Why inventory matters to a first-time founder
Inventory ties up cash before a sale and creates storage, damage and obsolescence risk. Too little can lose customers; too much can hide weak demand and strain runway. Founders who track units, cost and age can order more deliberately, protect margin and spot products that should be discounted or discontinued.
Examples of inventory
A skincare brand buys 2,000 jars at €4 each, putting €8,000 into inventory. It sells 600 in the first month and has 1,400 remaining. Those unsold jars are not immediately the month’s full expense under normal inventory accounting, but the cash has already left and expiry risk continues.
Common misunderstanding
Inventory is not the same as every asset the company owns. Products, raw materials and work in progress can be inventory when held for sale or production; office laptops normally are not. The accounting value also may not equal the retail price because it is based on cost and applicable valuation rules.
When to use it
Track inventory from the first meaningful physical order, using a system proportionate to your range and volume. Review counts, stock age, demand and reorder timing regularly. Service and software businesses may have no inventory in the accounting sense, so focus instead on the assets and capacity their model actually uses.