So you think it's time to trim back the products a bit, huh? Your menu looking like a phonebook? So many things in the catalog, you even find yourself forgetting they're in there?
It’s hard to say no to revenue, but sometimes you're up against a wall and you’ve got to make tough choices. If you find yourself in such a spot, here are the four questions I ask before cutting a product.
"What exactly are we trying to do, and if we do that, what do we expect to happen?"
The first part of the question is getting clear about why you are taking these steps. Are you resource-constrained? Are you looking to reduce overtime? Do you think your quality is suffering?
The second part should be a tangible metric used to know if you’ve accomplished your mission. Use the SMART goal format.
Here’s an example.
“Everyone feels overworked and our quality is suffering. If we make cuts, we'll reduce overtime, reduce exceptions, and still meet our current goals.”
When this is in your pocket, you can examine your decision later without pesky biases. We all want to be right in the end, but sometimes you're not. Writing down this statement is better than being right – it makes you accountable. And accountability is the fuel for growth.
What makes us the least amount of money?
It’s not heartless to ask this question. Making money is the most important thing in any business.
Yes, I know, your business is different – you’re changing the world. Well, as the old saying goes, you can’t save the world if you can’t pay the rent.
How you measure this is up to you. Whatever makes the most sense for your business. I usually default to the calculation of (Revenue - COGS - direct overhead = profit).
(Direct overhead is non-COGS expenses you know you could reduce if you got rid of the product.)
How is this product helping us serve our customers?
This question is to make sure you don’t throw the baby out with the bathwater.
It is acceptable to hang onto a money-losing offering if it helps you attract or keep customers. You don’t want to be a fool and cut things that may be part of the moat that protects your business from competitors.
It is also acceptable to keep a product if its existence is part of your larger strategic picture. Please make sure the product is a sail and not a sea anchor.
The fourth question is more of an exercise.
Take 10-20 minutes to brainstorm at least seven other ways you could accomplish your goals without cutting a product. You need to have at least seven. The first three ideas will come easy. You need to push for seven.
Take a look at this list and compare it to the pros and cons of cutting the products. In that light, you may find these alternatives attractive. Keep the list with answers to the first question. You might need them if these cuts you’re making don’t work.
Now, take a look at your options and pick some until you think you’ve got enough to meet your needs. Consider if any of these options are one-way swinging doors. Choices you can’t undo are risker.
The only step left is to do what matters most: execute the plan. You might feel nervous taking action in this circumstance, but that’s natural. Take a look at the documentation you produced and remind yourself of why you’re taking these steps.