The One With the Hardest Decision You’ll Make This Year: Kill, Fix, or Scale

The hardest decision you'll make this year: kill, fix, or scale. Last week, a founder sent me a spreadsheet. She'd done the work. Unit economics for every SKU. Contribution margin calculated line by line, just like we talked about in the last episode. Then she asked me the question I hear more than any other. Okay, Lara, I see the numbers now, but what do I actually do with this? She had 43 SKUs. 11 were clearly profitable, 8 were clearly not, and 24 were somewhere in the middle. The gray zone, the place where founders get stuck. Data is useless if it doesn't lead to decisions, and decisions are hard, especially when they involve killing a product you spent 2 years developing or scaling something that feels risky. Or admitting that your gut was wrong. Today, I'm giving you the framework that makes those decisions clear. Kill, fix, or scale. By the end of this episode, you'll know exactly which bucket every product belongs in, what to do once you've made that call, and how to handle the emotional weight of cutting things you love. This is Supply Chain Moves. I'm Lara Guevara, and this is the hardest decision you'll make this year. Let me tell you why most Founders freeze when they finally see their numbers clearly. It's not because the math is hard. The math is actually the easy part. Addition, subtraction, percentages. You learned this in middle school. The hard part is what the math implies. When you see that a product has an 8% contribution margin, the math is saying something. It's saying this product in its current form, at its current price, with its current cost structure. Is barely worth selling, maybe not worth selling at all. And that's uncomfortable because you chose that product, you believed in it, you told people it was great. Maybe you have inventory sitting in a warehouse. Maybe your whole brand story is built around it. Maybe it was your first product, the one that got you started. So instead of making a decision, founders do one of three things. One, they rationalize. They say, well, it's not that bad, or maybe it'll get better, or We need it for the product line to make sense. Two, they procrastinate. They say, I'll deal with it next quarter, or let's wait and see how the holiday season goes. Three, they panic. They kill everything that's not perfect and end up with a catalog that's too small to sustain the business. None of these are strategies. They're emotional reactions disguised as business decisions. What you need is a framework, something that takes the emotion out and gives you clear criteria. That's kill, fix, or scale. Here's how it works. Every product in your catalog goes into one of 3 buckets based on its contribution margin: kill, fix, or scale. Each bucket has specific thresholds, specific criteria, and specific actions. Let me walk you through each one. Let's start with scale because this is the bucket everyone wants to be in. A product qualifies for scale if it has a contribution margin of 30% or higher. That's after all variable costs, including customer acquisition. Why 30%? Because at 30% contribution margin, you have room, room for things to go wrong, room for CAC to increase during peak season, room for shipping rates to bump up, room for a bad batch of returns. 30% gives you a cushion. And if a product is at 30% or above, here's what scale actually means. And it's not just spend more on ads. Scale means increase inventory depth so you never stock out.. It means negotiate better supplier terms because you have volume leverage now. It means expand to new channels where this product can win. It means build out the product line, create variations, sizes, colors, bundles. It means test higher price points because you have a product people love. It means invest in content around this product, UGC, reviews, education. It means give it the hero treatment in your marketing. Most founders underinvest in their winners. They spread resources evenly across the catalog instead of concentrating on what's actually working. Scale means going all in on products that have earned it. But here's the thing, before you scale, pressure test the contribution margin. Make sure it's real. Make sure it holds up under increased volume. Sometimes margins shrink when you scale because you hit shipping thresholds or supplier capacity issues or increased competition. Test it. Then scale. Now let's talk about kill. This is the bucket no one wants to think about. A product qualifies for kill if it has a contribution margin below 15% or if it's negative. And yes, you probably have products that are negative. Most founders do. Why 15% as the threshold? Because below 15%, there's almost no path to profitability. Even if you fix everything fixable, you're still looking at a product that barely covers its costs. You'd need a miracle to make it work, and business strategy shouldn't rely on miracles. But before you kill anything, you need to ask one critical question. Does this product serve a strategic purpose that justifies keeping it alive? There are a few legitimate reasons to keep a low margin product. One, it's a gateway product. Customers buy it first, then buy your high margin products later. If you can prove that with data, lifetime value math might justify the loss on the first purchase. 