Cut Fat From Your Business Before Your Waist

A Resolution for Business Owners in 2012

Fresh Tips for Fast Profits

As the clock struck 12, you have probably already determined your New Years resolution for 2012. This year, we want to challenge you to forget the fad diets and the Rosetta Stone CDs that won’t make it through the month of January, and focus on something that is going to really make you feel good in the New Year – generating higher profits for your business. From the substantial increases in your company’s revenue, you can just hire a dietician, and learn how to speak Japanese in-person…in Japan.

With online sales commanding the revenue drivers for business and markets globally, business owners should be focused on how to trim the fat off of their businesses. We encourage companies who rely largely on eCommerce to focus their promotions and offers to target the most popular of the offerings in their store. There are incredible tools available online that will help you to figure out which 20% of your business is making you the most money.

At FreshRankings, the “80/20” analysis is part of our company’s DNA. We’re always looking for opportunities to optimize and simplify just about everything in our business and for customers who work with us. We perform this analysis on sales by products/services, sales by customers/clients and profits by product/services and profits by customers/clients, profits. The results of this analysis clearly define where we need to be spending most of our focus and monetary investment towards growing the business.

We have seen businesses with 30,000 SKUs realize that only 100 SKUs deliver 80% of their sales and profits.  This is a typical finding and it allows you to focus on what matters so that you are not distracted by things that are not producing results in your business. Additionally, it helps customers without distracting them with what the market has already proven that they don’t want .

Recommendation: Read the book – The 80/20 Principle by Richard Koch

E-commerce store that has a lot of SKUS, it’s found that a very small number of the are actually producing sales.

Example: an automotive parts suppliers offer tens of thousands of SKUs on their web store.  Companies don’t know where to begin They have so many due to the fact that the marketplace

Fresh Tips to Begin Your 80/20 Analysis Strategy: 

  • Run a  “Sales by Item” report that takes into account your last quarter’s sales. Run a  “Sales by Item” report for sales over the past 12 months. Compare the two to determine what your customer’s buy the most. Look for noticeable patterns and trends, and draw conclusions based on your observations. For stores with many SKUs available, there will likely be clear trends for which items have sold the most.  Use your accounting software to quickly identify which 20% of your SKUs are generating 80% of the income?
  • Compare the 80/20 of your products to your Internet Optimization strategy by cross-referencing your Google Analytics data for your Core Keywords. Observe which search terms are driving the most traffic to your website, and determine what people in your marketplace are looking for. Be sure to focus on keyword, geographic, and demographic data. What keywords are being searched in what regions to draw conclusions within your target market.  Use the tools available and to identify the demographic of the individual who is likely to buy your best-selling SKU’s.
  • Use the data that you have generated from the above steps to make educated guesses on where to “trim the fat” from your business. Boldly remove the items that don’t carry enough value for your business.  The more you can focus your business, the better. A simple 80/20 can make a huge difference in how your company operates itself and could be a great catalyst for change to give your brand a fresh angle and provide your business strategies with a new perspective.
  • Once you have identified the short-list for customers and the products they are going to purchase, you can focus your website and messaging to target those specific people and drive up the conversions from traffic that has found you from organic search. Revitalize your website with messaging and imagery that makes it easy for people with specific inquiries to find what they are looking for when searching for your Core Keywords.
  • In the next quarter and throughout the year, observe where running the 80/20 Analysis has had the most positive effects. Continue to incorporate the 80/20 Analysis to every aspect of your business and constantly clean house on the things that have been weighing you down. Focus your attention on the highest value and highest income producing activities for your business to grow from.




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