Business decisions · The service portfolio
Should You Stop Offering
a Service That Still
Brings in Revenue?
Before writing the announcement, find out what the business would gain, give up and still have to pay for.
the value
the promise
the replacement
Someone suggests removing a service from the website. The team is tired of delivering it, the margin report looks poor, and there are other things the business would rather do.
Then the owner asks a reasonable question: what happens to the revenue?
The answer requires more than confidence in the new direction. A service can bring in meaningful revenue while weakening the business. It can also look unattractive in a report while paying costs that will remain after it disappears. Before deciding how to explain a retirement to customers, work out what the decision would actually change.
I would put the public announcement aside until the business can describe the alternatives, their economics and the obligations it would still have to fulfill. Otherwise a communication decision can settle an operating question that has not been examined.
Name the problem precisely enough to test it
“This service is no longer working” can conceal several different problems. The price may be too low. The scope may be open-ended. Customers may need extensive help getting ready. One specialist may carry nearly all the work. The service may be worthwhile for established clients and expensive for one-time buyers.
Those situations point toward different decisions. Raising the price will not necessarily fix a service whose delivery repeatedly interrupts a more valuable commitment. Removing an offering entirely may be excessive if the difficulty sits in one package or one customer segment.
Write the problem as an observation you could disprove. For example: “Small standalone projects require the same senior review as large projects, but the fee rarely covers that review.” Or: “Our emergency option regularly displaces scheduled work, and we do not charge for holding capacity available.”
Then examine recent completed work, open commitments, lost opportunities and the next renewal cycle. Include quiet jobs as well as the memorable disasters. A retirement decision made immediately after one difficult delivery deserves a second look when that delivery is no longer dominating the conversation.
A reported loss can survive the service’s departure
The central accounting question is which revenues and costs differ between keeping and removing the service. Allocated common costs can make a service appear unprofitable even when removing it would reduce the amount available to cover costs that remain. OpenStax explains this issue, including possible effects on related sales, in its chapter on keeping or discontinuing a segment or product.
Here is an original, hypothetical example. A professional-services firm offers a recurring reporting service. All figures below cover the same twelve-month period and assume that customers pay the billed amounts.
| Item | Amount |
|---|---|
| Service revenue | $300,000 |
| Variable fulfillment and usage costs | ($126,000) |
| Dedicated annual specialist contract | ($60,000) |
| Amount remaining after these service costs | $114,000 |
| Allocated common overhead | ($132,000) |
| Reported service result | ($18,000) |
For this example, assume the $126,000 would disappear with the work. The dedicated contract is approaching renewal and can be allowed to expire without a termination charge, saving the full $60,000 during the comparison year. The $132,000 of common overhead remains under either choice.
Retiring the service would therefore remove $300,000 of revenue and save $186,000 of costs. Before any replacement work, related-sales effects or transition expense, the business would be $114,000 worse off for the year. The reported $18,000 loss did not identify an $18,000 saving.
The $114,000 is a service-level contribution after the specified avoidable costs. It is not the company’s profit, and it does not by itself justify keeping the service forever. It tells us what the retirement decision has to replace or otherwise overcome.
Put dates beside the proposed savings
In a real review, “avoidable” needs a date and a reason. A subscription might end next month. A lease may run for another year. A contractor may need notice. An employee assigned to the service may stay and work elsewhere, leaving payroll unchanged.
ACCA defines relevant decision costs through changes in future cash flows, and distinguishes costs already incurred or committed from costs a decision can change. Its relevant-cost guidance supports making that separation explicit.
For each proposed saving, identify the action that produces it, the earliest effective date and any associated expense. “Remove software expense” is incomplete if a migration requires another tool. “Free the team” describes capacity; it does not explain whether spending falls.
Use at least a transition-period view and a steady-operation view. If a service can be retired only gradually as commitments finish, revenue and costs will decline on different schedules. Do not apply the final year’s savings to the first month.
Have the appropriate finance, people and legal advisers review obligations and employment implications where needed. The purpose of this analysis is to make those decisions visible before announcing a result that depends on them.
The replacement needs an address on the calendar
“We could do more valuable work instead” is a possibility until the business identifies the work, the customer, the delivery window and the resources it requires.
Start with the actual constraint. Retiring a service that occupies junior production staff does little for an alternative held back by senior review. Releasing a specialist in November does not solve a deadline in September. Skills and timing determine whether capacity can genuinely move.