2, it completes a product line that would feel incomplete without it. Customers expect you to have it. Not having it would hurt the brand. 3, you have contractual obligations. Maybe you promised a retailer you'd supply it. Maybe it's part of a bundle you're locked into. If none of these apply, kill it. And I know that's hard to hear, but every dollar you spend supporting a dying product is a dollar you're not spending on winners. Every hour of customer service time, every square foot of warehouse space, every minute of your attention. Low margin products don't just fail to make money, they actively take resources away from products that could. Which brings us to fix the gray zone, 15 to 30% contribution margin. This is where most of your products probably live. Not bad enough to kill, not good enough to scale, stuck in the middle. Here's the truth about the gray zone. It's where businesses get stuck. If most of your catalog is in fixed territory, you are working really hard to basically break even. You're busy, but not profitable. The goal with fixed is to move products out of the gray zone, either up into scale territory or down into kill. Gray zone products should not stay gray zone products forever. Give every fixed product a 90-day window. 90 days to try the levers, 90 days to see if you can move the contribution margin above 30%. If you can't do it in 90 days, that product moves to kill. So what are the levers? I'm going to give you 5. These are the 5 things you try before giving up on a product. Lever number 1, price. This is the fastest lever and the one founders are most afraid to pull. If your contribution margin is 22% and you need to get to 30, sometimes a price increase is the simplest path. A 10 or 15% price bump can completely change the economics. Yes, you might lose some volume, but here's the math founders forget. If you raise prices by 15% and lose 10% of customers, you're still better off. You're making more money on fewer sales with less operational complexity. Test it, raise the price, see what happens to conversion. See what happens to margin. You might be surprised how inelastic demand actually is for a product. People love. Lever number 2, COGS reduction. Go back to your supplier, ask for better pricing. If you've been with them for a while and your volume has increased, you have leverage. Use it. Look at your product spec. Is there anything you can simplify without hurting quality? Different materials, simpler construction, less packaging. Get quotes from alternative suppliers. Even if you don't switch, having a competitive quote gives you negotiating power. A 10% reduction in COGS can add 5 to 8 points of contribution margin depending on your price point. That's often enough to move a product from fixed to scale. Lever number 3, shipping and fulfillment. Can you ship this product in a smaller box? Can you reduce the weight? Can you change from a box to a poly mailer? Can you negotiate better rates with your carrier? If you're shipping 1,000 units a month, you have volume. Get on the phone with your rep. Can you change your free shipping threshold? Instead of free shipping on everything, maybe free shipping over $50. Customers will add more to their cart. Average order value goes up. Effective shipping cost per unit goes down. Shipping is often $3 to $8 per unit. Cutting that by even 20% can meaningfully move the margin. Lever number 4. Returns reduction. If a product has a high return rate, that's not a fixed characteristic. It's a problem you can solve. Look at why people are returning. Is it sizing? Add better size guides. Is it expectations? Improve the product page copy and images. Is it damage? Fix the packaging. Is it quality? Fix the product. Every percentage point you reduce returns adds directly to your contribution margin. A product with a 15% return rate is a completely different business than the same product with a 5% return rate. This lever takes longer to see results. Changes to your product page might take 30 to 60 days to show up in return data, but it's often the highest impact lever for gray zone products. Lever number 5, customer acquisition cost. Can you sell this product through a lower cost channel? Maybe organic social instead of paid, maybe SEO instead of Meta ads, maybe email to existing customers instead of acquiring new ones. Can you bundle this product with a higher margin product so the acquisition cost is spread across both? Can you improve your conversion rate so your existing ad spend produces more customers? Sometimes the problem isn't the ad cost, it's the landing page. CAC is often the biggest line item in unit economics. Moving it by even $5 can flip a product from underwater to profitable. Those are your 5 levers: price, COGS, shipping, returns, CAC. For every product in the Fix bucket, pick 2 or 3 levers to focus on. Make the changes, then measure. You have 90 days. If in 90 days the product hasn't moved above 30% contribution margin, it moves to Kill. No more extensions, no more maybe next quarter. The clock is done. This is how you prevent the gray zone from becoming a permanent home for underperforming products. You force a decision. Now let's talk about the actual mechanics of killing a product because it's not as simple as