Product Client Matrix

A data process for deciding which products and clients to focus on.

By James Schramko

If you have been online for a while you may have been adding several products or services.

Not all products or services / divisions / units are equally valuable.

Not all clients are the best.

How do you know which ones to focus on?

I like a DDD process of retrospective data analysis for my decision making and action taking.

DDD, stands for:

Data

Decisions

We will score our historical data to look for patterns and use that data as a filter.

First, I map out the last year's sales by product line.

Then I account for fixed and variable costs, OTHER than my time.

Then I calculate my hourly requirement for each division.

That gives me an EHR by product / service.

I take into account other factors when viewing the data such as:

Is the market growing or shrinking?
Can it be recurring?
Is it scalable?
Does it generate an asset value (can I sell it)?
Does this product create another product?
Does it build authority (hero product)?
Does it sit with my values?
Is it defensible?

Let's look at Example 1 of a MADE UP business:

Here is how the four divisions compare once the last year of data is scored. This is a made-up business with a low ticket offer, high-level coaching, affiliate marketing, and royalty deals:

Low ticket offer: meaningful revenue, but it consumes the largest share of monthly owner hours, so its effective hourly rate is the lowest of the four
High-level coaching: solid revenue, modest hours, a strong effective hourly rate, and the most enjoyable work
Affiliate marketing: very little time and a very high effective hourly rate
Royalty deals: a slightly lower effective hourly rate than coaching, but each one also builds an asset value, usually a multiple of its annual revenue

In this made up example, the business is generating $960,000 in revenue for just 53 hours per month.

Pretty good, right?

It seems like most divisions are contributing a reasonable amount to that revenue.

You will notice for the royalty deals, there is an asset value created which is usually a multiple of the annual revenue.

Now it's time to make decisions.

I like the royalty deals showing here because even though they have a slightly lower effective hourly rate, they are building an asset value.

This is due to the sale of the business down the track. None of the other products have this advantage.

Business units that generate asset value or by-products should be viewed favorably.

Affiliate marketing is very easy and takes extremely little time and it has a very high effective hourly rate, so I would suggest doing more of that.

The high-level coaching has a good effective hourly rate and doesn't take up too much time. I suspect these calls are more enjoyable.

On the surface, it looks like each division contributes a similar amount of revenue.

When you dig in a bit closer to the amount of time spent to generate the revenue, it would show you the low ticket offer requires a lot more time.

When you look at it on an effective hourly basis, it is a low performer compared to the highest effective hourly rate product lines.

For the low ticket offer, I could suggest adding more members or increasing the monthly rate. Or hiring more help even though it currently has an expensive cost.

However, because there are better product lines, I think in this case, I would want to sell off or end the low ticket offer.

If you can sell off a division, go for it. It's always better to get paid than closing it.

As you come up with action steps, write them in columns 1, 2 and 3.

It could be to:

Delete a product line
Sell off a product line
Change price
Buy time (labor) instead of your time
Drive traffic
Improve conversions
Change team
Improve systems
Automate

Now let's have a look at Example 2.

In this NEW example I have removed the low ticket offer.

Some of the time allocated to low ticket has been put towards high-level coaching.

This has shown an increased capacity to serve more clients at a higher effective hourly rate.

A few more hours of affiliate marketing has generated a significant boost to the affiliate marketing revenue.

Adding one more royalty client has built an increased asset value upon sale for just a few more hours a month.

Now the business is generating 1.2 million dollars for 38 hours per month.

It has three products to focus on instead of four.

This may be a more interesting and exciting business to run, so always keep passion in mind when you are making the decisions.

Now it's time for you to score your product divisions and see where your focus should be.

I would also do this with your coaching clients. Score them and tune as required.

Then allocate tasks with deadlines to you and your team.