In business, profitability should be the driving force behind every decision you make. Yet, many entrepreneurs find themselves holding onto products or services that don’t bring in the profits they should. Today, we’re diving into how to ensure you’re only selling what truly benefits your bottom line.
Every business has a flagship product or service—something that’s key to attracting new customers. This gateway offering might not be the most profitable, but it plays a crucial role in drawing people in. That’s not what we’re talking about today. Instead, we’re focusing on those items in your lineup that are draining resources without delivering sufficient returns.
It’s common for business owners to stick with unprofitable products simply out of habit or because they believe customers expect them. But if these offerings are eating into your profits, it’s time to rethink your strategy. The fear of losing a few customers shouldn’t hold you back from making decisions that can significantly boost your profitability. In fact, letting go of these products can often lead to better financial health overall.
If you’re hesitant to cut a product or service entirely, there are ways to turn unprofitable items around. Here are three proven methods to ensure that everything you sell is contributing positively to your business:
1. Revamp or Replace the Product for Profitability
If a product isn’t pulling its weight, consider updating or replacing it with something more appealing—and charge accordingly. Enhancing its features or rebranding it can often justify a higher price point. Communicate the changes clearly to your customers, explaining the value they’re getting with the new version. If they still want the older version, make it available as a premium option at a higher cost.
2. Discontinue the Product Entirely
Sometimes, the best course of action is to stop offering a product or service altogether. Be upfront with your customers about why it’s being discontinued. When I decided to stop providing certain services like bookkeeping, I didn’t just cut ties. I partnered with a specialized firm to take over these tasks, ensuring my clients were still taken care of. This decision allowed us to focus on our strengths and significantly boosted our profits.
By eliminating these low-margin services, we saw a drop in sales but a substantial increase in our bottom line. Why? Because we freed up resources to focus on more profitable areas, proving that sometimes less is indeed more.
3. Start Charging for Previously Free Offerings
Many businesses offer free products or services as a way to attract customers. While this can be effective in some cases, it’s crucial to assess whether these freebies are hurting your profitability. If they are, it’s time to start charging for them. Analyze all associated costs and set a price that ensures you’re not just breaking even but making a profit.
To implement these strategies, start by calculating the true cost of every product or service you offer—from the initial sales effort to final delivery. Then, either phase out the unprofitable items, improve them, or start charging for what you’ve been giving away. Finally, ramp up your marketing efforts to focus on your most profitable offerings.
By taking these steps, you’ll ensure that every sale contributes to a healthier bottom line and a more sustainable business.