Smart forecasting

When cash flow and inventory pressures are high, realistic forecasting is essential. Taking a conservative approach, such as ordering 1,000 units instead of 2,000, with a plan to reorder if demand is strong helps avoid tying up capital in stock that may later need to be discounted. This strategy supports better financial control and reduces risk.

Seek an outside opinion

It’s highly beneficial to consult an external, experienced expert. Their unbiased perspective can offer clearer insights, as they understand the market without being emotionally invested in your business.

The impact of tariffs

The business landscape is in constant flux. Recent changes, like the new American tariffs, have profoundly impacted China and global businesses that failed to adapt quickly.

Consider the challenges faced by American businesses importing outdoor furniture. Between the time their stock left China and arrived in America, tariff rules changed dramatically. As a result, they are left with millions in stock and increased tariff obligations.

Their original pricing was based on the previous tariff structure, necessitating a complete overhaul of their pricing model and the re-tagging of every item.

This highlights the importance of rapid adaptability. If inventory isn’t selling at the expected price, adjusting the pricing to move the stock is essential to avoid accumulating excess inventory.

The problem with ‘pet projects’

I’ve been in meetings where we discussed expensive clothing that designers love but the average person might find too creative. That didn’t go over well. I’m no fashion expert, but you have to ask: what’s this product supposed to achieve?

Fashion designers often have passion projects, products they love but that might not make money.

The 5,000% success story

We had amazing success with a high-end fashion brand. We bought 400 pairs of leather trousers from China and sold them all in about four days, making close to 5,000% profit.

Sometimes courageous decisions need to be made, and we hope they work out. But if there’s demand for something, it needs to get to market at the right time and price, that’s the real art of retail.

The science is balancing this creative instinct with good business sense and profit management.

Why most forecasts are wrong

Most people don’t build enough conservatism into forecasts; assuming everything is expected will go to plan, which is unlikely to happen consistently. Forecasts become what brands are held accountable for, and when sales or margins fall short of the forecast, everything is placed under pressure.

Always take a conservative view of what you can realistically achieve. Plan for the minimum and hope for the best (it’s a strategy that works for Jack Reacher).

Focus on what you know

For a business that has been operating for 20-30 years, identify the revenue that can be absolutely relied upon. Build the cost structure based on what the business is certain it can deliver, rather than on optimistic projections.

If sales and margin exceed expectations, use the surplus to reduce debt, pay suppliers faster, fund expansion or address other business needs. Avoid immediately increasing costs under the assumption that favourable conditions will persist, staying disciplined helps protect long term stability.

The calm that comes from conservative planning

When conservative forecasts are met, it brings stability to the business, builds confidence and reassures the team that the business is operating within its limits and will continue to do so. With that foundation in place, people can shift focus to extra opportunities that add 2%, 3%, or 5% to performance.

Building credibility

Consistently delivering on promises builds credibility. For example, if payments on a two-year plan are completed in 18 months due to better-than-expected business performance, it signals effective management and earns trust from suppliers and other stakeholders.

Conservative forecasting builds trust with suppliers and other stakeholders because they perceive reliability. This strengthens relationships and creates opportunities, as people are more willing to support businesses that consistently meet their commitments.

The bottom line

Give the business the capacity to deliver on promises, then work from there. This may require adjusting the cost structure to make it viable, but the goal is to make sound decisions without placing unnecessary pressure on the business or its people.

A forecast doesn’t need to be exciting; it needs to be achievable. It should serve as the foundation of the business. Be conservative, be realistic, and treat any upside as a bonus. In retail, there are already enough hurdles and unexpected setbacks without adding more stress through overly optimistic planning.