Business turnover, also known as revenue or sales, refers to the financial value of goods and services sold.  This weeks video looks at

  • Firstly, what sales turnover is
  • Secondly, how it’s measured
  • Thirdly, its strengths
  • Lastly, why it is a vanity metric for financial success

Sales turnover – Strengths 

  1. Simple and easy to understand and get hold of.  Business turnover is a number that many can can access and understand.
  2. Reflects growth: A company’s turnover is a good indicator of its growth.
  3. Helps with budgeting and forecasting:
  4. Offers a broad view of performance: Turnover provides a broad view of a company’s financial performance.

Sales turnover – Limitations 

  1. Does not account for costs: Business turnover does not take into account the costs associated with generating that revenue. This means that a company with high turnover may still be operating at a loss.
  2. Does not reflect profitability: Your business can generate high turnover but not generating enough profit to cover its costs.
  3. Does not reflect the quality of products and services: Business turnover does not reflect the quality of a company’s products and services. A company can generate high turnover by selling low-quality products, but this does not necessarily mean that the company is performing well.

Conclusion and good to know

In conclusion, business turnover is a useful metric for measuring a company’s financial performance, but it has its limitations. It is important to consider other metrics, such as profitability, margins, and customer satisfaction, to get a more complete picture of a company’s performance.

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