When most people think of inventory, they only think of the actual stock of items held to restock existing items as they are sold.  However, the concept of inventory is more than the idea that when something is sold, one goes to the back to replace it with another equal item.  The inventory section of your business plan should include considerations such as:

>  Should we hold inventory, or will it be held outside of the company?

>  How will the inventory be insured?

>  Which accounting method will we use to evaluate the inventory? (i.e. LIFO, FIFO, Average weighted cost, etc.)

>  At what level of depletion do we re-order additional goods?

>  As goods are sold, how do we keep track of the depletion?

>  Are the goods perishable, fragile, or do they have an expiration date?

>  How much space is available for inventory?

>  Given limited space, which items are most economical to store?

>  What mix of items makes best use of inventory space?

>  What is the projected demand for items in inventory?

>  What items need to be purchased in bulk to maximize purchasing power?

>  Should we ever sell newly arrived items first, or should we always restock using the oldest items from the shelf to sell first?

>  What is the optimal level of inventory turnover each year?

>  Are the inventories secured against theft and natural disaster?

Generally speaking, the larger your product & sales volume, the greater these considerations will become.  For example, A business that sells extremely expensive jewelry and relies on a few sales a year will probably not have many of the above concerns—it’s greatest concern might be security of inventory.  On the other hand, a seafood distributor or restaurant dealing with perishable inventory must very precisely calculate it’s inventory planning in order to always have enough food without having so much food that much of it spoils before it can be used.

You business plan should convince the reader that you have thoroughly weighed these considerations and, if possible, have come up with a way to manage inventory more wisely than your competitors, turning your inventory management into a competitive advantage.