I have developed a simple tool to answer the above questions based on the Boston matrix. Which shows that all products can be STARS, CASH COWS, ? (potentials) or DOGS.
The tool can be used for products, services or any activities.
Here’s how you find out which of your products are STARS, CASH COWS, ? (POTENTIALS) or DOGS!
1. Do you know how much money you need to make in an hour to ‘break even’?
To work this out: write down how much you need to make each month, to live, pay your office bills, pay salaries etc.? We will call this amount ‘X’.
Then divide X by the number of working days in a month, usually 20 days.
Then divide this number by the number of actual productive working hours in a day (if for example you are a printer, it would be the actual hours your printers are working – all other work that supports this does not count in the calculation), say 6 hours per day.
This answer we will call ‘Z’.
Z = (X/20)/6
(Can you tell I have a degree in Mathematics!!!)
For example if you were the printer above and you work out that you need to make £3000 per month (inc. tax) to ‘break even’ this would mean
£3000/20 days = you need to make £150 per day to break even
£150 per day/ 6 hours worked = £25 per hour to break even
Therefore, you need to make £25 per hour to ‘break even’. Any amount above £25 is fab!
2. On individual post-its write for each product:
From these numbers you can work out your profit per hour for each product, write this on the post-it.
3. Take a large piece of paper with the ‘Z’ break even amount where the axis cross and write STAR, CASH COW, POTENTIAL & DOGS as below:
Click on the image to download the template
4. Stick each post-it on the chart in the appropriate place, relative to the number of jobs you’ve had in the last 6 months (you can do this for the last month, 3 months or a year. Whatever makes sense to you.)
STARS – Any products in the top right hand corner are fab! This is where you want all your products to be as they make you the most profit and you do lots of them. 🌟
POTENTIALS – These products are great! They make you lots of profit but unfortunately you probably haven’t had many. You need to put energy into marketing and promoting these, so you get more work and they turn into STARS! 🌟
CASH COWS – These make you a small profit, above your ‘Z’ break even amount and you probably have lots of them. You could try increasing the price, then they are on their way to becoming STARS! 🌟
DOGS – These are not good – stop doing them now!!! Spend the time promoting your Potentials and improving your Cash Cows and Stars.
We love solving problems here at ‘Project Complete’ and want to help you make your business grow and flourish. So, if you are having problems knowing which products will make you the most profit, then contact ‘Project Complete’ and we will help you sleep better at night!
All blogs are written by Karen @ Project Complete.