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12 Jan 2015

Why your yearly turnover DOES matter

Some accountants would advise that a company’s yearly turnover is the most misleading and superficial piece of data upon the company’s performance,

because it doesn’t tell how profitable the business truly is by reflecting the Net Profit, and obviously there is no point to stay in business if it’s not making a profit. I surely agree with this to a certain extent, having seen businesses present themselves bigger than who they truly are by “making $X a year”, especially comes proposal times for potential investors.

However, I would argue that the yearly turnover is actually an important KPI for a business to monitor how much of a business’s works have been acknowledged and appreciated during the year. The Net Profit factor, to me, is more of a financial management issue, with the Turnover being a quick business validation indicator.

The great Dave Ramsey and other businesses gurus often refer pay cheques as “Certificate Of Appreciation”. The amount of money you have received from your customers articulates how much they acknowledge the products and services you have provided as a value-add to their lives. Therefore if your business had a turnover of 500K last year compared to this year’s 600K, it means that your products and services have improved 20% this year!

So think value-add, think improving your turnover.

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