Dealing with math and numbers is a daily activity when you own a business, including a surplus one. This is why you cannot escape from financial modeling, as it is a way for business to plan and predict how much money can be made from selling surplus inventory.
We understand the difficulties of keeping up with numbers and expenses. However, you need them to know how much you are spending. Based on that, how much you can make as profits and maximize them in the process.
By using numbers and data, companies can make smart choices to get the best return on their investments (ROI) when recovering surplus assets.
This applies to every business and regardless of the category you have for the surplus option. categories, inventory, and all assets will apply to the math involved.
Coastal Surplus Solutions knows this well since we have been in the industry for over 10 years. Our professionals can handle sourcing surplus, handling logistics, streamlining them, and working with shipping and delivery.
For all of this, we need to know how the financial modeling works and, hence, how you can implement it if you partner with the team.
What Is Financial Modeling in Surplus Recovery?
Keeping it simple, it means creating a detailed plan that shows:
- All the costs involved during item purchased.
- Possible profits from selling surplus.
- And the total in expenses and profits.
The idea behind following a plan is to control all the expenses involved. While it looks more like a roadmap, you want to know how much is destined to each part and how to work around it.
In essence, a financial model helps figure out for how much you need to sell the inventory to make a good profit.
Key Steps in Financial Modeling for Surplus Recovery
What if you want to start the model and work on it?
It is easier than you would think.
Financial modeling tends to follow a type of formula. The aspects and elements involved are all calculated around and always included to get the most out of the process.
In our company, we have made sure to include all of them:
- Identify all costs involved.
Make sure you add up every single cost when buying the surplus goods. Also, when you ship the items and how much is spent in storage and marketing fees.
Anything that is an expense as small as it may be becomes part of the model for proper calculation. Otherwise, you won’t have a clear picture of the total investment.
- Estimate selling price and revenue.
Predict how much money the business can make by selling the surplus items.
While this will be a bit more of guessing and certainly not 100% guaranteed, it gives you a clear number of how much you can reach. It could be less or more, but the projections are more accurate with the numbers involved.
Following the advice from the Investment Recovery Association, you can use past sales data. Also, market trends and online marketplaces to set realistic prices. This will be the core of it all.
- Calculate ROI (Return on Investment).
This is done through a formula that is quite clear:
If you have positive numbers, then your recovery plan is successful and going the right way.
- Use technology and data analytics.
Automated tools and tracking systems can help work with all types of profits and calculations. You can monitor inventory, predict demand better, and find the best buyers.
- Plan for risks and challenges.
A good financial model also includes possible problems.
Items not selling fast enough, problems with demand, or prices dropping. You want to plan for them and have a backup in case any issues affect your business.
Contact us if you need more information and how we can take the burden off your shoulders when working with recovery plans.
