I’ve got some old stock, should I sell it at less than cost or hang on until I get a good price?

I worked with a business once that had so many stock lines that the print out of the “inventory report by product code” was too big to fit into an A4 lever arch file.

The business wasn’t even that big, but it was quite old – with something like 60 years of trading under its belt.

The CEO/owner, George, was a bit of a hoarder. He couldn’t bear to part with anything just in case it would one day be useful (he even had, what looked to me, like the world’s biggest, and most varied, elastic band collection).

He applied the same principle to inventory. He kept the funny little end-of-line and one-off pieces in case a customer should happen to need it, and he certainly never authorised the sale of any product at a discount for the purpose of shrinking the large inventory holding.

By the time I met the company it was rather past its hey day and it needed to reinvent itself to stay relevant. But reinventions cost money and the business really didn’t have any free cash.

After much discussion George was persuaded to fund at least part of the reinvention by doing, essentially, a fire sale of the excess inventory.

Even this wasn’t easy. The business was holding so much old stock that locating specific individual pieces was a challenge in itself, and George was grumpily muttering about how much the product had cost in the first place and how insane it was to “give it away”.

At the end of the inventory clean out the business was left with a very manageable inventory listing of just 10% of the size of the original and an injection of cash equivalent to four months of usual trading. Result!

I remembered this story a few weeks ago when speaking to Tina, the owner of, conversely, a very young retail business. Tina had many items of stock on hand which hadn’t sold at full price during the season and didn’t even seem to be showing signs of moving at the lightly discounted price they were now being offered at.

In a pricing experiment Tina held a few eBay sales and it turned out that if she discounted her inventory to roughly cost price she could sell it.

But Tina didn’t want to sell the stock at such a low price for two reasons. One, that she would be “losing money by selling at such a discount” and; two, that “one day a customer would come in for whom the piece would be perfect”.

After working out that Tina could expect to earn $150,000 from a mass eBay sale, I asked her (without alluding to the eBay sale) what she would do if someone gave her $150,000 cash. She said it would solve all her problems.

Tina did the sale, freed up in excess of $200,000 and hasn’t looked back.

Selling inventory at rock bottom prices hurts, but it’s not as painful as sitting on a pile of old stock when you could be playing with a mound of cash.

Julia Bickerstaff’s expertise is in helping businesses grow profitably. She runs two businesses:Butterfly Coaching, a small advisory firm with a unique approach to assisting SMEs with profitable growth; and The Business Bakery, which helps kitchen table tycoons build their best businesses. Julia is the author of “How to Bake a Business”  and was previously a partner at Deloitte. She is a chartered accountant and has a degree in economics from The London School of Economics (London University).