A founder I worked with had built an impressive catalog — dozens of SKUs, something for every customer segment imaginable. Revenue was growing. Margin was quietly shrinking. Nobody could point to a single decision that caused it. That is exactly the problem: it was hundreds of small decisions, each reasonable in isolation.
Every New Line Item Feels Justified
When a good customer asks for a variation, or a promising channel wants an exclusive configuration, saying yes feels like good customer service. It usually is, in the moment. The trouble is that each yes adds a permanent tax on the business: another SKU to forecast, another set of inventory to carry, another configuration for operations to support, another line for finance to reconcile.
None of that shows up as a line item called "complexity cost." It shows up scattered across freight, obsolete inventory, longer lead times, and a customer service team that needs a manual to keep the offerings straight. By the time someone adds it up, the company has often been absorbing that cost for years.
The Analysis Nobody Wants to Run
I ask founders to rank every product or SKU by contribution margin and by revenue share, together. It is an uncomfortable exercise because it usually reveals that a meaningful chunk of the catalog — sometimes a third or more — contributes very little profit and consumes disproportionate operational attention.
The instinct is to defend each item: "that one has strategic value," "that customer would leave without it," "we can't cut that, it's been core to the brand." Some of those defenses are legitimate. Most are habit dressed up as strategy.
Rationalizing Without Losing Customers
The companies that do this well don't slash the catalog overnight. They set a clear bar — minimum contribution margin, minimum volume, or both — and give underperforming items a defined window to either meet the bar or get sunset, with customers notified well in advance. Often, customers barely notice, because the items being cut were never the reason they bought from the company in the first place.
The freed-up capacity — in inventory dollars, in operational bandwidth, in leadership attention — gets redirected toward the offerings that actually drive the business.
Discipline Compounds
This is not a one-time cleanup. It is a discipline that has to be maintained, because the pressure to add "just one more variant" never goes away. The founders who protect margin longest are the ones who treat every new addition to the assortment as a decision with a real cost, not a free way to make one more customer happy. Growth that comes from expanding what you sell has to be paid for somewhere. Better it's a deliberate tradeoff than an invisible one.