2017 is here, which means it’s a great opportunity to reassess the state of your business. ROI is a term you probably hear a lot and maybe wish you had a better pulse on when it comes to your own store. Measuring return on investment gives you the insight to know exactly how your business is performing. To gain this insight, you must have a POS and inventory management that collects the data points you need to use when measuring ROI. But what exactly are those metrics and what do they tell you?
Return on investment (ROI) measures how many dollars of gross profit or margin you are getting back for each dollar you have invested in inventory (based on your present rate of sales and average inventory for the period). The equation to you use to calculate this is:
ROI= (Profit During Sales Period/Inventory Cost During Sales Period) x 365
This is an important metric because it helps you identify how quickly your inventory was sold, how much inventory you carried to generate those sales, and how profitable the sales were when they occurred. This not only helps you get an idea of the current state of your business, but also gives you helpful information to make educated buying decisions. Within RICS, you can run a Sales Analysis Report to determine ROI. Click here to learn more about identifying KPIs (key performance indicators) within RICS.
ROI is perhaps the easiest business concept to understand and yet the most difficult to measure. Luckily, RICS does this computing for you so that you can spend your time making important business decisions from concrete data. No more guesswork, no more hunches. Utilize your store’s ROI to improve your profit and get the most out of your merchandise.