Is It Time to Discontinue Your Product or Service?

Is your offer — whether it’s a digital product, 1:1 service, or group program — not performing like you wanted it to? Are you wondering if it’s time to discontinue your product or service? 

It’s a sticky situation. I’ve been there, and most of the business owners I know have too.

You pour so much into creating, marketing, and delivering your offers, and it can be really frustrating when you’re not seeing the ROI or revenue from them.

When this happens, you know something needs to change in your business — but you might feel stuck. Should you kiss that offer goodbye? Is it salvageable? Is there another offer that’s worth more of your time and attention?

This spiral is no fun, but there is a fix. 

You start by looking at your books! (You knew this was coming, right?)

When you analyze your revenue streams, business expenses, and overall profits, it’s easier to figure out which products or services need to go. So let’s walk through that process together and make it a little easier (and less emotional) to figure out which of your offers to drop. 

I’ve got two strategies for analyzing your offers and deciding which ones to discontinue.

Ready? Pull your latest P&L (that link will help you if you don’t know what a P&L is), and let’s get started!

Bookkeeping shows you when to discontinue a product or service

When your books are up to date, you’ve got detailed information on your revenue, expenses, and profit. And that data shows you exactly how well each of your offers is doing — or not doing. You can easily see when an offer just isn’t performing anymore, and then you can make decisions accordingly.

The power of separated revenue streams

The key to ensuring that your books can give you the crucial information you need is to make sure they’re accurate and detailed. That means breaking down your revenue and expense information into separate categories for each of your offers. If everything is just in one big group, you can’t tell how individual offers are performing.

Let’s look at an example. I had a client who we’ll call Sadie. And before she started working with me, her books just showed a single line for revenue and a single line for expenses. She could still calculate her profit, but she didn’t have any way of seeing which of her offerings was bringing in the most money.

I worked with her to separate her expenses and income into different streams and categories. And once we did that, it was easy for her to see that one of her services wasn’t bringing in nearly enough revenue for all the time and energy she was spending on it. 

She was able to rework that offer into something that met her clients’ needs better, increased her job satisfaction, and was more profitable! And all of that happened because she had an updated P&L with comprehensive details.

Method 1: Percentage of Revenue

When it comes to analyzing using your P&L to analyze your offers, there are two basic methods: percentage of revenue and profit. Let’s look at the percentage of revenue method first.

As the name suggests, this approach involves looking at the percentage of total revenue that each of your offers is generating. You calculate that number like this:

(Amount of income tied to the offer / total revenue) * 100 

Once you’ve calculated the percentage of revenue that each of your offers generates, take a look at those numbers. You’ll probably have some clear heavy hitters that bring in most of your income and some other offers that contribute smaller amounts here and there.

Now that you know which of your offers are bringing in the most money, see if you can find ways to make them even better by:

• Optimizing client experience
• Highlighting them on your website
• Increasing the marketing efforts

Next, it’s time to look at those low-performing offers. And don’t just focus on the money. Think about how much time you spend on them, whether they bring you enjoyment, and how they fit into your overall vision and goals for your business. 

Once you’ve factored in all those considerations, you can drop the offers that aren’t bringing in enough income, contributing to your enjoyment, or aligned with your long-term business goals.

Method 2: Profit Margin

The other option you have is to analyze the profit for each of your offers. Remember, profit is what you have left after you subtract expenses from revenue. In this case, we’re just going to be considering the COGS (cost of goods sold) expenses, because those are tied directly to each offer. (Your overhead/operating expenses are always there, and they aren’t based on any of your individual offers.)

Now, let’s calculate the Gross Profit for each offer. 

Revenue from the offer – COGS for that offer = Gross Profit 

Gross Profit is nice to know, but it’s not always as telling as the Gross Profit Margin of each offer. To get that number as a percentage:

(Gross Profit of the offer / Total Revenue for that offer) * 100 

Generally, a good Gross Profit Margin to aim for is around 60% or 70%. If you’ve got offers with a much lower Gross Profit Margin, see if you can figure out the cause. You might be able to change the pricing or reduce some of the COGS — or it might just be time to drop that offer.

Bookkeeping makes it easier to evaluate your offers

When your books are up to date, it’s easy to see exactly how well each of your products and services is performing. And once you have that information, you can decide which of your offers you want to keep or drop. You also have the critical information you need to determine whether you can reduce some of the COGS related to your offers.

So…are your books up to date? ? If not, now’s the time to catch up. And if you don’t want to do your bookkeeping yourself, my team and I are here to help!