Aint that the truth!
When I started out I held no stock. I worked with a local wholesaler that I collect stock from daily. Their company is not computerised and their stock control is terrible! The number of unhappy customers I had because I had to refund part or all of their order!
Over time, I have built up a stock of just 1 or 2 items of each product line. These are replaced straight away when they are sold. That way, if my supplier is out of stock my stock is not replaced, so can I tell to mark it as such on the website. I have plenty of alternatives that the customer can choose from, so it works out well.