Next. The Retailer That Won’t Trust a Good Summer.
Autumn Term, Lesson 3. Can you afford to hire on the back of your best month? Before you decide, it’s worth knowing what Next did with its own.
Autumn Term is a weekly series from WrightCFO, a UK fractional CFO practice, on what the numbers were saying in well-known businesses, the ones that went wrong and the ones that got it right.
The short version
- Many owner-managers decide they can afford to hire after an unusually good month, then find that sales return to normal while the new costs stay.
- In August 2026 Next reported sales £70 million ahead of forecast, largely thanks to warm weather. It calculated that the extra sales were worth £15 million of profit, not £70 million.
- Next then left its forecast for the rest of the year unchanged, treating the good summer as a one-off rather than a new normal.
- The same discipline works in a £2 to £10 million business: know what an extra £100,000 of sales really leaves you with, and be honest about how certain the money is.
- A signed contract is a promise to pay, not cash in the bank. Test whether you could still pay everyone if it never arrived.
Think back to the best month your business has ever had.
The work came in faster than you could quote for it. The bank balance looked like it belonged to a proper company, and for the first time in a while you went home thinking you might have cracked it.
That’s usually when the big decisions get made
You hire the person you’ve needed for a year, because you’re flat out and it would be mad not to.
Maybe you sign for the bigger office as well, or the second van, or the software you’d been putting off. It all feels sensible, and at the time it is, because you’re planning from the month you’ve just had.
Then it goes quiet again
A big client finishes their project. The next contract goes out to tender, or the season turns out slower than the last one.
Sales drift back to where they were, and everything you took on stays exactly where it is.
If you’ve been there, you’ll remember how it felt. The bank app open on a Sunday evening, working out whether payroll clears on the 25th if the big invoice doesn’t land by Friday.
The person you hired in the spring, who you like and who left a steady job to join you, doesn’t have quite enough to do. You both know it.
So you pay yourself a bit less for a couple of months, and you don’t mention it at home.
Nobody did anything stupid. A good month was treated as a normal one, and the costs were set to match.
Next nearly went bust doing the same thing
Most of us have bought something from Next, even if it was only school trousers the week before term. Fewer people remember that it very nearly didn’t survive the late 1980s.
It grew as though the boom would last forever, buying businesses and borrowing to do it. When the boom ended, the new management spent three years selling almost everything that had been bought. At one point the shares were worth less than 10p.
It’s now held up as one of the best-run retailers in the country, and what it did with its good summer this year is the opposite of everything I described above.
What did Next do with a good summer?
In August Next told its shareholders it had sold £70 million more than it expected, largely because the weather was warmer than it had planned for.
Then it did two things I would love to see more owner-managers do.
The first was putting a real value on the good news. The extra £70 million of sales was worth £15 million of profit, because selling more clothes means buying, delivering and advertising more clothes.
The second was leaving the rest of the year alone. Next didn’t assume the warm weather would come back, so it didn’t change its plans for the autumn. It took the good summer, counted it, and carried on as though it had been an ordinary one.
You could call that cautious, and it is. It also means a quiet autumn can’t hurt Next the way the end of the boom nearly did thirty-odd years ago.
What is an extra £100,000 of sales really worth to you?
You don’t need to run a FTSE 100 company to do what Next did, and two things make most of the difference. The first is knowing what an extra £100,000 of sales actually leaves you with.
It’s never £100,000. In a service business a good chunk of it goes on the people who deliver the work. In a product business it can be well under half, once the stock, the delivery and the discounts are paid for. (For what exceptional margins look like, see Games Workshop.)
If you’ve been treating extra sales as if they were extra profit, every hire you’ve made on the strength of them looks cheaper than it really is.
A signed contract is a promise, not money in the bank
The second is being honest with yourself about how certain the money is. The weather, one big order or a competitor having a bad patch are obviously not to be built on.
A signed contract feels different, and mostly it is. But it’s still a promise to pay rather than money in the bank, and the further away the customer is, the longer it can take to find out which one you’ve got. (Carillion learned the same lesson at a much bigger scale.)
The contract that never got paid
Years ago I worked with a business that won the biggest contract it had ever seen, a programme funded by a local government in the Far East. It was signed, it was official, and it was exactly the sort of win you’d build a plan on. They hired permanent staff to deliver it, bought the stock and did the work properly.
Then the paperwork started. Every few months a different official had to approve the invoice, and each election changed the rules again.
Requests for more documentation kept arriving, always polite, always reasonable-sounding, and none of it ever led to a payment. After a year of it, it was clear the money was never coming.
The delivery costs had already gone out. The stock was worthless to anyone else.
And a group of people who had been hired on the strength of that contract had to be let go, which is the part the founder still thinks about.
The business survived it. It took years to rebuild what that one contract cost.
Four questions to ask before you hire on the back of a good month
- Can you explain in one sentence why the good month happened? If the answer involves luck, the weather or a single customer, don’t build on it yet.
- What would an extra £100,000 of sales leave you with once you’ve paid to deliver it?
- If that one customer never paid you, or simply went away, could you still pay everyone you’re planning to take on, and for how long?
- Have you decided what you’ll do with the cash if the year goes well, before it arrives?
If you’re about to hire, or sign something you’ll be paying for years, on the back of a strong few months or a single big contract, that’s the conversation to have first.
We can work out with you what that work is really worth once you’ve delivered it, what the business could carry if the money arrived late or not at all, and how to grow without betting the payroll on one customer.
Thirty minutes, and nothing for you to send me beforehand. You can book a slot directly with me here.
Sophie
Frequently asked questions
How do I know if I can afford to hire?
Base the decision on the sales you can reasonably rely on, not your best recent month. Work out what extra sales actually leave you with after the cost of delivering them, then check you could keep paying the new hire for at least several months if sales fell back or a major customer paid late.
What did Next say in its August 2026 trading statement?
Next reported full-price sales £70 million ahead of forecast in the second quarter, mainly due to warmer-than-expected UK weather and stronger overseas demand. It said the extra sales added £15 million of profit, raised full-year profit guidance by £25 million to £1,243 million, and kept its sales guidance for the rest of the year unchanged.
Why is extra revenue not the same as extra profit?
Every additional sale carries costs: stock, delivery, staff time, discounts and marketing. What is left after those costs is the contribution, and that is the figure to use when judging whether new overheads such as salaries or premises are affordable. Next’s £70 million of extra sales produced £15 million of profit, roughly 21p in every pound.
How did Next nearly go bust in the 1980s?
Next expanded rapidly in the 1980s, buying businesses and borrowing to fund them. When the boom ended it was left over-stretched, its share price fell to a few pence, and under David Jones and David Wolfson it spent the early 1990s selling businesses and closing unprofitable stores before returning to profit.
Should I build my budget around a signed contract?
A signed contract is a strong signal but not cash. Before committing permanent costs to it, consider the customer’s payment record, how far away they are, and what happens if payment is delayed or disputed. Plan so the business could survive if that single contract were never paid.
Sophie Wright is the founder of WrightCFO, a fractional CFO practice of eleven Chartered Accountants founded in 2014. We work with founder-led and private equity-backed businesses across the UK, mostly between £1 million and £10 million in revenue, on budgets and forecasting, board reporting, exit readiness and post-acquisition integration.
Previous lesson: BHS. The £571 Million That Was in the Accounts All Along.
Sources: NEXT plc, Trading Statement for Quarter 2 (5 August 2026); Retail Gazette on the profit upgrade (August 2026); Management Today, interview with David Jones; MoneyWeek, on Next’s history (October 2025).
Photo by Julie Kicova on Unsplash.
