Product Performance

Identifying Unprofitable Products: Hidden Revenue Killers

A jewelry maker spent 6 months wondering why she wasn't hitting her profit targets. She had $25,000 in revenue—impressive on paper. Then she audited her products and discovered: 3 items were losing her $2,400/month combined. She was making them because they were "pretty." She didn't know. Most makers don't. This article shows you how to find—and fix—your revenue killers.

The Unprofitable Product Trap

Makers often keep losing products alive because:

Customer Demand: A few customers love it, so you keep making it—even though it loses money
Emotional Attachment: It's your favorite product or your "signature" even though margins are terrible
Hidden Complexity: The product takes 3× longer than you think, but you never tracked the time
Cost Creep: Material prices increased, but you didn't raise prices, so margins evaporated

6 Warning Signs of an Unprofitable Product

1. Selling Volume But Profit Isn't Growing

You sold 50 units last month and hit $3,000 in revenue, but profit barely moved. That suggests those 50 units have razor-thin margins. Compare the profit per unit to your other products—if it's half of your average, it's a candidate for discontinuation.

Action: Calculate profit per unit for every SKU using the 3-column profit analysis method.

2. High Production Time Relative to Price

You spend 4 hours making a product you sell for $60. That's $15/hour labor—likely below your target rate. If your target hourly rate is $40/hour, this product generates only 37% of what you should earn.

Action: Track production time on 10 units of each product type. Calculate effective hourly rate. Anything under your target is a candidate for repricing or elimination.

3. Customers Consistently Request Customization or Discounts

If customers always ask "Can you make it with X modification?" or "Is there a discount?", the product might be overpriced relative to perceived value—or your costs are too high. Either way, it's signaling a margin problem.

Action: Track customer requests over 30 days. High customization requests + high discount requests = unprofitable product alert.

4. Material Costs Have Increased But Prices Haven't

Supply chain disruptions mean your material costs increased 20% last year. If you didn't raise prices accordingly, your margins just got slashed. A product that was profitable at 50% margin is now at 35%.

Action: Compare material costs from 6 months ago vs. today for all products. Flag any with cost increases >10% that didn't get a price increase.

5. Low Repeat Purchase Rate

You have 100 customers who bought once, but only 5 bought again. That suggests the product either didn't meet expectations or the margins are so tight it's only attracting price-sensitive one-time buyers.

Action: Track repeat purchase rate by SKU. Products with <10% repeat rate often have profitability issues. Read about customer lifetime value by product to understand why.

6. It's Your "Hobby" Product—You Make It for Fun, Not Profit

Be honest: Is there a product you keep making because you love the process, even though you know the margins are bad? This is emotional decision-making, not business thinking.

Action: Calculate the true cost and profit. If it's losing money or earning <$10/hour effective rate, either reprice it aggressively or stop making it. Use the proceeds to focus on high-margin winners.

Real Example: Finding the Hidden Loser

Meet Emma, a leather goods maker. She makes three products:

Product A: Premium Leather Wallets (WINNER)

Price	$85
Materials	$18
Production time (1.5 hrs)	$45
Overhead allocation	$12
Total Cost	$75
Profit per unit	$10

Margin: 12% | Units sold/month: 40 | Monthly profit: $400

Product B: Leather Belts (WINNER)

Price	$55
Materials	$12
Production time (1 hr)	$30
Overhead allocation	$8
Total Cost	$50
Profit per unit	$5

Margin: 9% | Units sold/month: 35 | Monthly profit: $175

Product C: Hand-Tooled Leather Journals (LOSER)

Price	$65
Materials (including paper)	$22
Production time (3 hrs - hand tooling)	$90
Overhead allocation	$15
Total Cost	$127
Profit per unit	-$62 (LOSS)

Margin: -95% | Units sold/month: 15 | Monthly profit: -$930

Emma's revelation: She was making $575/month in profit from wallets and belts, but losing $930/month on journals. Net result? She thought she was making $575, but she was actually losing $355/month because she hadn't analyzed by product.

She loved making journals (the hand-tooling was creative and fun). But the economics were destroying her business. She discontinued journals, freed up production capacity, and used that time for high-margin wallets. Her next month: $630 profit instead of -$355. That's a $985 swing from one decision.

5 Options for Handling Unprofitable Products

1. Reprice Aggressively

If a product has high demand but low margin, the solution might be to raise the price. Test a 20% increase and monitor sales impact. If volume drops <20%, you've improved profitability. Use the insights from price point psychology to find the sweet spot.

2. Reduce Complexity/Production Time

If the product takes 3 hours but customers only value it at $60, reduce production time. Simplify the design, use faster techniques, or outsource labor-intensive steps. Can you cut it to 1.5 hours? That doubles your effective hourly rate.

3. Bundle with High-Margin Products

Pair the low-margin item with a high-margin product. Offer both together at a bundle price that masks the low-margin product's weakness. Learn more about bundle pricing strategy here.

4. Position as Loss Leader

In rare cases, keep an unprofitable product to attract customers who then buy high-margin items. But be disciplined: only keep it if customers consistently buy other products in the same order. Otherwise it's just a drain.

5. Discontinue It

Most likely option: stop making it. Free up production time and mental energy for products that actually make money. You'll see immediate profit improvements and can reinvest that time in scaling your top-performing products.

Audit Your Product Profitability Now

TrueCraft's profit calculator automatically analyzes product profitability by SKU. See which products are winners and which are draining your margin—in real-time, not spreadsheets.

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