If you want to increase profits, trim low-profit-margin items from your product line.
They are probably eating up limited and valuable resources that could be better used elsewhere.
Tom Monaghan, the founder of Domino’s Pizza, tells a story about the early days in his first pizzeria:
“One night, most of my employees didn’t show up, and I didn’t know whether to open or not. Someone said, ‘Why don’t you just cut out the six-inch pizzas?’ We had five sizes, but most of our business was the smallest, the six-inch. It took just as long to make as the big one and just as much time to deliver but cost less.
“I decided we would try that,” said Monaghan.
“We never got busy that night, and yet we made 50 percent more money than we ever had. The next night I cut out the nine-inch pizza, and all the bills caught up. I learned then that keeping things simple could be more profitable.”
You should continuously be asking yourself two questions:
1. How do I increase my business’s most profitable activities?
2. Is it really worth it to maintain the low-margin activities?
The answer to the second question, by the way, is “No!”
Cut your losers short and let your winners run. Make “survival of the fittest” your credo.[Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]