The $20–30M Inventory Reality Check
Why This Exists
Between ~$20–30M, inventory stops being a rounding error and starts becoming a balance-sheet decision.
Most founders don’t feel like they’re “bad at forecasting.”
What’s actually happening is more subtle:
- The business has outgrown the planning logic
- SKU count has crossed an invisible threshold
- Decisions are being made faster than systems can explain them
This guide is meant to surface whether your demand plan still reflects reality—before overproduction, write-offs, or cash crunches force the issue.
1. Ten Questions That Reveal Forecast Integrity
These are not trick questions. Strong teams can answer them calmly and consistently.
Can you explain why next month is higher or lower without opening a spreadsheet?
If the answer is “that’s just the growth rate,” the forecast isn’t explanatory.
Does your forecast change meaningfully at the SKU level or just in total dollars?
Flat growth by SKU feels conservative. It’s usually blind.
Can ops, finance, and marketing independently describe the same demand story?
Misalignment here shows up later as excess inventory.
Do promotions and launches change the forecast before inventory is committed?
If updates happen after POs are placed, planning is lagging execution.
Can you see which SKUs are driving volatility vs. stability?
Not all products deserve the same planning precision.
Do discontinued or end-of-life SKUs still “grow” in the model?
This happens more often than teams expect.
Is seasonality applied globally or by SKU family?
Seasonality is rarely uniform.
Can you trace a single forecast number back to a real assumption?
If no one owns the assumption, no one owns the risk.
Does your forecast inform purchasing or just justify it?
Planning that only validates decisions isn’t planning.
If demand missed by 15%, would you know where and why within a week?
That’s the difference between noise and signal.
2. Where Teams Lose Visibility as SKU Count Grows
The break doesn’t happen all at once. It happens quietly.
Common inflection points we see:
- 20–40 SKUs: Planning still works, but manually
- 50–100 SKUs: Exceptions start to dominate outcomes
- 100+ SKUs: Aggregates hide more than they reveal
Visibility usually erodes in three places:
- SKU lifecycle: New, core, and declining products treated the same
- Packaging & fulfillment logic: Unit economics assumed, not recalculated
- Decision timing: Forecast updates lag real demand signals
The result isn’t chaos.
It’s false confidence.
3. Warning Signs Before Overproduction Happens
Overproduction rarely feels reckless in the moment.
Early signals include:
- Inventory growth outpacing revenue growth—even slightly
- Increasing “temporary” storage solutions
- Longer conversations explaining why inventory is okay
- Heavier reliance on blended averages
- Founders stepping in to approve buys more often
By the time write-downs appear, the decisions are already months old.
4. What “Good” Demand Planning Actually Looks Like
Good planning is not perfect prediction.
It’s shared understanding.
At this stage, effective demand planning:
- Explains demand, not just projects it
- Separates signal from noise at the SKU level
- Adjusts for lifecycle, not just growth
- Connects demand → inventory → cash explicitly
- Updates at a cadence that matches decision speed
Most importantly:
It reduces founder involvement instead of increasing it.
5. The Inventory Reality Check — Self-Assessment Scorecard
Score each statement from 1 (Not True) to 5 (Consistently True)
Forecast Quality
- Our forecast changes meaningfully by SKU
- We can explain forecast changes in plain language
- Assumptions are documented and owned
Visibility
- We know which SKUs drive most volatility
- Lifecycle stages are reflected in planning
- Seasonality is applied intentionally
Decision Support
- Forecasts inform purchasing decisions early
- Inventory risk is visible before POs are placed
- Misses are diagnosed, not rationalized
Team Alignment
- Ops, finance, and marketing share the same demand narrative
- The founder is not the default backstop
Scoring
- 40–50: Planning is doing its job
- 30–39: Risk is manageable but rising
- Below 30: Inventory is likely already getting expensive
Closing Thought
Most inventory problems are planned months in advance.
Not because teams are careless, but because systems stop keeping up with reality.
This reality check isn’t about blame.
It’s about clarity.
Clarity is the kindest thing you can give your team and your balance sheet.
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