing inventory management is essential to unlocking the full value of a business. By adopting lean inventory practices, you can improve profitability, enhance cash flow, and strengthen the overall health of the business.
Want more insights on running and optimizing small businesses? Check out my book, Invest Local, available at www.DavidCBarnett.com or on Amazon. Be sure to join my email list if you’re not on it already at https://www.DavidCBarnettList.com and receive 7 FREE gifts.
Cheers!
David C Barnett
