TRIMMING A ROSTER of products and services can feel antithetical to entrepreneurial vision. Success is often synonymous with expansion. But downsizing could be the best way to get funding and save your brand. “Many startups are surprised to learn we prefer companies that have perfected one product or service line,” says Kyle Asman, managing partner of Backswing Ventures. “We advise them to focus on aggressive growth with a single product before increasing their offerings. But if they do need to correct for adding on too quickly, it helps to see reducing those items as a shrewd business move rather than as a mistake.” Here are a few tips for cutting back–and catching the eye of investors.
Declutter your shelves.
“More buying options often require greater consumer effort,” says Gautham Vadakkepatt, an assistant professor of marketing at George Mason University’s School of Business. “Choice overload is real.” Gus Hanger, founder and president of Industrial Hemp Farms, in Denver, learned that the hard way. After launching in 2018, IHF responded to demand for CBD by building out its New Dawn CBD-infused product line. By early 2020, IHF–an eight-figure company in its first year-was offering 25 New Dawn products, eight gift packages, and four customizable gift packages. “By April, we knew all those packages had gotten us into trouble,” says Hanger. Customers kept calling, asking which package was the best value. When IHF pulled the newer gift baskets and revamped how it sold the original eight, it relied heavily on data–repeat purchases and customer feedback– to select those to retain. Did it work? It definitely didn’t fail: IHF raked in $40 million in 2020 revenue, with a projected 50 percent growth rate for 2021.
Trust the process.
Reducing your company’s offerings can be fraught with emotion–which is why Vadakkepatt suggests relying on data, rather than on instincts. His advice: Reach out to your ideal customers through social media, email, or other conduits to match what you retain to their wants and needs.
Envision the brand you want, not the one you have.
It may be counterintuitive, but you shouldn’t always eliminate your poorest-selling item or service. “Your long-term goal for the brand will influence what to cut,” says Robert Bird, professor of business law at the University of Connecticut. A company that espouses sustainability but offers only a few products that uphold that standard, says Bird, might think twice before cutting those–even if they deliver only a small percentage of revenue. “Eliminating them could destabilize and even erode the customer base that buys from you specifically because of shared values.”
From the May/June 2021 issue of Inc. Magazine