The easiest way to look bigger is to add SKUs; the hardest part is paying for them.
Assortment Growth Feels Like Progress
Every growing product company faces the same temptation.
A customer asks for a variation. A sales rep wants a new size. A retailer wants an exclusive. A competitor launches a flavor, format, bundle, or finish that gets attention. The founder sees a chance to capture more demand.
One new SKU feels harmless.
Then another. Then a limited run. Then a seasonal item that somehow becomes permanent. Then a slow mover that no one wants to kill because one important customer still buys it.
Before long, the company has a larger assortment, more complexity, and no clear view of which products are actually earning their keep.
I call this the assortment trap.
It is common because it looks like customer focus. It feels responsive. It gives the sales team something new to talk about. It creates the appearance of innovation.
But assortment growth without discipline is often margin leakage with a product name.
Every SKU Creates Work Beyond the Shelf
A SKU is not just an item in the catalog.
It creates forecasting work, purchasing work, production work, inventory space, quality control, packaging, photography, training, sales material, customer service knowledge, system maintenance, and eventually end-of-life decisions.
Most companies underprice that complexity.
The P&L may show product-level gross margin, but it often misses the operational burden. A slow-moving SKU can look acceptable on paper while creating small headaches everywhere. Minimum order quantities tie up cash. Inventory ages. The warehouse picks less efficiently. The team spends time explaining differences that customers barely value. Production changeovers increase. Forecast accuracy drops.
None of this feels dramatic in the moment.
That is why the trap works.
A company does not wake up one day with a broken assortment. It accumulates one.
When I review SKU strategy, I do not start with opinions about the product line. I start with the data and then challenge the story around the data.
Which SKUs drive revenue? Which drive margin? Which drive repeat purchase? Which are required for strategic accounts? Which create complexity out of proportion to their contribution? Which exist because no one wants to have the hard conversation?
That last category is usually larger than expected.
Revenue Is a Poor Defense for a Bad SKU
Founders and sales teams often defend weak SKUs with revenue.
The product sells. The customer likes it. The retailer requested it. The sales team needs it to open doors.
Sometimes that is true. Sometimes revenue is hiding a bad trade.
A SKU that sells $150,000 per year with low margin, high returns, difficult sourcing, and poor forecastability may be costing more than it contributes. A SKU that helps win a major customer may be worth keeping, but only if that role is explicit. A SKU that adds variety but cannibalizes a better product may be flattering the top line while weakening the mix.
I like to separate four types of SKUs.
There are earners that generate strong margin and velocity. There are strategic SKUs that help win or retain valuable accounts. There are emerging bets that deserve a defined test window. Then there are legacy SKUs that survive because the company has not built a kill process.
The problem is not having all four. The problem is pretending all four are equal.
A growing company needs product truth. Not product nostalgia.
Innovation Needs a Gate, Not a Committee
I am not anti-innovation. I am anti-undisciplined accumulation.
The best product companies keep creating, but they also make room. They define what a new SKU must prove. They set launch expectations before inventory is built. They decide how long a test gets. They know what will be discontinued if the new item earns a permanent spot.
That last point matters.
If nothing leaves the line, every launch adds complexity forever.
A practical SKU gate does not need to be heavy. It needs to answer the questions that protect the business.
What customer problem does this SKU solve? Which channel is it for? What margin must it hit? What volume justifies the operational work? What inventory risk is acceptable? What existing SKU might it replace? What decision date determines whether it stays?
Without those answers, the company is not innovating. It is collecting ideas.
The founder’s role is to protect the product strategy from scattered enthusiasm. Sales will always have requests. Customers will always have preferences. Retailers will always ask for differentiation. None of that means every idea deserves a SKU.
Good product discipline says yes more carefully and no more quickly.
Cutting SKUs Is a Growth Move
SKU rationalization can feel like retreat.
It is not.
Done well, it improves focus, cash conversion, margin, service levels, and team clarity. The company sells more of what works and stops spending attention on products that dilute performance.
I have seen SKU cuts free up warehouse space, reduce stockouts on core items, improve purchasing terms, simplify sales conversations, and make demand planning materially better. The benefits are rarely limited to product management. They show up across the operating system.
The hard part is emotional.
Someone created that SKU. Someone sold it. Someone believes in it. A customer may still buy it. The founder may remember when it mattered.
That is why the decision needs criteria, not mood.
If a SKU is strategic, name the strategy. If it is being tested, define the test. If it is a margin driver, protect it. If it is a drag, exit it cleanly.
A product line should reflect current strategy, not the company’s entire history.
As revenue grows, assortment discipline becomes more important, not less. Complexity that was manageable at $4M can become expensive at $12M and painful at $25M.
The companies that scale product well do not just launch better. They prune better.
A bigger catalog is not a stronger business unless every SKU has earned its place.