Which of your lines or products or services made you the most money this past year? This is important information to know.
One of my clients has a retail shop. She did an analysis of her gross margin on the different lines she carries, and found that the famous line she had front and centre was the least profitable. She redesigned the layout of the store, phased out that line and became more profitable in the following months.
Another client and I analyzed his craft lines. He tracked the time it takes to make his various items and the amount he can charge for each of them. He has very little material costs so his labour is the largest component. Once we had that information, he could see very clearly which of his pieces made him the most money. He did also think about how much he enjoys making the various pieces, how proud he is and how they add to his creativity as he made decisions about where to focus his attention and time. In his case, he really likes this new line, but he was concerned that it was very different from his other things so he might become ‘type cast’. Once we analyzed the profitability and saw the freedom that gave him, he started making plans to support the new line and even to attend some special events over the next year.
Knowing where you are most profitable helps you make decisions, but it must be balanced by your needs and desires, too. Profitability is only one factor.
What did you do last year that brought in the most money? What was most profitable (not always the same thing)?
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