How Much Inventory to Start a Small Business With

Start with enough of each item to last until your next delivery of it would arrive, plus a small safety margin, and not much more. For each ingredient and packaging item, that's daily use × (lead time + safety days + days between orders), rounded up to the supplier's pack size and minimum order. Finished goods for launch follow the same idea, using expected sales. In the example below, a new taro chip business needs about $5,160 of opening stock, and 60% of it is printed pouches, because the printer's minimum is 10,000. That's the usual pattern: minimums, not your sales, drive the opening bill. Below is the formula, a full opening list, and how to start smaller without running out.

The short version

• Opening stock per item = daily use × (lead time + safety days + days between orders).
• Round up to the supplier's pack size, and to at least their minimum order.
• Estimate daily use from your sales plan and recipes; be conservative in month one.
• Minimum orders, especially for printed packaging, often decide the bill.
• Plain packaging with a label is a common way to start smaller.
• Recount after the first few weeks and reset reorder points from real use.
• TaroStack turns real use into days of cover and suggested orders from week one. More below.

The formula

Daily use           = expected weekly use ÷ 7
Days to cover       = lead time + safety days + days between orders
Opening quantity    = daily use × days to cover, rounded up to whole packs, at least the minimum order

Lead time is how long a delivery takes once you order. Safety days cover a late delivery or a busy week. Days between orders is how often you plan to order: weekly for fresh things, monthly for dry goods and packaging. How to set safety stock more carefully, once you have real numbers, is in safety stock formula.

An opening list, worked through

Windward Roots, the made-up taro business I use in these examples, plans to make 700 bags of taro chips a week:

The pouches are $3,100 of $5,164, 60% of the opening stock, and they'll last about 14 weeks against about 8 weeks of need, because the printer won't print fewer than 10,000. The taro, the item the business is named after, is $504.

Starting smaller

Plenty of small brands start on plain pouches with a good label, then move to printed once the product and the design have settled and the volume justifies the minimum. The minimum-against-cash trade-off is worked through in minimum order quantity.

Finished goods for launch

If you sell from stock rather than to order, you also need finished goods before day one. Make enough for the first week or two of expected sales, plus whatever your first wholesale orders need, and check shelf life: a two-week product made three weeks early is waste. For a market, the estimate is different, covered in how much inventory for a craft fair.

After the first month

Your opening numbers are guesses. After three or four weeks, count everything, compare real use with the plan, and reset each item's reorder point and order quantity from what happened. How much to keep on hand from then on is in how much inventory to keep on hand.

Where this stops working

The opening list is a spreadsheet you build once. Then real use turns out different from the plan: the oil goes faster because the fryer runs hotter, the salt barely moves, a café orders double. The spreadsheet still says what you guessed in month one, and the reorder decisions keep using it.

How TaroStack does it

TaroStack starts from your opening list and learns your real use from the first week.

Your opening stock, imported. Items, suppliers and opening stock import from your spreadsheet, with every row previewed before anything is saved, or from a photo of a price list or count sheet. Suppliers carry their lead times, pack sizes and minimum orders. Units convert: buy oil by the 20 L pail, use it by the liter.

Real use, from week one. Every batch takes its ingredients off stock, so use is measured, not guessed. The reorder list shows every item in days of cover at the rate it's really going out, with a red line where an order placed today would arrive too late, and reorder points are suggested from how stock actually moves. The suggested order counts what's on order and rounds up to the supplier's pack size and minimum, and says when it has.

And the overbuy shows. Stock that isn't moving shows how long since it last went out, so the 14 weeks of pouches and the salt that barely moves are visible, and stock value shows what your opening stock is worth at cost.

Stock, counts, receiving and the reorder list are on every plan, from $49 a month; batches that measure ingredient use are on Standard at $99. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.

Questions people also ask

How much inventory should I start with?

For each item, enough for the lead time, a few safety days and the time until your next order, rounded up to the supplier's pack and minimum. In the example, about $5,160 of opening stock for a 700-bag-a-week chip business.

How do I calculate opening inventory?

Daily use × (lead time + safety days + days between orders), rounded up to whole packs and at least the minimum order. Estimate daily use from your sales plan and recipes.

Why is my opening inventory so expensive?

Usually minimum orders, especially for printed packaging. In the example, pouches with a 10,000 minimum were 60% of the opening stock. Plain packaging with a label can cut it.

When should I adjust my starting inventory levels?

After three or four weeks, once you've seen real use. Count, compare with the plan, and reset reorder points and order quantities.