The Profit

This obvious mistake could be costing your business thousands

On any given day, small business owners have a hundred things to think about. Profit margins, store management, loan repayment, payroll, marketing — the list goes on. In the process, it's easy to lose sight of the crucial details that keep a business efficient.

On this week's episode of CNBC's "The Profit," self-made millionaire and small business investor Marcus Lemonis sat down with the owners of hair care company Ashtae Products. He found that the company's co-owner, Michael Woods, was making a big mistake: Failing to properly keep track of sales.

When Lemonis walked into one of the salon's that uses Ashtae Products, he saw that the shelves were completely empty. Technically, this was a good problem to have — many people were purchasing the company's products. But not monitoring how fast your products sells is a major mistake, Lemonis says.

The good news for Ashtae Products, and for other small businesses, is that an easy tweak can fix the problem of under-stocking or over-stocking.

Start by keeping track of how many products you sell each week or month, Lemonis says, and make sure your stores keep inventory that's as close to that number as possible.

"What Michael should be doing every time he walks into a salon is understanding the sales history of his products over the previous two weeks or month," Lemonis says.

For Woods, that means knowing that Ashtae Products sells about four shampoo bottles and three hair spray bottles at that particular salon each week.

"He would then take that data and give the salon a recommend stocking number," Lemonis says.

So if Woods only comes to the salon once every two weeks, the salon would purchase eight bottles of shampoo and 6 bottles of hairspray.

"Sell-through will lead to stocking, stocking will lead to the appropriate amount and will generate sales," says Lemonis. "There has to be some science to it."

CNBC'S "The Profit" airs Tuesdays at 10 p.m. ET

Video by Zack Guzman

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