To do this and end up with $450,000 in sales, she would need an inventory of $77,000 ($450,000 x 0.60 divided by 3.5). This would raise her initial cash requirement by $47,000. With that much cash investment needed, her business idea probably is not worth pursuing unless she can generate a good deal more profit than her Profit and Loss Forecast indicates. This would undoubtedly mean raising sales projections, and otherwise trying to force profits into a questionable business. If your retail business has an inventory turnover of three to four times per year, youll be doing pretty well. Many retailers are able to average only one or two turns per year.     Many people who plan new retail businesses expect to start with a fairly small inventory because they dont have much capital to invest. This will very likely cause problems if the sales figures they expect this inventory to produce are too high. For example, if you plan to sell widgets, but can only buy a starting inventory of $10,000 at cost, it would seem unlikely that you could produce sales of $200,000 per year. Even assuming you doubled the price of the widgets, this would mean turning your inventory over ten times in the year. For most businesses, it simply isnt realistic to expect inventory to turn over even seven or eight times a year.     Many retailers make a similar mistake; some catch the mistake at this stage, some catch the mistake when they have a business consultant review their plan and some never catch it. They just sink slowly into bankruptcy, wondering why sales never met projections.     What about Antoinette and her inventory problem? I shall continue with Antoinettes original assumptions, including those for inventory turnover. This book is simply not set up to go back and revise all her numbers. Second, I want Antoinettes problem (the fatal flaw in her plan) to really sink in. I hope Antoinettes predicament will give you a vague feeling of unease as you continue to read her plan. The lesson is this: Just because a business plan appears to be thorough and looks good on paper, thats no guarantee that it will be successful. It pays to be skeptical.     2. Typical Problems Retailers Face     You can skip the rest of this chapter if youre not planning to run a retail business. Otherwise, youll find the following discussion extremely useful.     Heres what Antoinette should have known about inventory. Inventory management separates the professionals from the amateurs in the retail business. Inventory is usually the biggest single investment a retailer makes. Commonly, it happens that a retailer shows a high taxable income, but no cash. Why? Because all her cash went into increasing the inventory. The goals of inventory management are: to have a wide enough selection of new, fresh merchandise to appeal to customers     to quickly reduce or eliminate items that move slowly, and     to keep the overall investment in inventory in line with profit expectations.     Good retailers keep current with the merchandise customers want now. They make it a point to always have the popular items in stock. No self-respecting popular music store would be caught dead without the top ten CDs and tapes in stock. Good retailers quickly mark down slow moving items for a quick sale. They then use the cash from selling these dead items to buy new and popular ones. For example, there is nothing sadder than a small bookstore still trying to sell last years hard cover best seller when the drug store down the street already has the paperback