What should I do if profit income is always used to buy new stocks?

Now, my family business is 2 years old. Every month, we get the profit from our online retail business, specializing in apparels for baby & child. But we realize that all the money is always used to buy the new stocks. When buying new stocks, the stocks lifecycle is around 2-6 months (is it normal for fashion retailer?). So whenever we need to buy the new model, we always use money from the profit if the capital is not enough. This situation actually makes me worry. I am afraid that our business is not healthy, because we always use the profit to buy the new stocks. Since as you know that fashion is something will be time based products. It's about trend, so if we do not follow the new trends, we are not strong enough to compete with competitor.

How do see this business condition? What should I do to improve 'the financial thing' in this business?

Profit is the margin that is left after costs. Costs include replacing the stock. If stock costs $5 and you sell it for $6 you should have $1 of profits. If the cost of selling that is an additional $1 then you have no profit.

Maybe what you are doing is buying more stock than before which is investing but otherwise it sounds to me like you need to lower your costs or raise your prices... perhaps both. You need to identify what is soaking up all the money you should have left over after you replace the stock.

Could it be that stock costs have risen but that you have not passed this on to the consumers? If the stock cost increases were slight and spread over time you might not have noticed that they were eating into your margins.

If what you are saying is that your margins are tiny that is normal but you need to find lines that have enough margin to make it worth your while.

You also seem to have a lot of stock on hold which is locked capital that you might otherwise use to invest in a new direction. Can you find a way to reduce the amount of time you hold the stock? Look into how close you can get to JIT (Just In Time) ordering so the capital of the business is tied up in stock for the least amount of time.

If you are buying at volume the other option to JIT is to see if you negotiate a discount for your bulkier purchases.

If no discount can be had are there other suppliers that can provide you similar or the same goods at a lower cost?

Can you shift focus onto similar but slightly different stock items with better margins?

If the answer is no, no and no then your prices are going to have to go up.

I hope this gives you some ideas. Let us know how you get on.

I think if the stock cost is $ 5 and you can sell it for $ 6 you should get more than $ 1. You can do also some other business for more profit. I think you have heard about the forex. Now 25% of the people of the world doing forex. You can think about it. You can learn about Forex Day trading strategies using Google.