Everything seems to be in place: you had a great idea for a product or service and know there's a large market for it based on research. Your prototype works and is ready for production. You have a business plan in hand after getting advice from industry experts. You've even talked to investors and reached out to retail buyers. And you feel ready for what comes next, because you've built a team to support you.
But for whatever reason, the pieces just aren't coming together. Maybe you haven't been able to raise enough money or retail buyers are lukewarm. What should you do? When your business plan isn't working out, how do you know when to throw in the towel and move on? Every entrepreneur has had to make these kinds of tough decisions at one point or another, including myself -- many times. Holding tightly to an idea that isn't working can prevent you from identifying something better.
Here are four things you should consider before walking away:
1. Have you done everything in your power to get a purchase order? If you know your product has a benefit consumers will pay for, you should try to do everything to get it in their hands. Limited sales can really help push a product through. Purchase orders can be used as leverage; they help get the ball rolling by saying, "Yes, there is interest here. I can prove it, because these people want to buy my idea." When I developed a technology for a rotating label, I had a tough time finding a manufacturer that would produce it. But when I reached out to a major distributor of vitamins, they liked the idea and gave me a purchase order, which I then showed to manufacturers. They were willing to manufacture my label because I had a purchase order.
2. Have you talked to enough investors, and really listened to what they are saying? If there are problems they identify, fix them. Exhaust all potential investors, including your family, friends, private equity firms, and even angel investors. Maybe you can get creative and start a Kickstarter campaign. Realize that there's inherent risk in bringing on partners, and by all means, do not mortgage your house. When I started a guitar pick company, I didn't have enough capital to get going, but I brought on three different partners who had different value, and we were able to launch.
3. Have you thought about licensing your idea? Before you throw in the towel, consider the benefits of licensing. Whoever licenses your idea will have distribution, established shelf space and the ability to bring your product to market much more quickly. You might be able to divide up different channels of distribution in your agreement. For example, they'll sell to big box retailers, while you manage small boutique and specialty stores. It's helpful to think of a licensee as another business partner.
4. Have you reached out directly to contract manufacturers and large retailers? It might not seem the most obvious, but more and more contract manufacturers are becoming private label producers, as are large retailers. Contract manufacturers have great relationships with retailers, and vice versa. You might be able to license your idea to one of them or get the ball rolling with some interest from a power-player.
It's hard to walk away from an idea you believe in. But sometimes, it's necessary. Maybe your timing is off. The truth is, it really could be any number of things. Making the choice to walk away and start something new isn't giving up: it's sane. You have to believe that if you've had one idea, you'll have another.
Some start-ups just aren't meant to happen. But their failure could pave the way for something even greater. If you need to reassure yourself of that truth, explore the story of any successful entrepreneur. I'm betting you'll find at least one example of a business plan gone awry.