Follow these 5 steps. Drive your inventory to a targeted, well-conceived ENDING INVENTORY level at the end of each month.
- Determine precisely what annual inventory turnover rate your store(s) should have to be profitable and provide an adequate cash flow. (For free guidance, find your segment under the "Retail Benchmarks" tab.)
- Next, convert that turnover rate into "days of supply"; i.e., 4.3 turns divided into 365 days in a year equals 85 selling days (of supply) or "one turn's worth of inventory".
- Now, simply guesstimate your reasonably expected sales volume for the 85-day period from April 1st forward, in this example, through June 24. Got it?
- That sales number now becomes your targeted inventory level (at retail, not cost) for the end of June. Now you've got a goal, a definitive number to shoot for which is based on going forward safely.
- But it's only as good as your ability to hit that target. Therefore, with just a limited number of selling days left before the end of June, you can, and must, reduce prices, cut orders, give spiffs to your staff...whatever it takes to drive down your inventory to hit that ending inventory goal. Now that you know what to do, we know you can do it.
And remember: Survival, without profit, through this recession is like halitosis; it's better than no breath at all!