Businesses that introduce items that survive the first year at increasing rates tend to be healthy.
Businesses that consistently increase the rate that first-year items survive to a second year tend to be healthy.
In our example, 41% of first-year items are discontinued, they fail to survive to a second year. There are three metrics to keep track of, over time.
- Does the first-year item survival rate increase, or decrease, over time? Hopefully, it increases.
- Does the number of first-year items increase, or decrease, over time? Often, I analyze businesses that struggle to produce enough productive first-year items, and this hurts the business, long-term.
- Does the business generate enough first-year items with high levels of productivity? The healthiest businesses tend to observe increases over time.
Give me a holler (click here) if you'd like for me to perform a Merchandise Forensics analysis for your business.