For a constrained resource, contribution per unit of that resource can help compare alternatives. ACCA describes that method in its discussion of limiting-factor analysis. The comparison must still respect demand, commitments and the other resources needed to deliver.
If replacement demand is uncertain, separate committed work from qualified opportunities and general ambition. Estimate the incremental contribution after the new work’s own delivery, acquisition and onboarding costs. Replacement revenue on its own will make the alternative look too attractive.
Also consider whether the constraint can be relieved without retirement. Different scheduling, a limited scope or a qualified delivery partner may preserve useful revenue while reducing the burden. These options have costs and risks of their own, which belong in the same comparison.
Follow the service into the rest of the business
A small service may be the practical reason a customer buys a larger one. A diagnostic assignment may lead to implementation. Recurring support may help retain a project relationship. An apparently modest offering may give customers a low-risk way to judge how your team works.
Investigate those connections instead of assuming them. Trace which customers bought both services, in what order and for what reason. Ask the people managing the relationships what would change if the smaller service were unavailable. A shared customer list establishes overlap, but does not prove that one purchase caused the other.
Estimate the contribution at risk from other work, rather than subtracting all of its revenue. Include the costs that would fall if that work disappeared. Where the relationship is uncertain, show a range.
The effects can run the other way too. If the service repeatedly delays more important commitments, retiring or redesigning it may improve retention elsewhere. That benefit needs evidence just as much as the claim that the service is an indispensable source of leads.
Test the retirement case with all the pieces present
Return to the hypothetical reporting service. Suppose retiring it would free the relevant internal capacity for other work. After allowing for the actual start dates, delivery expenses and additional acquisition costs, that work is forecast to generate $160,000 of incremental contribution in the first year.
Assume the firm would also lose $24,000 of contribution from related services and incur $18,000 of one-time transition expense. These amounts are distinct from the costs in the earlier table and from the replacement work’s expenses.
- Contribution from replacement work: +$160,000
- Contribution given up from the reporting service: −$114,000
- Contribution lost on related services: −$24,000
- One-time transition expense: −$18,000
Net first-year improvement: $4,000
That narrow result should change the discussion. It gives little room for an optimistic sales forecast or a delayed handover. If replacement contribution comes in 15% below forecast, it falls to $136,000, and the decision produces a $20,000 first-year reduction instead.
Under these assumptions, replacement contribution must exceed $156,000 for retirement to improve the first-year result. If all recurring figures stay the same and the $18,000 transition cost does not recur, the following year’s improvement would be $22,000. Those are conditional calculations, not predictions.
The useful question is now specific: what evidence supports earning at least $156,000 of replacement contribution on the required timetable? That is a better assignment for the next management meeting than a general debate about whether the service fits the brand.
Compare a smaller service with no service
A full retirement often gets compared only with continuing exactly as before. That gives a weak operating model more permanence than it deserves.
Consider a narrower version: scheduled delivery instead of on-demand work, an annual minimum, a defined input format, fewer customization options, or availability only within a larger engagement. A separate paid preparation stage might address work that consistently arrives incomplete.
Evaluate the revised offer with its likely customer response. A price increase that retains every current sale is an assumption. So is a scope change that customers accept without moving their other work. Use evidence from buying conversations, comparable engagements and a bounded test where practical.
A test needs an owner, a review date and a decision rule. For example, trial the narrower scope on appropriate new work through one delivery cycle, record senior hours and exceptions, and compare the result with the existing service. Protect current obligations while testing the next version.
Keeping the service for now can be a deliberate transition choice. Specify what the period is buying: evidence, replacement demand, completion of commitments or time to move a capability. Otherwise “for now” can quietly become another year.
Make the decision before writing the announcement
The decision is ready when leadership can say which version of the service will remain, which customers and commitments are affected, what spending will change and when, how released capacity will be used, and what evidence could overturn the economics.
Some services should end despite continuing revenue. Others need a different price, a smaller promise or a better delivery method. The work is to distinguish those situations without requiring the people closest to delivery to defend an indefinite burden.
Once the decision is sound, customer communication has something solid to explain: an achievable timetable, responsible handling of existing commitments and a realistic next step. Doing the economic work first makes it easier to be clear and fair with the people who relied on the service.