Are your bestsellers actually your most profitable products and services?

Revenue can be reassuring, but it does not tell the whole story.

A popular product may keep your team busy while contributing very little profit. Meanwhile, a smaller service line may generate fewer sales but deliver a much healthier return.

Improving your margins begins with understanding what each part of your offer truly contributes — and making deliberate choices about where to focus.

Start with the full cost

Direct costs such as materials, labour, packaging and delivery are usually easy to see.

Indirect costs can be more difficult to identify. These may include premises, software, management time, administration, customer support and the cost of acquiring each sale.

Allocate these costs as sensibly as you can. The calculation does not have to be perfect to reveal meaningful differences between your products, services or customer types.

Measure contribution, not just turnover

Imagine that one product generates £100 in revenue but costs £90 to provide. It contributes £10 towards your overheads and profit.

Another product generates only £50 in revenue but costs £10 to provide. It contributes £40.

The first product generates twice the revenue, but the second provides four times the gross contribution.

Review both the margin percentage and the actual cash contribution. A high percentage on a very small sale may still have a limited overall impact. You should also consider the time, capacity and risk involved in delivering each offer.

Find the patterns behind profitable work

Look beyond individual products and services.

Are certain types of customer more profitable? Do repeat contracts outperform one-off projects? Does a particular package generate fewer support queries or result in faster payment?

Your most useful insight may be a profitable combination of offer, customer and delivery model. That is where focused marketing and sales activity could have the greatest effect.

Decide what deserves more attention

Once the numbers are visible, you can begin making informed choices.

You might promote your highest-margin offers more heavily, bundle them with popular products, train your sales team to lead with them or give them more prominent space on your website.

Low-margin offers do not automatically need to disappear. Some may attract new customers or make a more profitable later sale possible. However, they should have a clear strategic purpose rather than simply existing because they have always been offered.

Review pricing and delivery together

Poor margins are not always caused by low prices.

The underlying problem could be an inefficient delivery process, unnecessary customisation, rising supplier costs or excessive discounting.

Before withdrawing an offer, consider whether it could be standardised, repositioned, repriced or sold to a better-suited audience.

Keep the analysis alive

Costs change, customer preferences move and once-profitable services can become more difficult or expensive to deliver.

Review the profitability of your products and services regularly instead of treating this as a one-off exercise.

A simple monthly overview showing revenue, direct costs, contribution and delivery time can help ensure your decisions remain grounded in evidence.

Your action for this week

List your five highest-revenue products or services and calculate the approximate gross profit generated by each.

Now rank them again according to their profit margin.

If the order changes, ask yourself whether your marketing activity, sales incentives and team capacity currently reflect the second list — or merely the first.

A stronger business does not simply sell more. It sells the right work at the right margin.

Your ActionCOACH can help you understand the numbers and turn them into a practical plan for sustainable, profitable growth.