Strategies: Inventory piling up? You've got to get rid of it

— -- Two for the price of one. Buy two, get one free. Buy one, get two free!

A few months ago, auto dealers made an astonishing offer: "Buy one car, get one free." I'd never seen anything like that before, but there was a solid business reason for it. They had an immense amount of excess inventory, and they had to get rid of it.

Well, let's face it — you may be in the same boat (car?) as those auto dealers. Right now, customers are putting a lot of purchases on hold, and that means that a lot of the stuff you sell is still sitting on your shelves or gathering dust in a warehouse. Excess inventory costs money. It's time to take action and do something — anything — to clear out your shelves and warehouse.

Never forget this phrase: "Inventory is money sitting around in a different form." Remember that concept every time you look at the stuff you sell. You've already paid for those jeans hanging from racks in your clothing store, the snowboards you have in your ski shop. Those cutting-edge ear phones you sell from your website? You had to pay the manufacturing company months ago, and you've already paid the vendor (or put it on your credit card) for the boxes of blank T-shirts you hope to screen print as soon as you get orders.

You can't put the money that's tied up in inventory — whether raw materials or finished products — to work for you. You can't spend that money on marketing or hiring a new salesperson, to pay your rent or health insurance. And you can't use it to pay down your line-of-credit or credit cards. After all, Visa doesn't accept T-shirts as a form of payment.

But how can you afford to sell a $100 product for $50? What if it cost you $50 in the first place? Isn't that bad business? Yes — if your inventory is selling or "turning over" to use the business-school phrase. But in this economy, if your inventory isn't moving, you need to recognize some hard truths.

And one of those truths is: "Cash now beats cash later." It's better to sell something now at a lower price than something next year at a higher price, especially if you have carrying costs for that stuff. What do I mean by 'carrying costs'? I mean the cost of the credit you're paying on outstanding balances, the cost of warehousing and storage, the cost of the value of merchandise that gets outdated or is perishable, the cost of salaries for people to keep track of inventory — even the cost of your overhead for day-to-day operating or living expenses.