Sales Tip: Inventory turn is a key measurement in retailing

Jan. 11, 2019
To calculate inventory turn, divide annual sales by average inventory.

Inventory turn is a key measurement in retailing. It measures how effectively you are using your assets. To calculate inventory turn, divide annual sales by average inventory. There is no hard and fast rule in tool distribution on what a turn should be. But in theory, one turn is too low. And six turns is excellent.

About half of the dealers I polled did four or more turns a year. Lower turns concern me, but not as much as those that had no idea what their turn was. That’s scary. If you don’t know your numbers off the top of your head, you don’t have a pulse on your business. 

Cornwell dealer Phelps is successful at doing about five turns a year. I give him a gold star for using his assets well to make money. He is textbook.

The other aspect of inventory is keeping most of your inventory on the truck and not in storage. Having too many items in storage is tying up inventory and cash.

“I really don’t have anything at the house if there isn’t one on the truck,” Phelps says.

He clarifies that there are big items that he doesn’t carry on the truck like welders and toolboxes. But he tries to keep at least one item from the product category on his truck. He has about 75 percent of his inventory on his truck and the rest at home.

About the Author

Phil Sasso

Phil Sasso is president of Sasso Marketing Inc. (, a technical marketing agency providing advertising, public relations and promotional services to tool and equipment marketers. Subscribe to his free marketing tip at

Sponsored Recommendations

Garage Tip: The Value of System Solutions

Learn why inspecting related parts when repairing your vehicle can save you time and money. Avoid future failures and ensure satisfaction! Click to watch now.

Access the Best Learning Resource for Professional Mechanics

Get hands-on tips, updated repair instructions, mounting videos, failure diagnosis, and best practices for professional mechanics. Click to access essential technical info to ...

From the Basics to Innovations - Transmission Technical Training Videos

Explore Schaeffler's portfolio of transmission technical trainings for the LuK brand. Tailored for all skill levels, our modules cover basics to innovations. Click to learn more...

Clutch Release Problems - Diagnosis & Failure Analysis

Explore common clutch release problems and their causes, from hydraulic issues to mechanical faults. Understand diagnostics and solutions for optimal clutch performance.

Voice Your Opinion!

To join the conversation, and become an exclusive member of Vehicle Service Pros, create an account today!