Tag: inventory

The Ultimate Dashboard Metric

Velocity is the ultimate dashboard metric. The velocity at which your business resources generate free cash flow is the ultimate determination of success.

The realities are simple. If cash flows out faster than in, you must find working capital to replace it. When you can no longer replace it, the business is finished. If cash flows in at a higher velocity than out, you have the opportunity to sustain or grow.

If you measure nothing else, measure and forecast your cash flow. To the extent that you can determine the cash contribution margin of every significant current and planned activity of your business, you have the opportunity to manage your business.

Leading businesses use this information to either fix, fire or exploit their product lines and services for maximum near- and long-term value.

One of my clients doubled their profits within 6 months by using this simple dashboard metric. This set the stage for a doubling in top line revenues over a period of just 48 months.

Wasting Money on Space

Space is an asset until it is no longer producing adequate income. Then it becomes an anchor on profits. Remember that the costs of using space go far beyond rent, lease payments, mortgages, taxes and utilities. Here are four steps to take to see if you can reduce your space costs:

  1. Dig deep and find out what the true cost of ownership is for every space you have.
  2. Review how productive each space is for your business. How much revenue does it support or generate?  Retail space is usually measured in revenue per unit space (e.g. $/square foot).
  3. Ask yourself what would happen if we reduced or eliminated this space?
  4. Once you know the answers to #3, see if you can eliminate the space, reduce the space or put it to other productive uses.

One of our clients that did this reduced costs by $95,000 per year and then sold an entire building for a significant profit.