Your sales mix shows you the winners and losers hiding inside your top-line revenue.
What's inside your top line?
Here's a situation. Sales last month were $140,000, and the same month last year was $120,000. That's a 17% year-over-year increase.
I've been preaching that you should know this number, your YoY growth rate, like the back of your hand. And you should. But it's a bit misleading, because the 17% and the $140,000 are a 30,000-foot, zoomed-out view of the business.
But what's actually inside that $140,000?
What's a sales mix?
Most companies have multiple product or service offerings.
ApparelCo sells t-shirts, jackets, pants, shorts, and accessories.
ManufacturingCo sells a high-end product, a mid-range product, a value product, and parts.
ServiceCo sells an hourly rate, a monthly retainer, and various fixed-fee services.
This collection of offerings in the catalog is your product mix. On top of that, you probably sell in more than one place: a storefront, a website, Amazon, wholesale accounts, distributors. Those are your sales channels.
Sales mix = revenue broken down by product or service and by sales channel. Think of it as a grid, products down the side and channels across the top. Every box is a stream of revenue adding up to your total for the month.
Why does this matter?
Imagine your business is a cruise liner and total revenue is the tip of an iceberg. It'd be helpful to know what's lurking beneath the surface, right? Here's the product and channel mix for the past few months.
See any opportunities or challenges in here?
Product A is a growth gem, ramping from $50k to $75k, and it isn't even sold through Channel B. Big opportunity?
Product B has some issues. What's going on there?
Product C is flat. Maybe it's time to refresh the pitch or the marketing.
Channels A and B are stagnant. Worth investigating why there's no traction.
Channel C is the growth engine. Maybe invest in growing Products B and C there.
Your mix matters because it gives you a beneath-the-surface look at those sales figures, which helps you find the winners and the losers in your catalog: where to invest more and where to pull back. Without this view, you might be pouring money into shrinking or low-margin products and channels.
Business is all about doing more of what's working and less of what isn't.
Where do you even get this?
This is why good data matters so much. Without reliable data you're piecing it together by hand, which is still worthwhile but usually relegated to a few times a year.
Say you invoice wholesale customers out of QuickBooks for one channel, take Amazon deposits for another, ring up cash sales at the register, and run a POS system in the storefront. That's four channels and four sources of data, and it's on you as the owner to combine them the right way.
How do you use it?
Three basic ways to put it to work:
Product opportunities. Find which products are growing fastest and which are declining. Throw more resources at the growers; cut or stop investing in the decliners.
Channel opportunities. Do the same for channels. Which work best? Are there products missing from your strongest channels? Is there an easy new channel to add?
Unit economics. Review how profitable each product and channel is. If a declining product is also your least profitable and nearing a 0% margin, stop selling it immediately.
This isn't a report to stare at every week. Review it a few times a year, especially during annual planning when you're preparing price increases. A quarterly cadence works well.
The short version
Top-line revenue is only a 30,000-foot view.
Sales mix is the beneath-the-surface view of revenue.
Sales mix = product/service mix and channel mix.
It reveals growth and margin opportunities.
Invest in good data to see it clearly.
Review it a few times a year, especially at planning time.
Homework: pull last month's sales and split them into your top 3-4 products and top 3-4 channels. Don't aim for perfect accuracy, just get something on paper. I'd bet at least one thing surprises you.
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Colin King, CPA, CFA
CEO, Profit Mastery
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