#Turnover rate meaning how to
It can also function as a guide when setting profit margins and assessing how to reach profit-related goals.įor instance, income which falls short of targets indicates poor sales. Knowing your turnover figure can help when trying to win over investors. But turnover can reveal more than just profit margins. Indeed, you can have impressive sales but also extremely high costs, meaning your profit is actually very low. Some experts argue that knowing your net profit is a better measure of financial success than business turnover. Why knowing your turnover helps your business It can also refer to labour turnover or turnover rate - the number of employees which leave your business within a set period. It’s not to be confused with profit which measures your overall earnings and is reached by subtracting your total expenses from your total sales. Basically, it’s all the money that comes into your business before any expenses and operating costs are deducted.
This could be weekly, monthly, quarterly or annual turnover - whatever time period you choose to measure. What is the definition of turnover?Īlso known as income or gross revenue, turnover is the total amount of sales you make over a set period. Turnover, however, is one of the easiest metrics to understand and will provide insight into whether you’re smashing your financial goals or not. But with so many terms, acronyms and KPIs (key performance indicators) used to describe business finance, it’s easy to get confused. Understanding how your business is performing financially is key to gauging its success. For guidance or advice specific to your business, consult with a qualified professional. Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice.
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