What is GMROI?

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<p>Are you a music store owner with a lot of inventory and a lot of cash flow problems?&nbsp; Do you often wonder where your money is going each month, and why you still can&rsquo;t take a decent owner&rsquo;s salary?&nbsp; If the answer to these questions is &ldquo;yes,&rdquo; you probably don&rsquo;t know what your GMROI is.&nbsp; This great analytical tool is for you!&nbsp; Regardless of if you have to calculate it by hand (even though your Point-of-Sale software will probably do this for you), tracking GMROI can revolutionize the cash flow of your business.</p> <div style="margin: 0in 0in 0pt">&nbsp;</div> <p><strong>How to Calculate GMROI</strong></p> <div style="margin: 0in 0in 0pt">GMROI, or Gross Margin Return On Investment (the investment, in this case, is inventory), is a great tool to use to track the efficiency and productivity of your largest investment&mdash;inventory.&nbsp; It is calculated by taking the gross profits made over the last&nbsp;12 months and dividing it by the average inventory dollars on hand over those same 12 months.&nbsp;This calculation can be run on your entire inventory, or even a single SKU, to see how productive your inventory investment is working for you.&nbsp;</div> <p>&nbsp;</p>