No doubt people will answer: real estate ah, education ah, car ah, energy ah, IT digital products ah. Obviously, such an answer is meaningless, because most businessmen are already in the boat, and it's not easy for them to change course and jump into another boat; what's more, these "most profitable businesses" simply make it more likely that those who are in them will make money.
What we want is the relevance of this question: how can businessmen make more money than others in the industry they are engaged in? Because, that's the lifelong dream of every businessman.
The correct answer to this question should be: "The business with the fastest turnover is the most profitable. Or, in the same industry your capital turnover faster than others, you will be the most profitable." In fact, business is not so, once engaged in a certain industry, the target customer base is fixed, at this time you think day and night, as important as life as the core problem should be: how to sell things faster? Because every turnover, you can achieve the fundamental purpose of business operations - making money. The faster you turn it over, the more money you make.
Fast turnover, the times make it so. Commodity shortage era, "hoarding" to make a fortune, but whoever does this today, who is "stupid"; in the commodity surplus cash for the king of today, the most important means of wealth is in the product update before "fast, more out, more out". The most important means of getting rich is to "get out fast and get out more" before product renewal, of which the most effective is: low price.
In the past, the most effective means of making money is to sell high prices - to improve profitability. Today, the most significant means of making money has become selling low prices - improving turnover. In the past, high profits but ultimately less money, because of selling less; today, low profits but ultimately more money, because of selling more. The price war, once chastised because it harmed others who were not yet enlightened enough to follow the traditional profit model, is undoubtedly the most enthusiastically pursued by the bill.
"Spin = Profit" is the most important business characteristic of our time.
"Earn = spin", is the business code followed by more and more of the ultra-rich in this era.
Of course, different industries have different turnover methods and turnover cycles. Real estate takes a few years to turn over, thermal underwear takes a year, the restaurant industry requires multiple turnovers per day, and there are countless other industries that have a monthly cycle. You can increase productivity to reduce costs to speed up the turnover such as Granz; you can improve the brand content to stimulate the purchase of turnover such as Haier; you can flatten such as the United States; you can zero inventory such as Dell; you can also use ERP like Lenovo. in short, in this "fast fish eat slow fish" era, you must be exhaustive, you must not be satisfied with the taste, you must change the rate of capital turnover do something. Change the capital turnover rate to make a difference.
If the essence of the enterprise is the implementation, then the essence of business is the turnover. The fact is that execution and turnover is a skill, and it is a skill that has a thousand variations. Then, figure out how to make them turn faster with better skills, the U.S. GE's Jack. Welch in the United States GE thinking about this issue, China's remote townships selling dry fruits and vegetables stall vendors are also difficult for this problem. From this point of view, Welch and the vendors of the business nature of the same, they have the same business talent, but also faced with the same unchanging business problems.
So, in addition to low prices, how exactly can money turn faster?
(I)
One sand, one world.
Some seemingly insignificant small businesses often contain the biggest truths of the business world.
Shi Zhenrong, chairman of Taiwan's Acer Computer, used to help his mother sell duck eggs and stationery when he was a teenager. Duck eggs 3 yuan a catty, can only earn 30 cents, only 10% profit, and easy to deteriorate, not sold in time will be bad, resulting in economic losses; stationery high profits, do business for 10 yuan can earn at least 4 yuan, profits of more than 40%, and stationery will not be bad to set up. It looks like selling stationery is more profitable than selling duck eggs.
But in fact, Shi Zhenrong later recounted his experience that selling duck eggs is far more profitable than selling stationery. Duck eggs, although thin profits, but at most two days on a turnover; stationery, although high profits, but sometimes half a year or even a year can not be sold, not only the cost of the backlog, the profit was earlier interest corrosion of the empty. Duck eggs are sold more often, so the profit is far greater than the slow turnover of stationery. Shi Zhenrong will later apply the experience of selling duck eggs to Hong?
Shi Zhenrong mother and son to sell duck eggs doorway, behind a general theorem of business: return on assets = profitability × turnover rate. Shi Zhenrong's business acumen is reflected in his ability to consider both profitability and turnover at the same time.
(ii)
But many Chinese people don't have this kind of business acumen, and they tend to ask, "What kind of business is the most profitable?" Undoubtedly they all fix their eyes on the profit margin and ignore the turnover rate, i.e., they concentrate on projects (industries) with large profit margins. But projects with large profit margins tend to have slow turnover due to high prices, and at this time, once the funds cannot be benignly and quickly turn over, the terminal retailers themselves will not only be crushed by the inventory, but also the whole industry chain will be in crisis.
He Boquan era of Lebao's, had suffered such a disaster. 1997 He Boquan determined to share the market from the jelly. August Lebao's jelly market initial market response is really warm, sales channels a urgent call: to goods! Around the Spring Festival in 1998, the market seems to have reached the peak of the madness, a province or region often dozens of wagons to goods. He Boquan feverish mind, immediately expand production capacity, production line from 2 to 4, 6, 8. When all 48 machines on the production line were installed and put into production - the terminal suddenly declared a full stall! The original Lobel's jelly all crowded in the channel, and did not reach the hands of consumers. Normal capital turnover did not form, Lebest quickly fell into the sweet "jelly vortex", the market quickly collapsed. Hundreds of millions of dollars, blood money.
Why would this happen?
