How to reap maximum benefits from a slow-growing product.
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.
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