Turnovers & Takeaways
True football fans, particularly those like me who consider football a religion rather than a mere obsession, speak an entirely different language than you normal people. While I am, like other “NFLians” bound by a certain code of honor, I’m going to let the rest of you inside our secret world: just this once!
Football statistics have become a legitimate science on par in complexity with theoretical mathematics and quantum physics. Most of you know the basics, a touchdown is the prized commodity, a quarterback is better when he throws more touchdowns than interceptions, runners are great when they log more than 100 yards in a game. One of the statistics most meaningful to those of us who consider ourselves true football intelligencia is a mystery to the casual fan: TO/TA.
“TO” stands for “turnovers.” This is how may times you lost possession of the ball to the other team. If you’re an exorcist “possession” might be a bad thing; in football and business, it’s everything!
“TA” is “takeaways.” That’s how many times you took the ball from the other guys. “TO’s” and “TA’s” are reduced to an elegantly simple statistical construct called the “Turnover Ratio.” As you might well imagine, if your Turnover Ratio is positive, you’re taking more than you’re giving and you’re much more likely to win.
In the moment, it doesn’t always seem that turnovers are a factor; you might be moving the ball well, you might be beating the other team up and down the fields, but keep turning the ball over and you can be beaten by an inferior opponent. Over the course of a season, the teams with the best Turnover Ratios are nearly always the teams contending for a championship.
If you’re in the retail business and you sell your product for less than you paid for it, your Turnover Ratio is going to be negative and will be proportionately represented on your profit and loss statement. But of course, that’s just plain idiocy! Why would anyone sell any product or service for less than what it costs?
Just like a confident team that’s giving the ball away; the cost of turnovers isn’t always evident until the final gun. Do you have “hidden” costs that reduce or even eliminate the margin on your products? Are you keeping close tabs on increases in shipping costs and adjusting your prices accordingly? Are you paying attention to the cost of human resources necessary to deliver your product? There are specific break points when expansion or increased demand requires the commitment of greater resources; sometimes it takes a while for the margin to catch up to the increased resources. These are the turnovers; pay close attention to them.
Turnovers can be even more dangerous in service businesses. Without the hard cost of inventory or cost of goods sold it’s imperative to track carefully the cost of producing each hour of service. Your time is your inventory and you’re the goods being sold. It’s important to keep track of hidden costs that relate to your service including training and travel.
I recently analyzed a part of my business in which I invested more than 5 years, and incurred a net loss of $1,000 over that time. At first that relatively small amount might look like a single fumble. In reality, the net effect of this negative Turnover Ratio cost me many times that one thousand dollars in time and resources that could have been directed toward more productive projects. I was moving forward confidently, knowing I could get the ball back. At the same time, I was losing the game!
Givers do get; in a philosophical sense. You’ve got to give your best effort, you’ve got to give your time, you’ve sometimes got to give without concern for what you’re getting back, however…
…in the end your Turnover Ratio in business has got to be consistently positive. If you’re not taking away more than you’re giving in dollars and cents, you’ll soon find yourself with nothing left to give!
Been there, done that: SUCKS!
I’m not a football evangelist; well, that’s not true, I am. For now I’ll promise not to try and convert you to the dark side of endless Sunday afternoons and sleep deprived Tuesday mornings. Football has provided me with a number of great lessons in life and business; I just wanted you to take away this one!
Have a question for Jim? Ask or leave a comment below!