Luke Smorgon

CEO

9th December 2011

When a good idea is no longer a good business

Thoughts By 5 years ago

We made a pretty big decision recently to pull out of a great project we were involved in. This concept, let’s call it Project X, was based around a brilliant idea in the media space, utilising mobile and web. The opportunity seemed to ripe: the concept was fresh, there are no existing competitors, the barriers for entry were medium but easily overcome, and the network and contacts were there to help execute the business after the systems were built. We had 3 other great partners in the project, all of which bought a unique set of skills and various viewpoints to Project X. We have worked closely with each of them on other successful projects, and on paper we seemed to be a winning team.

So why pull out then? This was a tough decision, and one that took us a while to grapple with. In essence, we came to realise that as good an idea as Project X was, the business model behind it was not sustainable, and would result in too high an opportunity-cost for b2cloud. To give any business a real chance of success, your full time attention really needs to be put into it, not just spare time you have from other projects. We worked out that the return on our effort after 12-24 months on Project X, compared with spending that time focusing on growing b2cloud, would not make it worth our while pursuing any further.

The same is applicable when dealing with difficult clients. Some clients seem like great ones to have, either because of their name, size or reputation, but this often comes at a great expense to the effort you have to put in to maintain that client compared to the minimal revenue you can make from them. I have encountered that many times recently, and have had to make some tough calls to stop pursuing work with clients. The effort required either in the sales process or project management process, or indeed the risk of the client giving you massive amounts of grief should something not go exactly to plan, has been too large to warrant our focus.

So, my lesson has been to better assess the real opportunity of any prospective work, be it your own projects or client work, and best determine the real opportunity-cost of getting involved.

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