When is it time for strategic planning?

Q: In general, retail sales have been on an upswing in recent months, with strong gains throughout the holiday season and unseasonably warm temperatures boosting early 2012 spring sales. Considering this trend, how do you feel retailers should approach outside help when business is good? Is it just as important to have strategic planning in place when margins are high, and sell-through is consistent?

A: When business is good, you need to focus on maximizing your profits and setting a higher precedent. You need to develop a cushion in preparation for the leaner times, to avoid dropping below a new standard of profitability.

Whether your business is doing poorly, just maintaining, or operating at a high level of profitability, outside services can be helpful; there’s no “best” time to utilize outside planning services. I’ve found that retailers can become overconfident when they’re operating at a higher volume–inventories become mismanaged, and long-term goals become more difficult to execute.

Simply put, performance needs to be managed whether business is good or bad. If you hope to grow your business to a higher standard of profitability, managing your inventory and strategically allocating extra capital is critical if you want to maintain high margins.