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Writer's pictureJuly House

Maximizing Your Profits—Deciding Which Products to Keep and Which to Drop for Greater Profitability

Updated: Sep 17, 2024




Deciding which products or services to keep is like swiping on a dating app—choose the ones that spark joy and trash the rest. We'll show you how to identify your top-selling products and let go of the ones that aren't worth your time (boy bye). As a business owner, your time and resources are precious. Deciphering which products are worth the investment and which ones to let go can significantly impact your profitability and growth. In this post, we’ll guide you through identifying top-selling products and eliminating those that aren't worth it.


Heads up... This post might seem a bit dry, but these details matter! We've aimed to make this topic easy to understand and implement, so we can get back to the fun stuff. Stick with us, okay?


Step 1: Analyze Sales Data


Review Historical Sales Data


Start by diving into your historical sales data. By analyzing these metrics, you can identify which products consistently perform well. Look at the following metrics over the past 6-12 months:

  • Total Sales Volume: How many units of each product have you sold?

  • Revenue Generated: How much revenue has each product generated?

  • Profit Margins: What is the profit margin on each product after accounting for costs?


**Example: If you own a boutique selling clothing, here’s how you might analyze the data for two products: summer dresses and winter coats.


Summer Dresses:

  • Units Sold: 500

  • Revenue: $50,000

  • Profit Margin: 30%


Profit Calculation: $50,000 * 0.30 = $15,000


Winter Coats:

  • Units Sold: 50

  • Revenue: $10,000

  • Profit Margin: 20%


Profit Calculation: $10,000 * 0.20 = $2,000


Clearly, summer dresses are a stronger performer, generating a higher profit of $15,000 compared to $2,000 from winter coats.


Use Sales Reports


Generate detailed sales reports from your Point of Sale (POS) system or e-commerce platform. Look for trends such as seasonal spikes, repeat purchases, and customer favorites.


**Example: Your POS system might show that during the holiday season, gift sets sell particularly well. This insight can help you prepare inventory and marketing campaigns in advance.


Step 2: Evaluate Customer Feedback


Collect Customer Reviews


Customer reviews are a goldmine of information. Products with consistently high ratings and positive feedback are likely worth keeping in your inventory.


Conduct Surveys


Send out surveys to your customers asking them about their favorite products and what they'd like to see more of. This direct feedback can help you understand customer preferences and potential gaps in your product line.


Step 3: Assess Market Trends


Industry Research


Stay informed about market trends in your industry. What products are trending? Are there new innovations or shifts in consumer behavior that you should be aware of?


**Example: If you're in the tech industry, you might notice a growing trend towards wearable technology. Incorporating smartwatch or fitness tracker accessories into your product line could be a profitable move.


Competitor Analysis





Keep an eye on your competitors. What are their top-selling products? Are they discontinuing any items? This can provide insights into market demands and potential opportunities. What do their reviews say? It doesn’t mean you need to copy your competitor; take the information as a data point. You can collect a lot of data from their customers based on what they love, like, and dislike.


**Example: Observe your competitors' online presence and digital marketing strategies to refine your own e-commerce tactics and expand your reach online.


Step 4: Calculate ROI


Cost-Benefit Analysis


Conduct a cost-benefit analysis for each product. Consider production costs, marketing expenses, and the time required to manage inventory. Compare these costs against the revenue and profit generated by each product.


**Example: If a product costs $5 to produce, requires $2 in marketing, and sells for $15, your profit is calculated as follows:

  • Cost: $5 (production) + $2 (marketing) = $7

  • Revenue: $15

  • Profit: $15 - $7 = $8


Compare this to another product that costs $8 to produce, $5 in marketing, and sells for $20:

  • Cost: $8 (production) + $5 (marketing) = $13

  • Revenue: $20

  • Profit: $20 - $13 = $7


The first product has a better ROI with a profit of $8 compared to $7 for the second product.


Inventory Turnover


Measure the inventory turnover rate for each product. A high turnover rate indicates strong demand, while a low turnover rate suggests that a product may not be worth restocking. Ultimately, you'll determine what qualifies as high versus low turnover for your business, but researching typical turnover rates in your product category or industry can provide valuable insights.


**Example: If the basic t-shirts have a high turnover rate, selling out every 2 weeks, it's a sign that you should keep them in stock. Conversely, if your decorative vases have a low turnover rate and sit on shelves for months, they might not be worth restocking.


Step 5: Identify Underperforming Products


Low Sales Volume


Products with consistently low sales volume are clear candidates for discontinuation.


**Example: If your artisanal jams only sell a few jars each month compared to hundreds of units of your best-selling cookies, it might be time to stop producing the jams.


High Return Rates


Products with high return rates can be a drain on resources and indicate potential quality or satisfaction issues.


Negative Feedback


Products that receive frequent negative feedback or complaints may not be worth the

effort to improve or continue selling.


Step 6: Make Data-Driven Decisions


Categorize Your Products


Segment your products into categories based on their performance:

  • Top Performers: High sales, high revenue, and positive feedback.

  • Moderate Performers: Steady sales and revenue, generally positive feedback.

  • Underperformers: Low sales, low revenue, and frequent negative feedback.


**Example: Your analysis might show that your organic soaps (top performers) should be expanded, your scented candles (moderate performers) should be promoted more, and your bath salts (underperformers) should be phased out.


Decide on Actions


For top performers, consider investing more in marketing and inventory. For moderate performers, evaluate if minor adjustments or promotions could boost sales. For underperformers, decide whether to discontinue, discount, or improve the product.


Step 7: Monitor and Adjust


Regular Reviews


Make it a habit to regularly review your product performance metrics (we suggest putting this in your calendar). Quarterly or bi-annual reviews can help you stay on top of market changes and consumer preferences. Put this in you


Stay Agile


Be prepared to adjust your product line based on your findings. Flexibility and

responsiveness are key to maintaining a profitable and efficient inventory.


**Example: If a new trend emerges, such as a sudden demand for eco-friendly products, quickly adjust your offerings to include more sustainable options.


Putting It All Together


By following these steps, you can streamline your product offerings, focus on top sellers, and ensure that your time and resources are invested wisely. Remember, the goal is to maximize profitability and customer satisfaction while minimizing waste.


 At July House, we’re here to help you grow, connect, and achieve success. Book a consultation with us and let’s get started on your journey to greatness!


Your partners in growth,

July House Consulting

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