It wasn't like most of the business plans Jack Ferner reviews. Instead of investing more money to boost sales of a well-established but slow-growing product line, it outlined a plan to shrink investment, keep sales static and milk the market for profits as long as inventory lasted.
"The idea was to collapse advertising costs and other discretionary expenses, treat [the product line] as a cash cow and liquidate the investment to focus on a product line they thought was more promising," explains Ferner, a management professor at Wake Forest University in Winston-Salem, North Carolina. Using this kind of strategy to harvest the profits of a business or product doesn't come naturally to most entrepreneurs. But experts say a harvest strategy that allows you to redeploy assets to better opportunities is an important part of an entrepreneurial toolkit.
"People invest time, talent and money building value in a venture," says Mark Rice, director of the Center for Technological Entrepreneurship at Rensselaer Polytechnic Institute in Troy, New York. "The time comes when it is appropriate or necessary for them to get a return on their investment."