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Capital Constraints (Budget Limits)

Capital constraints or Budget Limits refer to limits on how much money can be invested in inventory at a given time.

Why It Matters

•Sellers almost always operate with constrained capital, especially while growing.
•Forces prioritization across SKUs.
•Makes clear trade-offs visible—one SKU purchased means another cannot be.
•Prevents relying on "buy everything that sells" logic.
•Highlights the need for financial evaluation, not only operational planning.
•Even profitable SKUs may be unattractive if they require too much working capital.

Connection to Capital

When capital is limited, the opportunity cost of each inventory decision increases — efficient allocation becomes essential.

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