Remove Unprofitable Clients and Products

My job is to help CEOs and leadership teams grow profitable companies and today we're going to look at a couple of tools that CEOs and leadership teams can use to quickly evaluate products, services and clients slash customers to determine if they're profitable relative to their level of effort or relative to their popularity. And these help us make very key decisions about business. So imagine what you see below, which is a scatter plot, x y plot, compares two different things. By the way, great coach Alan Weiss said a few years ago, a great x y plot can solve a lot of things in business and in life and it's true.

If we take this matrix and we look at profitability and level of effort, imagine that we have clients plotted in each of these boxes. We can start making really, really key decisions about clients in each of these squares. So let's say we're looking at those that are highly profitable but have a low level of effort. How do we get more of those clients?

If we're looking at clients that have low profitability but a high level of effort, can we increase the price? Can we decrease the cost of delivery? Or can we stop? Should we stop doing it altogether?

Should we stop working with the client altogether? Those are considerations and decisions we make all the time. I had one client that discovered that 66% of their clients were unprofitable and we had to make a decision to move on from several of them and still maintain our relationship or our reputation. But this was a key way to be able to do that, to be able to look at this and as a team make very good relative decisions.

And of course we have data to back these things up. We know how much profitability there is, we know about basic sense of level of effort, but just putting them into this framework helps us get into those really deep decisions. Then if we look at another scatter plot, this is great one for products and services. This is popularity versus profitability.

I had a restaurant client where we did this analysis putting all of our menu items in here at one point and it was awesome to see the decisions that the leadership team made once they could see it in this format. So again, if you look at things that are highly profitable, a low level of effort, how do you sell more of those? If you start looking at items that have low profit but are really popular, you start making decisions or asking questions like, what else could we pair it with to make it more profitable? And we found that we could train our team to offer drink options that were designed to make a highly popular dish even more profitable when we sold it.

And you can also look at things that, you know, they have low popularity and low profitability. The key question is, should we be offering those? And again, you can see by going through each of the boxes, you can start asking some very key questions just by looking at it in this framework. And making some very quick decisions or have to say, Hey, we've got to go back and get more data before we make these decisions.

But you can make some very key decisions about your product, service, or customer/client mix and what you could do going forward. Most companies don't look at it like this. I do it all the time. We've never taken the time with clients that I work with, and these are great companies, but they have never really taken the time to look at it in this level of depth.

I know others haven't as well. Use tools like this to be able to get into this analysis. You can do it in Excel. You can do it literally just writing it on a board in front of you and use post-it notes.