4–6 minutes Every small business wants to boost revenue, strengthen margins and scale sustainably—but many don’t realise that the key may already be sitting on their shelves. The difference between surviving and thriving often lies in understanding which products are truly profitable, not just popular. For SMMEs navigating tightening budgets, shifting customer behaviour and rising operational costs, knowing where your profits come from is not optional; it’s strategic survival. Here is a practical guide to help small businesses uncover, refine and double down on their most profitable products. 1. Start With Real Numbers — Not Assumptions Many entrepreneurs mistakenly assume their best-selling items are also their most profitable. But sales volume is only half the story. Profitability requires looking deeply at both costs and margins. A proper product profitability analysis includes: Cost of Goods Sold (COGS): raw materials, packaging, production. Indirect costs: marketing, rent, electricity, labour, transport. Time investment: how long it takes to produce or deliver the item. Return rates or warranty costs for products that need repairs or replacements. One product may bring in high revenue but swallow up time, labour and marketing spend. Another may sell less frequently but deliver a cleaner margin. Without real numbers, you’re relying on guesswork—and most small businesses discover major surprises when they calculate accurately. 2. Segment Your Products Into Clear Categories A simple but powerful framework is to categorise your products into four groups: High profit, high demand – Your stars. Promote, package and prioritise. High profit, low demand – Hidden gems. They may need better marketing or bundling. Low profit, high demand – Your traffic drivers. Great for footfall but monitor costs closely. Low profit, low demand – Consider phasing out unless they serve a strategic purpose. This exercise often immediately shows where you should focus your time and marketing resources. 3. Analyse Customer Buying Patterns Your customers are telling you what’s profitable—you just need to listen. Look for: Frequently purchased combinations (bundles) High repeat purchase items Products customers recommend most Items tied to customer loyalty or long-term value Sometimes the most profitable product isn’t the first thing a customer buys—it’s the one that keeps them coming back. For example, a beauty salon might discover that while haircuts draw customers in, aftercare treatments and premium hair products deliver the highest profit margin. Or a bakery may find that celebration cakes sell weekly, but the real profit lies in cupcakes and muffins sold daily. 4. Calculate the True Lifetime Value (LTV) The product a customer buys first is rarely the only one they will buy. LTV helps you understand which products lead to deeper, more profitable relationships. Ask: Which products do first-time customers buy? Which items trigger upsells? Which purchases lead to repeat visits? A “starter product” with a low margin may be worth keeping because it opens the door to high-margin follow-on purchases. 5. Identify Products That Drain Resources Some items are deceptively expensive to maintain. These are the products that: Take too long to produce Require specialised skills Frequently result in customer complaints Require heavy marketing to sell Have high return or warranty issues Have volatile or rising input costs Even if they look profitable on paper, the operational strain may outweigh the benefit. SMMEs should be ruthless in identifying and trimming these “resource drainers”. 6. Test Pricing Power A product is truly profitable when customers are willing to pay more for it. To test pricing power: Increase prices slightly on high-margin items Create premium versions of popular products Introduce bundles with higher overall value Compare pricing with competitors while emphasising quality or uniqueness Many SMMEs underprice themselves out of fear. But customers will pay more for reliability, craftsmanship, expertise or locally made products—especially in South Africa’s growing “support small” culture. 7. Use the 80/20 Rule to Refocus Your Strategy In most businesses, 20% of products generate 80% of profits. The trick is identifying that 20%. When you find those high-potential items: Promote them more heavily Ensure you never run out of stock Streamline production Create variations or upgrades Cross-sell them with other products Doubling down on what already works is often the fastest path to growth. 8. Continuously Review and Adjust Markets shift, costs rise, and customer needs change. A product that was once profitable may not remain so. Review your product profitability at least quarterly. Track: Changing input costs Seasonal patterns New customer behaviour Competitor activity Product lifecycle maturity Agile SMMEs win because they adapt fast. Final Thought: Profitability Is a Strategy, Not a Mystery Finding your most profitable products isn’t about guessing or reacting—it’s about analysis, clarity and discipline. When you identify the items that deliver the highest returns and align your operations toward them, your business becomes more stable, scalable and resilient. For small businesses, growth doesn’t always come from expanding your offerings. Sometimes it comes from refining what works, pruning what doesn’t and putting more effort behind the products that truly move the needle. Your most profitable products are already in your business. Now is the time to uncover them—and build your strategy around them If you are interested in a Checklist and further advice on how to implement such strategies, do email me at mashite@youstartup.co.za Mr Mashiteletse Hlabirwa Tisane is the Founder of YouStartUp (www.youstartup.co.za | mashite@youstartup.co.za), an SMME Advisory company. Business feature writer and Advisor for Mo Media Newspaper now The Weeke Post navigation ANC takes January 8 rally to Moruleng Educator leads drive to fix desk crisis
