High margins; high capital turnover; both? You can’t be neither.
There are 4 quadrants. Which are you?
You can be:
- high margin & low turnover
- low margin & high turnover
- high margin & high turnover (= heaven)
- low margin & low turnover (= death)
Most leaders choose to focus on margin. But what they don’t realize is that capital turnover can often be a faster fix and have a bigger impact. Higher margins, but low turnover also means higher working capital needs. If you have excellent access to capital, this is not a problem. But access to good capital is hard for most scaling brands. So improving capital turnover reduces working capital needs and thus your need for outside capital.
In this video, I pick on Allbirds as a cautionary tale and compare them to other public companies that fill each of the other 3 quandrants.
Let me know your thoughts. And if you would like to discuss further or need help with some of the problems above, please reach out to ben at elephantherdconsulting.com or