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Too many tents not enough warehouse space

By Steve Arendt

Before I started Teeco Solutions I owned a party rental company. Growth always had a way of creating new opportunities as well as new pains for me to deal with. As a growing company, we never seemed to have enough building space, inventory and excess cash.
I remember one time wanting to buy a new building for expansion. When I did the calculations to rent or buy a larger space, I realized that I would also be forcing myself to grow all the aspects of my business. In order to justify the building cost I had to increase the number of employees, buy more trucks, invest in a better sales effort, buy more inventory and so on. I was not simply finding a larger space to store additional inventory for my immediate growth. The cost of that space was going to force me to grow beyond my immediate opportunities. I wanted to grow, but was not willing to grow that quickly. So, I asked another question: "How can I grow with the space I have?"
The answer was for me to learn about an accounting term called earns and turns. I had to go through my entire inventory to find out two things about each piece I had. First, when I rented this piece; how much profit did it bring me (earns). Second, how many times in a year did I rent it. (turns)
The results were revealing! I ended up selling some of my stock because it was not making me enough money to justify the yearly cost of storing it. My money was best reinvested into inventory that made me more money (had better earns and turns, or could work harder for me). Some items I could justify keeping, but they only went out a minimal amount of times a year. I stored some of these items outside and others in cheaper warehousing a small distance away. I now had more space in the building. Problem solved!!
Now I had another question to answer: What to do with the extra space? Initially I did nothing. By learning about earns and turns, I found out what my most profitable inventory was. To grow my profit, I simply focused on how to rent these items more times (produce more turns). I focused on methods to get items to the jobsite and returned to our shelves as quickly as possible. Returned to our shelves meant they had to be clean and ready for the next rental. This is often referred to as "rental ready". Getting the items out more often then quickly having them "rental ready" increased my profit. Much of the new systems only cost me time to develop. We had to simply invent new ways to get this done. Some of the new systems meant I had to buy new tools.
Only after I got really good at making my inventory work really hard for me did I start to make a good profit. Once I felt comfortable managing my earns and turns, I started to buy more inventory. The new key to growth was that I only bought inventory that I knew I could maximize my profits with.
Getting smart about my space usage was a very profitable learning opportunity. As I grew I continued to monitored my earns and turns. I kept only the inventory that could work hard for me and got rid of all the rest. I was constantly inventing new methods and buying new tools to improve my turns.
Thinking twice about accessing new space was a profitable endeavor.

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