Product Grouping for Your Business is an incredibly powerful way to run your business. It gives you

• Firstly, great insights
• Secondly, lessens your financial and mental anxiety about the future
• Thirdly, allows you to gauge profitability with a great degree of accuracy.

In this weeks I Hate Numbers podcast I'm going to

• Firstly, outline the idea of what product groups are
• Secondly, give you examples of product groups
• Thirdly, how they can help your business
• Finally, show you how it all fits together.

Conclusion

Product Grouping for Your Business shows you where there's money being made in your business.  You'll spend less time spent worrying about whether or not things are going right and more time actually working towards improving them! That sounds pretty good, doesn't it? Let's get started!

Product grouping is a powerful way to run your business. The first type of product group that may come to mind is when you sell products in groups based on their price point or size.  For example,  if I sold ladies' shoes from 15-40 pounds. But there are other types too! For example, some companies will want an assortment of items within one category (like all lipstick shades) while others might have specific needs at certain points in time (say, seasonal clothing).

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The Numbers Crew- Here to help you!

Viewing your business through the looking glass of product groups is a powerful way to run your business. It gives you great insights, lessens your financial and mental anxiety about the future, allows you to gauge profitability with a greater degree of accuracy, and puts you firmly in the driving seat of your business.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. Welcome to another weekly episode of I Hate Numbers, the podcast that's got a primary mission of improving your money mindset, improving your financial awareness, helping you and your business make more profit, save tax and time. What a fantastic combination we have there. Let's crack on with the podcast.

In this podcast, I'm going to outline the idea of what product groups are, outline the concept, give you some examples of product groups, and how you go about defining them for your own business, and how you can tap into them, and use them to make those wonderful, insightful decisions I mentioned earlier.

Firstly, let's talk about the concept of groups and why we should bother. What I want to do is come with me and visualise the idea of a dirty laundry basket. Now, that laundry basket will be full of dirty clothes, but before we do anything with those clothes, we can't just shove them into the washing machine,

we're going to organise them into discrete piles. We might sort them out by whites, by colors, by delicates, by hot wash, by cold wash. Those are convenient groups. Tackling and looking at our clothing in those sort of groups allows us to make the right decisions about what to wash, what goes with what, and how we should treat those items unless we want to run the risk of ruining our clothes.

Likewise, if we take a trip into the world of hospitality, a restaurant business, a restaurant will have a variety of products, but for it to make meaningful decisions about profitability, about what product makes it money, what products loses it money, it might decide to categorise those items, those products based on outside catering, in-house consumption, fast food delivery.

It could also have a look at the same items and decide to categorise them by meat-based products, fish-based products, starters and mains. Now, stick with me, folks. If I go into a supermarket, the idea of grouping here is I can group and cluster the variety, the many hundreds of thousands of lines a supermarket is likely to sell based on, again, convenient groupings.

Now, what groupings could we consider for a supermarket? Well, we might consider: wines and spirits, fresh fruit and vegetables, fast-moving consumer goods, dairy products. You get my drift. Now, you might be thinking what merit is there in actually looking at the idea of groups. If we think of anything in terms of groups, and we can break it down, we can study

behavior much more accurately, we can gain better insights and we can make better decisions. If I was a zoologist, uh, frankly, I didn't follow that path in my school career, I decided to follow a different path, but if I decided to become a zoologist or just have a natural instinct for studying animals, I might look at animals of which there are hundreds of thousands of species, and decide to break that down into convenient groups.

Within animals, which could be cats, feline creatures, I could break that down into wild animals, domesticated animals, and even within that, I could actually break that down even further. Now, what that enables me to do is to draw better conclusions, understand the patterns of what's going on, and therefore that would give me greater insight.

I wouldn't look at things as just one lump, as a homogenous item, I'd break those down into discrete groups. It's the same for your business. Now, whether your business is a service-based business, you may look at what you're doing, the level of revenue that you're doing, and it's a good idea to break that down into groups.

If you are a training consultant, for example, you may be offering services that is one-to-one, peer mentoring, workshops, online delivery. Those are different groups that you could have. Let me share a couple of more examples. In my own business, in terms of the different levels of variety of work that I would be doing in my firm,

I would be offering things from tax advice and planning, accounts production, future cash planning, I would also be doing compliance work, mentoring, education and a whole variety of things as well. For me, I might look at my business in those discrete groups. So we've got this idea of groups here and what we have when we decide to break things into groups.

It could be based on customer needs. It could be based on the different price points I have for each product that I do, and by product, by the way, folks, I'm also talking about service-based businesses. Now, having decided to actually look at those things in groups, one of the more powerful things we can learn from putting things into groups, our business sales, our business activity into groups, is each discrete group has different levels of risk, different levels of profitability, different levels of margin, perhaps different expertises that we might also need to deliver those products and services to our end customer.

The next step, having decided what your product groups are, and I would suggest, as a rule of thumb, have no more than a dozen maximum. If you have too many product groups here, then keeping an eye on them, monitoring them, and managing those groups becomes very unwieldy and we don't want that for your business. Having decided the different groups that we might have for our business, the next more powerful thing is to then think in terms of attaching some numbers to those groups.

Now, the two key numbers that we want to start with is having the idea of an average price for that particular product group, and an average cost, so we can work out the average profitability. Now, I'm going to expand on that theme in later podcasts here. But for now, step one has been the idea of looking at our business and defining what those different product groups are.

It's an absolute must. If you think you only offer one thing, think again. Secondly, we need to attribute an average price that we charge our customers, and we need to match that to each product group. If we can match the cost of providing that product to the customer, so in a restaurant, when we've got different items on the menu, we could work out the cost of the ingredients that goes into each meal,

we could work out the costs of the labor, the chef's wages that goes into producing each meal, each product group, and therefore that gives us an idea of profitability. If I offer training courses, I know the prices that I'm charging. I can match it up with the resources required to deliver it, and it gives me an underlying level of profitability.

Now, the power lies in is that if I want to expand and drill down and have a look at the respective profitability of each group, I might find that some of the higher ticket items that may be high valued on the sales line, but actually consume a lot of resources. I can actually plan and forecast with much better accuracy knowing what the groups are that I'm going to be selling on.

If I want to have an insight to which customers, which products are draining resources, which ones are worthwhile investing and developing, grouping gives me that powerful insight. I can understand better how each product impacts my bottom line. I can help decide my future forecast, my future financial story, and that's going to help me power my business forward much more effectively.

Now, folks, this is just the start of the process here. Have a think about your own business, and if you were to look at your business, where the money comes from, what groupings would you suggest that you could have for your own business? Are you gonna break them down by the nature of what you charge for each particular group?

Do things get clustered into things that have respective levels of competence, levels of risk attached to them, levels of margin? Again, try not to have too many because we've got to be able to monitor and manage all those discrete groups, but surely, take that viewpoint of looking at your business, not just as an overall lump, an overall sales line, but break that down,

break the services you offer, the products you deliver, and break them down into convenient categories. Folks, I hope you've got some value from this podcast. If you have, I'd love it if you could share it with those who might benefit. If you've got any feedback, I'd love to hear your feedback and comments, and obviously I'd love you to subscribe

to future episodes. Stay tuned until next week's podcast, and in the meantime, happy grouping. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.