When the livelihoods of over 100 people are at stake, any decisions that you make are critical.
I was asked to work with a large company who had acquired a smaller B2B business in its sector 3 years earlier, but was yet to make a profit. And they were on the point of closing it down.
As is often the case, the product range had simply mushroomed beyond anything that could be considered sensible or viable, with over 1500 SKUs, some of which had not moved for over 12 months. There was real resistance to discontinuing any lines from the sales team, who had favourite customers who ‘always’ bought that product and wouldn’t have anything else. However, when talking to the customers we discovered that actually they would be happy to have an alternative – as long as it didn’t cost any more of course!
Once the line size had been reduced to c. 350 SKUs we were able to re-negotiate prices with suppliers as there were now larger volumes on each item, which helped us hold prices to the customers at very competitive levels.
Where products were retained because they offered a bespoke branding service for individual customers to add their logo to, the prices did go up as they were otherwise losing money – a fact that hadn’t been noticed for some time. Sales of the bespoke ranges actually grew because we could provide a better and faster service too.
This is a simple story – but it illustrates that the size and productivity of your range needs to be kept under close control. By addressing the problem head on, the business actually produced a profit after 6 months, and was subsequently sold in at trade sale for a very good multiple of its profits