The life and death of a company is determined by its
turns. Turns is how many times in a
given period a company sells through its stock.
Billy-Bob keeps four 14 inch white-wall, Mud Gripper tires
in stock. Each month he sells twelve of these. This means he turns his stock
three times each month. The higher the number of turns, the greater the profit.
As long as Billy-Bob is never out of stock when a customer
wants this particular tire it would appear that he has a pretty good handle on
his turns. If he were to increase his inventory to thirty tires, then he would
not be turning his stock each month and is paying too much in inventory. There
is a fine art to turns but with today’s modern software programs it is easier
to keep up with this than in days of old.
I have worked with a group of people who seem to love to buy
baseball caps to sell. If a salesman comes along with a load of caps to sell,
they will buy them if they get a good price. Then, the caps sit and gather dust
for months. Eventually, years later, the caps will almost be sold out and along
comes another salesman and the whole thing starts over. They don’t seem to
understand that they are losing money on this.
Disclaimer
The opinions or advice listed in this blog or website should be used as a place to start only. It is not a substitute for the use of a professional.
Please be sure to consult your attorney and/or accountant with any specific questions.
There is no one right answer to any business question that will cover all circumstances. Please Visit McClendon Enterprises
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