How do you determine your most profitable products?

Aug 17
4 min read

Updated: 2 days ago

Introduction

In any business, the primary goal is not just to sell a lot… but to sell Most profitable You may have dozens of products, but only a few are the ones that... Generates the most profits.

The question is:

In this post, we provide you with practical and easy steps that will help you:

Identify the most profitable products
Understand the difference between a “best-selling product” and a “most profitable product”
And make smarter marketing and purchasing decisions

First: What is the difference between high sales and high profitability?

Product

Number of pieces sold

Net profit from each piece

Gross profit

Product (A) – its price is 20 riyals

100

3 riyals

300 riyals

Product (B) – its price is 50 riyals

15 riyals

600 riyals

💡 Although product (A) sells more...but product (B). Most profitable.

Second: Why should you focus on winning products?

✅ Because it increases your profits without the need to significantly increase sales

Instead of selling 100 items of a low-profit product, you can sell just 30 of a high-profit product and make the same or more return.

✅ Helps you target ads intelligently

Focus your campaigns on products that are actually worth investing in.

✅ Facilitates purchasing and storage decisions

Reduces capital blockage in slow and unprofitable products.

Third: How do you determine your most profitable products?

Step 1: Calculate the profit margin for each product

Profit margin = (selling price – product cost) ÷ selling price x 100

A product sells for 100 riyals and costs 60 riyals
Profit margin = (100 – 60) ÷ 100 = 40%

🎯 Calculate this for each product you have.

Step 2: Add the net profit for each product

Net profit = number of pieces sold x profit from each piece

📌 This explains Full product effect On profit, not just its margins.

Step 3: Divide products into 3 categories

Step 4: Use the 80/20 rule

80% of profit usually comes from 20% of products. Use this rule to discover which products make up the majority of your profits.

Step 5: Monitor the evolution of product profitability over time

A product that was previously profitable may become less profitable because:

Supply cost changes
Increased competition
Weak seasonal demand

🎯 Review the profitability of products on a monthly or quarterly basis.

Fourth: Tools that help you in analysis

Tool

Use

Google Sheets/Excel

Build product schedule and calculate margins and profit

Point of sale (POS) software

Extract sales reports for each product

Accounting software such as Zoho or QuickBooks

Calculate the cost of goods and net profit

ERP or Inventory software

Integrate data from purchases and sales

Fifth: Additional indicators of profitable products

📈 Inventory turnover rate

= The number of times a product is sold during a given period

The higher the turnover rate, the more active and effective the product.

⭐ Customer satisfaction and repeat purchase

Products that customers repurchase indicate high satisfaction = sustainable profit potential.

🔁 Cross-selling opportunities

Products that are frequently purchased together…means they create additional value.

Sixth: Smart decisions after identifying winning products

✅ Focus on it in advertising campaigns

Example: High profit product x paid advertisement = faster and more profitable results

✅ Create offers or packages around it

Combine the winning product with another to raise the average bill.

✅ Store larger quantities of it

As long as the product sells well + is profitable = keep it in permanent stock.

✅ Motivate employees to sell them

Offer incentives (commissions or prizes) for selling a winning product.

Seventh: Practical examples from reality

☕ Coffee shop:

Best selling product = "Americano"
But the most profitable = "vanilla latte"
Emphasized in signage + barista training on his suggestion
The result: his sales increased by 60% in one month

🛍️ Gift Shop:

Mid-priced products were more profitable than expensive items
The purchase of expensive pieces has been reduced, and the assortment of medium-sized pieces has increased
The result: sales and profitability increased, and the customer experience improved

🍔 Restaurant:

The “Spicy Chicken Burger” meal achieves the highest profit, although it is not the most popular
A special offer was created for her, and she appeared on the menu cover
Sales increased by 80%, and branch profits improved

Eighth: Common mistakes to avoid

Error

Negative result

Relying only on the number of sales

You may be focusing on a product that doesn't make a real profit

Ignore the cost of the product when pricing

Low pricing risks eating into profit

Not reviewing numbers periodically

Inaccurate decisions over time

Pay attention to expensive products only

Some cheap products are more profitable

Ninth: How do you link analysis to daily decisions?

When launching an offer → choose the winning product, not the random one
When choosing a new product → compare to current profit margins
When reviewing monthly performance → review profitability, not just sales
When expanding or opening a new branch → rely on winning products as the main focus

Conclusion

The success of the project does not mean selling more... but rather... Sell smart.

Profitability analysis helps you:

Maximize profits
Reduce waste
Direct your time and effort to products that are worth it
Make decisions based on data, not impressions

Start today with a simple review of profit margins... and you will be surprised by results that may change the way you manage the project.