Latest / Cash Flow Conversations with Fexingo: Working Capital, Receivables, and Small Business Finance / How a T-Shirt Printer Used Consignment to Free Up Inventory Dollars
Transcript
- Lucas: Luna, I want to tell you about a t-shirt printer in Austin who turned his inventory problem on its head by convincing his suppliers to take the risk instead. Luna: I’m all ears. How does a small shop get suppliers to carry the risk? Lucas: Well, his name is Marco, runs a custom print shop called Tee Public. He was sitting on about thirty thousand dollars’ worth of blank t-shirts in every color and size. That’s the industry norm—you buy stock upfront, then hope designs sell. Luna: Right, and if a design flops, you’re stuck with boxes of plain tees. Lucas: Exactly. So Marco proposed a consignment arrangement to his main blank supplier. Instead of buying the shirts, he’d take them on consignment—pay only for what he sells, send back the rest. The supplier would still own the inventory until sale. Luna: That sounds ideal, but why would the supplier agree? They’re taking on all the inventory risk and storage costs. Lucas: Marco offered two things. One: he committed to a minimum monthly volume—ten thousand dollars in sales of their blanks. Two: he agreed to promote their brand exclusively on his website and in his shop. The supplier got a guaranteed revenue stream and free marketing. Luna: So it became a partnership rather than a transaction. Did he have to change his accounting or tracking? Lucas: Big time. He set up a separate inventory log in his point of sale system, tagging each consigned item with a unique ID. Every week he reconciles what was sold and sends a payment to the supplier. The leftover stock he keeps in a dedicated bin with a consignment label. Luna: And the cash flow impact? Freeing up thirty thousand dollars is huge for a small shop. Lucas: Life-changing, actually. He used fifteen thousand of that freed-up cash to buy a second heat press and a newer embroidery machine, which let him take on bigger orders. The rest went into marketing—Facebook ads, a local music festival sponsorship. His revenue grew about forty percent over the next year. Luna: Wow. So consignment effectively financed his growth without a loan. Were there any downsides? Lucas: A few. First, the supplier still requires quarterly physical counts of the consigned inventory, so Marco has to pause operations for half a day. Second, slow-moving designs still take up space, and if they don’t sell within six months, the supplier pulls them back anyway. Luna: So you still can’t sit on deadstock forever. What about pricing? Does the supplier set minimum retail prices? Lucas: In Marco’s case, the supplier gave a suggested price floor, but he has flexibility. The consignment price per shirt is about ten percent higher than if he bought bulk upfront—the supplier builds in a small premium for risk. But Marco passes that cost to customers and his margins are still healthy because he’s selling more volume. Luna: So it’s a trade-off: higher unit cost for lower upfront risk. Lucas: Right. And that premium is worth it when you can reinvest the cash into revenue-generating assets. Marco told me the biggest surprise was how much easier it made forecasting. He now orders small batch test runs of new designs, prints only a handful, and if they sell out, he reorders quickly. Luna: That sounds like a leaner operation. Is this something other small businesses could replicate? Lucas: Absolutely, but it works best when you have a strong relationship with your supplier. Marco had been buying from this supplier for three years with perfect payment history. That credibility was key. You can’t walk in on day one and demand consignment. Luna: So build trust first. What about product categories? Consignment is common in retail for slow-moving items, but here it’s used for core inventory. Lucas: Exactly. It’s more common in art galleries or bookstores, but Marco proved it works for a high-turnover consumable like blank shirts. The key is that the inventory is generic—not custom printed yet—so the supplier can sell the returns to another printer. That’s why they agreed. Luna: So if your inventory is easily resellable, consignment is more feasible. Lucas: That’s the sweet spot. Marco also set up a similar deal with his ink supplier, but that’s consumable and more liquid. The ink supplier was actually easier to convince because the ink never expires if stored properly. Luna: Interesting. So he extended consignment beyond just t-shirts. What about the risk of damaged or lost inventory? Lucas: Marco carries a small insurance rider for consigned goods—about a hundred dollars a year—covering theft or fire. The supplier requires it. But damage during printing is Marco’s responsibility; he has to absorb the cost of misprints. Luna: That sounds fair. So the consignment model shifts financial risk but not operational risk entirely. Lucas: Right. And now Marco is planning to open a second location using the same consignment model with the same supplier. He’s essentially scaling his inventory footprint without requiring more capital. Luna: That’s the dream—using someone else’s money to grow. I wonder if this could work for a restaurant with perishable ingredients? Lucas: Tougher, because spoilage risk is high. But for non-perishable supplies—napkins, takeout containers—it might. I’ve seen a café do it with coffee beans from a local roaster who wanted shelf presence. Luna: Let’s talk about that in another episode. For now, Marco’s story shows there are creative ways to unchain your cash from inventory. Lucas: And it reminds us that cash flow solutions often start with a conversation. By the way, if you find these real-world stories useful, we keep this show ad-free by design. If you’d like to support that, you can find us at buy me a coffee dot com slash fexingo. No pressure—just a way to keep these conversations going. Luna: Yeah, and we really appreciate the listeners who have chipped in. It lets us focus on practical tactics without any sponsor noise. Lucas: Exactly. Back to Marco: he’s now looking at consignment for his packaging materials too. His lesson? Look at every purchase order and ask, ‘Does this have to be paid upfront?’ The answer is often no. Luna: That’s a great closing thought. Cash flow is just a series of choices—and sometimes the best choice is to invite your suppliers to share the risk. Lucas: Absolutely. Thanks for listening, everyone. We’ll be back with another cash flow conversation soon.