Your floor can look full and your bank account can still feel empty.

That is not a mystery. It is a math problem. And once you see the numbers behind it, everything changes.

This is Part 2 of the Inventory Engine Workshop. Coach Maven Dana Connell and I go deeper this time, into the metrics that tell you exactly how healthy your inventory really is, the buying mistakes that drain cash before you even notice, and what it looks like when a store gets all of this right.

We also did a live inventory audit with real numbers. Start to finish. So you can see exactly how this works.

If you haven’t listened to Part 1 yet, go back and start there. But if you have, you’re ready for this.

The Bathtub That Explains Everything 

Inventory turn tells you how fast your merchandise is moving. The goal is three to four times a year.

Dana’s analogy is the one that finally makes it click: think of your inventory as water in a bathtub. If the drain is slow, the tub is overflowing, you’re overstocked. If it’s draining faster than you can refill it, you’re losing sales.

The water has to move.

Think about the stores you shop in. If you walk by and see the same window display from last month, you slow down. You might not even go in. But if there’s something new? You stop. You look. You walk through the door.

That is a healthy turn doing its job.

The lesson: Look at each category in your store as its own profit center. Some categories drain fast. Some barely drain at all. They each need their own attention.

Watch the Full Episode Here:

What Do You Own Compared to What You’re Selling? 

Stock to sales ratio is the number that answers that question.

The formula: inventory at retail divided by sales for the month. You want two to three months of inventory on hand based on what you’re projecting to sell.

Dana put it simply. If you brought home $10,000 worth of snacks and you’re only eating $2,000 a month, your pantry is way too full. And what happens to food that sits too long? It goes stale.

The same thing happens to inventory.

If your ratio is above three, you’re overbought. If it’s below two, you’re likely missing sales. Both situations cost you money just in different ways.

Every dollar sitting on your shelves is sitting there rent free. Every dollar has a job. If it’s not doing one, that is worth fixing.

The lesson: Run this number by category, not just for your whole store. That’s where you’ll see exactly what’s going on.

Your Customers Are Paying Attention

At least 50% of your inventory should have arrived within the last 90 days. If you’re in apparel, aim for 60.

Your customers notice. They come in, they scroll your social media, they check your website. And when nothing has changed, they stop coming back as often. There’s just no reason to.

Dana made a point that stuck with me, she has seen stores posting the same product photo for two months running. If a customer already saw it and didn’t buy it, posting it again is not going to change that.

Fresh inventory tells your customers something new is always happening here. That feeling is worth protecting.

The lesson: Pull your inventory this week and flag anything that’s been sitting for more than 90 days. That list is where you start.

The Number That Holds Everything Together 

If you are doing $500,000 in sales, you should be spending no more than 48% of that $240,000 on inventory in a year.

This holds up across thousands of stores and decades of data. When inventory spending creeps above 48%, cash gets tight fast, even when sales look fine on the surface.

The lesson: Multiply your annual sales by 0.48. That is your inventory budget. If you’re spending more than that, now you know why.

The Buying Mistakes That Cost You Before You Notice 

Dana and I went through the traps we see most often, and I want to name them plainly.

Vendor pressure. “It’s going to sell out.” “Order now or miss it.” These are tactics, not facts. A real vendor partner calls after your order arrives. They help you merchandise it. They troubleshoot when something isn’t moving. If all they do is take your order and disappear until the next market, they are not your partner.

Free shipping thresholds. Spending an extra $200 to save $10 in shipping is not a win. That $200 is now tied up in inventory you didn’t plan for.

The shiny object I bought. You walk into the market with a plan, see something exciting on Monday, write an order. Then something else catches your eye Wednesday. By the time you’re on the flight home, you’ve lost track of what you spent and whether any of it fits your budget.

All of these come back to the same thing: no plan means every decision is emotional. And emotional buying is expensive.

The lesson: Retail is both art and science. Your gut matters. And your gut needs a plan behind it.

The Items That Keep the Lights On 

Every store has them. The things that aren’t always the most exciting, but they sell every single time. Your customers expect them to be there. These are your Never Out Ofs, and they are the fuel that keeps everything else running.

Most store owners manage these by feel, waiting until stock gets low and then reordering. But when you apply the stock to sales ratio to those items and keep two months of inventory on hand consistently, the results are significant. We have seen this lift sales by 13%. Not from new products. Not from more marketing. Just from having enough of the right things in stock.

Your Never Out Ofs also fund everything else. When those basics sell consistently, you have the cash to bring in the fresh, interesting things that make your store worth visiting.

The lesson: Identify your Never Out Ofs in every category. Fund them first. That consistency is what supports everything else.

What the Numbers Actually Show You

Here’s a real example. A store doing $500,000 in sales. Inventory at retail: $400,000. Inventory at cost: $195,000.

Take that retail inventory and multiply by three because a healthy store turns three times a year. That’s $1.2 million. That is how much business this store should be doing based on the inventory they’re carrying. They’re doing $500,000. They are significantly over-inventoried.

Now flip it. Take $500,000 in sales and divide by three. That store should be carrying about $167,000 of inventory at retail, not $400,000. That is $233,000 of trapped cash.

That is not a crisis. That is a road map.

The lesson: You only need three numbers: annual sales, inventory at retail, and inventory at cost. Those three tell you everything about where your store stands right now.

Your Millie Moment

Step 1: Run your stock to sales ratio on your top three categories. Inventory at retail divided by last month’s sales. Anything above three is overbought, start there.

Step 2: Flag everything in your store that has been sitting for more than 90 days. That is your action list.

Step 3: Multiply your last 12 months of sales by 0.48. Compare that to what you actually spent on inventory this year. The gap tells you something.

Step 4: Pick one Never Out Of category. Check your stock against two months of projected sales. If you’re short, place the order.

Resources & Links

💚 Remember: Your inventory is not a guessing game. It is a financial tool, and it is wealth building in real time. You now have the numbers. Use them. Part 3 is coming and that is where the full system comes together.