Capital turnover is calculated by dividing a company’s sales or revenue by its average total assets. A higher capital turnover ratio indicates better efficiency in using capital to generate sales. Here are some strategies to increase capital turnover in the furniture sector:
1- Improve Inventory Management:
Reduce excess inventory levels to avoid tying up capital in unsold goods by applying continuous production and shipping program with suppliers instead of keeping high stock in your own warehouse
Introduce seasonal promotions or clearance sales to move slow-moving inventory
2- Accelerate Cash Conversion Cycle:
Negotiate favourable payment terms with suppliers to improve cash flow, you can agree with them to get your purchasing by LC for 120 days, which will allow you to receive and sell the goods without investing your own capital
3- Employee Training and Engagement:
Well-trained and motivated employees can contribute to increased productivity and efficiency, foster a positive work environment to enhance employee engagement
4- Customization and Personalization:
Offer customization options to meet diverse customer preferences, utilize a “made-to-order” or “assemble-on-delivery” model to reduce the need for extensive pre-made inventory
5- E-commerce and Online Sales:
Establish a strong online presence to reach a wider audience, utilize e-commerce platforms to facilitate online sales and reduce the need for extensive physical showroom space
6- Product Diversification:
Expand product offerings to cater to different market segments, introduce complementary products or services to encourage upselling
7- Collaboration with Interior Designers and Businesses:
Partner with interior designers and businesses to supply furniture for commercial projects. Explore collaborations with real estate developers for staging purposes
8- Customer Relationship Management (CRM):
Implement a CRM system to manage customer relationships effectively, offer after-sales services and warranties to build customer loyalty and encourage repeat business
9- Payment and Financing Options:
Offer flexible payment options, including instalment plans or financing, to make high-ticket items more accessible to customers
10- Digital Marketing and social media:
Utilize digital marketing and social media platforms to promote products and engage with customers.
Run targeted advertising campaigns to reach specific demographics
Implementing a combination of these strategies can contribute to increased capital turnover in the furniture sector. It’s crucial to adapt these recommendations based on the specific characteristics of the business, target market, and trading trends. Regularly reassessing and adjusting strategies based on market dynamics will help maintain competitiveness and efficiency