Understanding What Products You’re Offering & Why
During episode 4 of Energy is Currency, we discussed product offerings and their contribution to profits and what not. I wanted to break that down on paper.
Lets start with the two types of groups that are ready to start their business
Many people who desire to start a business don’t know what they want to sell, or what type of business they want. They just know they have that desire. No problem.
Think of Will Smith in Pursuit of Happyness
Then there’s the group that is ready and wants to sell everything. Fifty Lemmon products and services. They literally have something for everybody. Also, no problem.
Think of the McDonalds Brothers before they scaled their business.
This is a perfect segue into what I need to say next. Both groups have what the other needs. The first groups needs inspiration and options to work with. The second group needs refinement.
in most business structures, there are at least four product offerings, based on upon the BCG Matrix.Each broken down by investment, potential for growth, innovation and profitability.
High Return on Investment
High potential for growth
High Return on Investment
Low Expected growth
No longer innovative
Questionable Return on Investment
Questionable growth rate
Low Return on Investment
Low growth rates
No longer innovative
According to this your products and offerings should be diverse with the potential to grow. Your cash cow may not be your favorite product or service but it will provide a source of income to invest in star products or services. Eventually the investment will turn a star into a cash cow.
Really its the question mark and the dog that need addressing in any business. The dog obvious. It has a loyal customer base and can guarantee some profit, although in decline. The question mark, on the other hand, requires real thought and effort to decide upon. This is the product or service that offers no certainty.
At one point in my career, my graph looked like:
Clinical Hair services
Facilitation and Education
Hair Care Products
Many of the reasons for this place included, what I was passionate about, what was correctly priced and scheduled, what brought in steady profits, and what had the most opportunities for growth.
Admittedly, travel styling was my dog because of my own efforts. I was servicing clients at a rate that didn’t fit my base needs, let alone profits. I didn’t account for gas, labor driving or flying, or living expenses. It was an expendable service that I eventually restructured in price and delivery.
The reason that hair care products fall under the question mark is simply because it is a new entry into my business portfolio. The investment is substantial for the potential for growth can someday exceed the profits made from hair services. I am only one person and only earn income at the completion of a service. Selling products means that I can sell multiple units to one clients or customer, or unlimited units to costumers online at any given time of day. The potential for growth is as high I take it.
Hair services will always be my cash cow as long as I am willing to stand behind the chair. With a steadily inclining clientele, and service refinement to offer niche services combined with products, styling hair each will has always provided the financial security that I crave. Owning a hair loss clinic or salon carries some heavy overhead expenses that must be accounted for. Above all things the passion and potential are there, so the investment will continue.
The star is facilitation, public speaking has so much room for growth with little over head expenses to provide the service. With the aid of the internet, many speaking engagements can take place online. Live events are stipulated to cover any incurred expenses including travel and room and board. The passion for sharing my craft and expertise is ever growing as I get through stage fright, but all is well. Let your story pay your bills.
Now you can look at all of this from a purely financial perspective. Look at all the products and services that you are currently or planning to offer. Add up all of the costs for goods sold and subtract it from the product or services sales. Divide that number by net sales again to get gross profit margin. This formula will reveal where you are over investing into low profitability. Each of your products or services will rank differently. Its the reputation behind the product or service and its potential for growth that will decide how long it should stay in a business portfolio.
I hope this helps you match your energy to your currency by refining your product offering. Do what makes sense and cents.