Lessons for Crisis
7. Romanticize nothing.
If your business has lost significant market share and margins, everyone is out to kill you. If your competitors don’t put you out of business, inertia eventually will. Clean house—fast. Dump all of your old inventory, marginal products, and marginal employees. Sell off or donate all unproductive assets. Pour all energy and dollars into the products and services with the best contribution margins. Embrace the Pareto Principle; the 80/20 rule. Do the analysis and you will discover that most likely 80% of your revenue is coming from 20% of your products. Once you have that, dig into those numbers and discover where the best margins are—focus on building those segments. Oftentimes, troubled companies’ top sellers are margin losers—which is one of the main reasons they are in trouble. They mistake revenue for profits. Their salespeople were beating their competitors because their product or service was underpriced. Sometimes, to survive, you have to dump your best seller (if you can’t figure out how to make it more profitable).
Task: Conduct an 80/20 analysis of all of your product or service offerings.