THE BARATELLI INSTITUTE · Mentoring at Scale
FOR EQUIPMENT DEALERS · HVAC · RESTAURANTS · SOLAR INSTALLERS · CONTRACTORS · ANY OPERATOR WITH INVENTORY

Cash sleeps on a shelf. How much of it is yours?

Every operator with parts, food, spares, or finished goods has working capital trapped in physical inventory. Most never measure it. Turns, days on hand, A/B/C/D mix, the carrying cost nobody books to the P&L, the dead-stock cash in the back corner, and the stockout cost when the truck shows up without the part. Run it once with your real numbers and the next reorder conversation gets different.

Turns / yr
vs benchmark
Days on hand
cash velocity
Dead stock $
recovery target
Carrying cost
the hidden line
YOUR INVENTORY
1
Inventory basics
2
A/B/C/D mix
3
Carrying cost
4
Stockout & obsolescence
5
Results & recommendations
STAGE 1 OF 5

Inventory basics

Defaults are typical for a mid-size dealer or contractor running ~$2M of parts on the floor with $7M of pass-through COGS.

Shapes benchmark turns — food spoils, electronics obsolete, structural steel sits.
Average inventory value across the year, at landed cost — not retail. Use the trailing 12-month average if you have it.
$
12-month parts COGS — what flowed off the shelf into jobs, sales, or production at landed cost.
$
Distinct part numbers / line items on the shelf. Dealers: 5K-25K. HVAC truck: 200-800. Restaurant: 300-1200.
Blended margin across all parts sold. Dealer parts: 28-38%. HVAC: 30-45%. Restaurant food: 65-72%.
%
What this tool actually measures. Inventory turns and days on hand are the two oldest operating metrics in commerce, but most operators run them once a year for the audit and never use them. This tool turns them into a working-capital decision: how much cash is parked, what would two more turns free up, and what is the dead-stock corner actually worth if you stop pretending. Run it with your real ERP extract.
STAGE 2 OF 5

A / B / C / D mix — the Pareto cut

The 80/20 (or 95/5) cut of inventory is the most useful single chart in operations. A-movers fund the business; D-movers are dead weight. Most operators have far more D than they think.

A-movers = top 80% of revenue. Usually only 15-25% of SKUs. If your A% is much higher, your cut is too generous.
%
B-movers = next 15% of revenue. Usually 25-35% of SKUs.
%
C-movers = last 5% of revenue. Slow but still selling. Usually 30-40% of SKUs.
%
No sale in 12+ months. Typical dealer: 15-25%. If your D is below 10%, you may be defining it too narrowly.
%
The Pareto cut by value, not just count. The tool estimates dollar value tied up in each tier using the standard inventory distribution (A holds ~55% of inventory $; D ~8-15%). Override D below if you have a real ERP cut.
Carrying-cost cash trapped in items with no movement. Override the estimate if you have an aging report.
$
Cents on the dollar if you push the dead corner. Typical: 15-35% via secondary market, scrap, or vendor return-to-stock.
%
STAGE 3 OF 5

Carrying cost — the line you don't book

Carrying cost is warehouse + insurance + capital + shrink + obsolescence. The textbook range is 18-28% of inventory value annually. Most operators have never put it on the P&L — which is why it never gets managed.

Rent + utilities + racks + WMS + warehouse labor allocated to inventory holding. Typical: 4-8%.
%
Property tax on inventory (where applicable), commercial property insurance attributable to stock. Typical: 1.5-3%.
%
Your effective cost of money. Line of credit rate, or weighted cost if mixed financing. SMB 2026: 8-12%.
%
Theft, breakage, miscounts. Restaurants and small parts: 1-3%. Industrial parts: 0.5-1.5%.
%
Actual dollars written down or scrapped in the past year. If your number is zero, you're either tiny or not looking.
$
STAGE 4 OF 5

Stockout cost & the other side of the trade

Carrying too much is expensive. Carrying too little is more expensive — you just don't see it as a line item, because the customer walks away. This stage estimates lost-sale cost.

Of all line items requested, the % you couldn't fill same-day. Best-in-class dealer: 2-4%. Average: 7-12%. Trouble: above 15%.
%
Of stockouts, % that result in a permanent lost sale (customer buys elsewhere). Typical: 30-55%.
%
Total parts revenue subject to stockout risk. Roughly COGS / (1 - margin).
$
What you'd like to hit. Dealer benchmark: 4-6. HVAC: 6-10. Restaurant: 24-52. Solar: 3-5.
The two-sided trade. Inventory optimization is not a one-way push toward "less stock." It's a balance: carrying cost on one side, stockout cost on the other, with vendor terms and lead times as the modulators. The right answer for an emergency-service HVAC truck (high stockout cost, low carrying cost) is very different from a dealer's slow-moving D-tier (low stockout cost, high carrying cost). The tool calls out where you sit.
STAGE 5 OF 5

Results & recommendations

The full working-capital picture — turns, days, carrying cost, dead-stock recovery, stockout cost — on one page.

HERE, TRY THESE. THEY MAY HELP.

Three honest links — no forms, no email capture.

The inventory math is the easy part. The harder part is the operating discipline that follows — reorder points, vendor terms, cycle counts, dead-stock liquidation cadence, the conversation with your lender about working-capital efficiency. The guides walk through it.

CFO & Controller's Guide Business Operators Blueprint All free tools
Practitioner reference. Outputs are estimates based on user inputs — use your ERP / WMS / accounting extract for production decisions. Inventory accounting (FIFO / LIFO / weighted-average / specific identification) and lower-of-cost-or-NRM reserves under ASC 330 are jurisdiction- and method-specific; consult your CPA. Carrying-cost percentages are operator estimates, not GAAP categories. This is not financial, tax, legal, or accounting advice.
WANT THE METHODOLOGY BEHIND THIS TOOL?
This calculator pairs with CFO & Controller's Guide and Business Operators Blueprint.
The tool gives you the inventory math. The guides give you the surrounding operating discipline — ASC 330 reserve accounting, reorder-point methodology, vendor consignment negotiation, cycle counting cadence, and the working-capital conversation with your lender. Three honest links. Here, try these. They may help.
CFO & Controller's Guide → Business Operators Blueprint → All free tools
PROFESSIONAL DISCLAIMER · PLEASE READ

Educational and informational purposes only. This calculator and any output it produces are intended solely for general educational and decision-support purposes. They do not constitute investment, tax, legal, accounting, appraisal, lending, insurance, or any other professional advice, and they do not create a fiduciary, attorney-client, accountant-client, or advisor-client relationship of any kind.

Estimates based on your inputs. All results are estimates derived from the data and assumptions you provide. Inventory accounting under ASC 330 (lower-of-cost-or-NRM, FIFO/LIFO/weighted-average methods), tax treatment of inventory write-offs, and lender-collateral valuations are jurisdiction- and method-specific. The Baratelli Institute, its affiliates, and any co-branding professional make no warranty of accuracy, completeness, currency, or fitness for any particular purpose, and disclaim all liability for decisions made in reliance on the output.

Consult your own qualified professionals. Before acting on anything calculated here, consult your own CPA, controller, lender, or operations advisor licensed and experienced in your industry and jurisdiction. The Baratelli Institute is a publisher of practitioner reference material. It is not a registered investment adviser, broker-dealer, law firm, accounting firm, appraisal firm, or lender.

Co-branded versions: If a professional advisor's name and contact information appear on this tool, that advisor has elected to make the tool available to clients as a courtesy. Inclusion of an advisor's name does not constitute the advisor's endorsement of any specific result.