just stopping. Here's the playbook. Step 1, stop ordering new inventory. This seems obvious, but I've seen founders continue to reorder products they've decided to kill because the PO was already in the system or because they didn't You don't want to deal with minimum order quantities. Stop now. Step 2, liquidate existing inventory. You have 3 main options. Option A, discount and sell through your own channels. Run a clearance sale, bundle with other products, offer to your email list first. Option B, sell to a liquidation service. You'll get pennies on the dollar, but it's fast and clean. Option C, donate for a tax write-off. Better than throwing it away., and your accountant can help you value it properly. Step 3, communicate clearly. If this product has loyal customers, tell them what's happening. Give them a chance to stock up. Thank them for their support. Don't just let the product disappear without explanation. Step 4, update your systems. Remove from your website once inventory is gone. Update your ERP. Clear it out of your 3PL. Don't let zombie SKUs hang around creating confusion and taking up mental space. Step 5, learn from it. Why did this product fail? Was it the wrong price point, wrong market, poor execution, bad unit economics from the start? Document what went wrong so you don't repeat the mistake. Killing a product cleanly takes about 4 to 6 weeks from decision to completion. Have a timeline, execute it. I want to talk about the emotional side of this because it's real and pretending it's not doesn't help anyone. Killing a product feels like failure, even when it's the right decision, even when the numbers are clear, it still hurts. You invested time, money, creative energy. You told people this product was great. Maybe you told yourself this product was your identity, your big idea, and now you have to admit it didn't work. Here's what I want you to understand. The product failing doesn't mean you failed. It means you tried something, you learned something, and now you're making a better decision with better information. The only real failure is refusing to see the truth. The only real failure is letting a bad product drag down everything else because you can't let go. Let me tell you about sunk cost fallacy because it's probably running your decision-making right now without you realizing it. Sunk cost fallacy is the tendency to continue investing in something because of what you've already invested rather than because of what you'll get in the future. You think, I've already spent $50,000 developing this product. I can't just walk away, but that $50,000 is gone. It's spent. It doesn't exist anymore except as a line on your P&L. The only question that matters is, what will this product return going forward? And if the answer is nothing good, the past investment is irrelevant. Every dollar you spend on a losing product today is a new decision. It's not protecting your past investment, it's adding to your losses. The most successful founders I know kill products faster than everyone else. They're not smarter at picking winners. They're faster at cutting losers. That's the difference. Let me put this all together for you. Pull out your unit economic spreadsheet, the one you built after last week's episode. If you haven't built it yet, pause this and go do that. You can't run this framework without the numbers. For each SKU, look at the contribution margin. Sort your products into 3 buckets. Scale, 30% contribution margin or above. These are your winners. Go all in. Invest, expand, protect. Kill, below 15% contribution margin. Unless there's a documented strategic reason to keep it, start the liquidation process this week. Fix, 15 to 30%. Pick your levers. Set the 90-day clock. Make the improvements. Then decide. Run this exercise every quarter. Product economics change. Something that was scale-worthy last year might be fix-worthy now. Something in fix might graduate to scale. Keep the categories dynamic. Your goal over time is to have 70% or more of your revenue coming from scale products. If you can get there, you've built a profitable, scalable business. If most of your revenue is stuck in fix and kill territory, You're running really hard just to stay in place. Here's what's at stake. If you don't make these decisions, your business makes them for you. You run out of cash, you burn out, you wonder why you're working so hard for so little. But if you do make them, if you kill what needs to die, fix what can be fixed, and scale what's actually working, you build a business that rewards your effort. A business that gets easier, not harder, as it grows. A business where the math actually works. Kill, fix, or scale. That's the framework. Now go use it. That's it for today. If you're working through these decisions and want a second opinion, or if you want to share what you learned running this exercise on your own catalog, join us in the Slack community. Link in the show notes. Next week, we're going deep on inventory, specifically how much is too much, how much is too little, and the cash flow math that tells you exactly where your inventory should be. If you've ever had money stuck in boxes or lost sales to stockouts, that episode is for you. I'm Lara Guevara. This is Supply Chain Moves, and I'll see you next week.