Before stocking up for the holidays, small-business owners should look at past sales, supplier deadlines, payroll, and the bills waiting in January.
The holidays can bring a welcome boost in sales. But for a small business, a busy December doesn’t always mean a comfortable January.
Imagine a neighborhood gift shop that fills its shelves for Christmas. Customers come in, gifts sell, and business looks good. Then January arrives. Some merchandise is still sitting on the shelves, sales have slowed, and rent and payroll are due.
The problem isn’t necessarily that the store didn’t sell enough. It may have spent too much money before the season even started.
For small businesses across Los Angeles and California, the challenge is finding the right balance: having enough products for holiday shoppers while keeping money available to run the business.
The first question isn’t how much inventory you can sell. It’s how much you can afford to buy.
Look at What Customers Bought Last Year
Before placing a holiday order, pull out last year’s sales records.
What sold quickly? What stayed on the shelves? Were customers shopping throughout December, or did most sales happen during the final two weeks before Christmas?
Those details can help owners make better purchasing decisions.
A gift shop might discover that candles and small gift sets sold consistently, while expensive decorations barely moved.
A bakery might find that holiday cakes sold well through preorders, but preparing too many without confirmed customers led to wasted ingredients.
The nonprofit business mentoring organization SCORE recommends reviewing previous sales and preparing different demand scenarios instead of relying on one sales prediction.
Last year’s results won’t tell you exactly what will happen this year. Customers may spend differently, prices may have changed, and new competitors may be attracting shoppers.
Still, actual sales records are a better place to start than a guess.
Before Buying More, Look at the Bills Coming Due
Here’s where many business owners need to be especially careful.
Money in the business account isn’t necessarily money available for new merchandise. Some of it already belongs to expenses that haven’t been paid.
Consider a fictional Los Angeles gift shop with $20,000 in available cash.
The owner expects to need:
- $9,000 for rent, payroll, utilities, and other upcoming bills.
- $5,000 to help cover January expenses and unexpected costs.
- $2,000 for other committed business expenses.
That leaves $4,000 available for holiday inventory.
And even that doesn’t mean the owner should spend all $4,000.
The business may need money for shipping, packaging, returns, or additional workers. Some merchandise might also have to be discounted after the holidays.
This example assumes those expenses aren’t already included in the amounts set aside. Every business will have different numbers.
The lesson is simple: Decide what money the business needs to keep before deciding what it can spend.
As one of our passed articles explaines in The Growth Trap: Why Small Businesses Can Lose Money by Trying to Sell Too Much, selling more products doesn’t automatically mean making more money.
Can You Buy Less Now and Order More Later?
Buying in bulk sometimes saves money. But a lower price per item doesn’t help much if those products never sell.
Before placing a large order, ask your supplier how quickly another shipment could arrive, whether smaller orders are allowed, and what happens if merchandise doesn’t sell.
For a bakery, buying packaging early may make sense. Fresh ingredients, however, might be purchased closer to the date they’re needed.
A neighborhood retailer could start with products that sold well in previous years, then order more if customers are buying faster than expected.
There is a trade-off. Smaller orders can mean higher shipping costs, and some suppliers may not be able to deliver additional products before Christmas.
Owners should decide when to reorder by considering how quickly products are selling and how long replacements take to arrive.
The goal isn’t to keep shelves half-empty. It’s to avoid spending money on products the business may not need.
What Happens if Holiday Sales Fall Short?
A store can prepare for a busy season and still have fewer customers than expected.
Suppose a business expects $15,000 in holiday sales but brings in $12,000 instead.
That’s $3,000 less revenue than planned.
Would the owner still be able to pay employees? Would rent be covered? Would unsold merchandise need to be discounted to bring in cash?
Those are questions worth answering before placing orders.
Extra holiday workers, longer store hours, packaging, and delivery expenses also need to fit the budget. California employers can review applicable wage and overtime requirements through the state Labor Commissioner’s Office.
Borrowing money to purchase inventory deserves the same careful review.
A loan may help a business cover a temporary shortage of cash, but payments will still come due even if holiday sales disappoint.
Be prepared, we have talked about the challenges some Latino entrepreneurs face when looking for business financing. Before borrowing, owners should understand the interest, fees, repayment schedule, and what happens if sales are lower than expected.
Holiday Inventory and Cash Checklist
Before spending money on seasonal products, small-business owners can work through these questions:
- What sold last year? Review your bestsellers, slow-moving products, and leftover merchandise.
- What do you already have? Count products that can still be sold before buying more.
- How much might customers buy? Prepare estimates for slower, expected, and stronger sales.
- What bills must be paid? Include rent, payroll, taxes, utilities, debt payments, and other expenses.
- How much cash should stay in the business? Set aside money for January and unexpected costs.
- Can you reorder later? Check supplier deadlines, minimum orders, shipping charges, and return policies.
- Will you need extra help? Include additional staffing and operating costs.
- What if products don’t sell? Decide which items can be kept, returned, or discounted.
- Are sales matching your plan? Review actual sales, inventory, and cash each week before placing another order.
Business owners who want help reviewing their numbers can explore SCORE’s holiday small-business resources or find local counseling through the U.S. Small Business Administration.
The holiday season is an opportunity to bring in customers, increase sales, and finish the year on a stronger footing.
But success isn’t measured only by how much merchandise leaves the store.
It’s also measured by whether the business has enough money left to pay its bills when January arrives.