Obviously, this is another version of the "beer game". The famous "beer game" clearly shows how the money in the whole industry chain is backed up in the inventory of the working capital:
The retailer found that a kind of "lover's beer" sells well, so it increased the amount of the weekly report to the wholesaler. The retailer found that a "Lover's Beer" was selling well, so it increased the amount it reported weekly to the wholesaler. But the wholesaler's request to the manufacturer for additional shipments is not honored until four weeks later (because of the time it takes the manufacturer to expand production). So, the retailer is waiting for 5 weeks to increase the quantity of goods in a hurry. At this time, the wholesaler will mistakenly think that the end of the hot sales, so he will be feverishly exponentially enlarged to the manufacturer's demand for goods, when the manufacturer will be restless that the end of the sales, so he also greatly enlarged the capacity to expand production. The whole industry chain is a kind of step by step amplification of the misinformation stimulated by the heat. Finally, a large number of goods to the terminal when the retailer will find the actual demand for the market, but only a small part of their own mountains of inventory! At this point he will suddenly stop asking for goods, but the wholesaler's inventory has already increased many times, while the manufacturer is still working day and night to speed up production!
--The end result is that the liquidity of the whole industry chain has become the dreaded "sinking capital", the "dead goods" that no one wants, and cannot be turned around! The company's main goal is to provide the best possible service to its customers.
Le Baishi jelly of the defeat, the defeat in the "information level by level amplification" effect caused by the inventory backlog.
The same reason, so that China's home appliance industry is in mourning. 2004 national air-conditioning inventory of more than 8 million units, the entire industry inventory deposits in the funds of more than 12 billion yuan, and some people predicted that such inventory will inevitably lead to a large number of enterprises to break the financial chain. As it turned out, in 2004, the air conditioning brand than in 2003, a reduction of nearly 90, and each of the collapse of the brand behind the burial of a large number of dealers. So the U.S. believes in a phrase: "rather sell less, not more inventory."
When there is a lot of inventory, capital turnover slows down.
More inventory, capital turnover is a dream.
(iii)
We believe that the essence of different businesses is actually the same. It's true for Shi Zhenrong, and it's true for Ho Pak-kuen, and that's to grasp the essence of turnover through the confusion of appearances. Yet most people are so indifferent to turnover that authoritative expert Cheng Xiaohua has repeatedly exclaimed, "This is the issue most easily ignored by most companies, but it happens to be very critical and even fatal!"
Today, the competition of capital turnover rate has become the core of modern business competition, so you must always be awake to know: First, how much money you have lying in the warehouse every day to sleep? What is the effective utilization rate of inventory funds? Second, how many times a year your capital turnover? Each turnover, how much you gain?
In a word: how can you make your money turnover faster? This has become an historic proposition.
Super-fast inventory turns of once every seven days have made it a big moneymaker; with more than seven days' worth of inventory, products are disposed of immediately. "IT products are forever dropping in price. If the goods are not sold for 3 months, it is a loss; if they are sold in 7 days, they are sold at the best price and at the best profit."
Turnaround is about speed. The fastest thing on land is the "magnetic levitation train".
Speed, too, is the most tantalizing secret killing technique of Hongtu Sanko. Founded only three years ago, headquartered in Nanjing, Hongtu Sanko has 35 stores in East China, with a turnover of up to 2.5 billion yuan, making it China's largest IT retail outlet. in July 2004, it created an industry miracle with a retail turnover of more than 120 million yuan in seven days! The company has left behind all of its dumbfounded competitors.
What kind of method did Hongtu Sanko use to realize a faster turnover than its competitors?
It is well known that traditional computer cities are all over the world. They are all the biggest competitors of Hongtu Sanko.
But the model adopted by computer cities is often a leasing system, which means that the computer city only provides the venue, while the products and logistics are taken care of by the leased dealers themselves. Under this model, it is difficult for individual dealers to form a scale effect, and they also lack the right to speak in logistics. Scattered operations ultimately make manufacturers, computer city, dealers, consumers, the interests of the four parties, it is difficult to truly meet.
But Hongtu Sanko is different, it will position itself as a large terminal retailer, the entire store own business. Hongtu Sanko chose such a positioning because over the years, the strong channels represented by Wal-Mart, Carrefour, Gome and Suning have become a brand symbol of quality and credibility, and have great appeal and influence on the terminal market. Similarly, if IT manufacturers want to enter the East China market, they can not ignore the 35 strong chain stores of Hongtu Sanko single-handedly take all the key market's enormous control. At this point, manufacturers have no choice but to enter the market, they must enter the Hongtu Sanko.
Different strategic positioning leads to different scale effects, and ultimately, the benefits of scale gained by Hongtu Sankyo are:
1) Large supply of manufacturers and low prices. This is the most important condition for Hongtu Sanko to accelerate the turnover at a lower price than its competitors;
② More favorable billing period. Cash holdings are greatly increased and cash turnover is more benign;
③ Product buyout. Huge sales volume makes manufacturers willing to let Hongtu Sankyo sell their new products exclusively;
④ Product specialization. Unique products customized by Hongtu Sankyo to manufacturers.
None of these benefits are available to dealers inside traditional computer cities, and when their products don't sell, Servcorp has already turned around I don't know how many times.
Just because the decision-makers strategically positioned themselves differently, the two businesses have completely different fates.