Free tool
GMROI calculator (gross margin return on inventory)
How much gross profit does each dollar of inventory earn you? Enter revenue, cost of goods sold and average inventory.
The GMROI formula
Example: $180,000 revenue, $90,000 COGS and $30,000 average inventory. Gross margin is $90,000, so GMROI = 90,000 ÷ 30,000 = 3.0. Every dollar on the shelf earned $3 of gross profit.
How to raise it
Carry less of what sells slowly, and keep best-sellers in stock. Both come down to ordering from real sales velocity. See inventory turnover and cash tied up in inventory.
FAQ
What is a good GMROI?
Above 1 means each dollar of inventory earns back more than a dollar of gross profit. Many retailers aim for 2 or higher, but it varies a lot by category and price point.
GMROI vs inventory turnover?
Turnover shows how fast stock sells. GMROI shows how much gross profit each dollar of stock earns, so it also reflects your margin.
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