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
- Simple and easy to understand and get hold of. Business turnover is a number that many can can access and understand.
- Reflects growth: A company’s turnover is a good indicator of its growth.
- Helps with budgeting and forecasting:
- Offers a broad view of performance: Turnover provides a broad view of a company’s financial performance.
Sales turnover – Limitations
- 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.
- Does not reflect profitability: Your business can generate high turnover but not generating enough profit to cover its costs.
- 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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