What is it with turnover? Everyone loves to talk about it. Even the quality end of the financial press give it a higher billing than other metrics – useful metrics like gross margin, profit or of course, cashflow.
I have no shame in admitting that I couldn’t tell you the turnover – even approximately – of any of my clients. I could tell you a lot of other things – net worth, margins and several others. My only interest in turnover is its supporting role in calculating useful ratios.
Yet almost unfailingly I am presented with business plans driven by turnover – normally big, noisy ambitions such as doubling or trebling turnover. The quickest – and common – way to ramp up turnover is to reduce prices, increase sales & marketing overhead or offer softer buying terms.
In about 5% of cases the ambition is tempered and controlled – a modest increase in turnover supported by increase in yield and greater efficiency.
I have yet to see a business plan which revolves around increasing yield and efficiency with a resultant fall in turnover – apparently it’s not allowed.
Turnover is big & shouty- like the loud bloke at the bar.
Profit is the people around him, humouring him & nodding whilst keeping their secret to themselves.
Cashflow is the quiet chap sat at a table with a few friends & family, comfortable & relaxed.