Enjoy this free access to selections from The ROI's proprietary content. Ready for more? The Members-Only Collection includes even more for owners about inventory management and Open-to-Buy planning.


Index of Sales Potential

Retailer's Index of Sales  Potential Retailers. You know your average inventory over the year, right? 

Is that enough for the sales you expect? 

Or too much? 

Now, get perspective on that. In 10 seconds (or less!) 

What does it mean?

Do your stores have higher sales volumes than the median retailer with the same levels of inventory? 

• That suggests that your inventory turns would be in the Top Quartile of retailers in your segment.

• It also is likely that you are very cash flow positive!

Wow! Nice to get some perspective, isn't it? 

To get even more perspective on your store's performance compared to others in your retail segment, see the Benchmarks here at The ROI.


But...what if, with the same amount of inventory, your sales are lower than the median performing retailer in your segment? 

• That likely means your inventory turns are lower than the median retailers. 

• It also suggests that a cash crunch may be looming.

Oops. Good to have a hint about that in advance, isn't it? 

 

"Your mileage may vary."


Compare Your Choices | Regain Control

So Now What?!

Is it better to grow sales?  Or focus on controlling inventory? 

Here's how to compare your choices.


1. First, do the math, starting with sales

Identify the dollar difference between your sales and the "median retailer's" sales.


2. Next, consider the inventory levels.

Go back to the SALES Potential calculator and enter different amounts for the Average Inventory @Cost until the sales volume it shows (for the median performing retailer) is close to your sales volume.

Now, do a little more math. What is the dollar difference between this revised inventory level and your original entry for inventory?


3. Now, apply your best judgment! 

Compare how much annual sales would have to grow, with the amount that average inventory would need to be trimmed over a 12 month period.

Then ask yourself: 

Which is more plausible for our stores? More likely to be achieved? More controllable?


Every retailer will have different answers to those questions.

Do not bog down at this stage. Make a choice, and make it happen. The goal: take advantage of the lead time!


Nagging Owner Issues



Since 1999, empowering retailers and store owners to "Turn on your financial headlights!"