Deciding when to stop selling a product or service can be as important as deciding what to start selling. While it’s tempting to hold onto everything that’s brought even modest success, knowing when to cut ties with a stagnant or burdensome offering can free up resources to focus on what truly drives growth.
Crocs’ acquisition of HeyDude for $2.5 billion in 2021 offers a fascinating case study. The shoemaker had ambitions of building a comfy footwear empire, hoping to expand beyond its iconic clog brand. Initially, the strategy seemed to pay off: HeyDude’s revenue skyrocketed from $100 million to $400 million per quarter in 2022. But the momentum didn’t last. By 2023 and into 2024, HeyDude’s sales plateaued, raising questions about its long-term viability within Crocs’ portfolio.
For small business owners, these same challenges can emerge, albeit on a smaller scale. When is it time to stop selling a product, discontinue a service, or pivot away from an investment that’s no longer paying off? Let’s explore key considerations to help you make this critical decision.
1. When You Aren’t Making Money from It
Profitability is the most obvious indicator of a product or service’s success—or failure. If your offering consistently fails to generate a profit, it may be time to move on.
Difficulty in Achieving Profitability: Even if you value the product, detailed financial analysis may reveal that it’s not viable in the current market. This has been represented by the difficulties Sweetgreens has been going through in the last couple of years. In the chart below, you’ll see that they lose $2.50 per salad they make! Within the last year, they’ve cut the profitability margin in half, but they are still losing money. While Sweetgreen may eventually resolve these challenges, it doesn’t seem like they have all the winning ingredients.
Evaluate Margins: Are your costs outweighing the revenue generated? If you’re spending more on materials, labor, or marketing than you’re earning, the math doesn’t add up! No matter how much you might like the product!
Consider Hidden Costs: Sometimes, a product might break even or appear profitable on the surface (especially with its COGS), but hidden costs—like excessive customer support, poor management of inventory and frequent returns—can quietly erode your margins.
Seeing Growth in Overall, Net Profitability
For Crocs, HeyDude’s stalled growth could signal a tipping point. If the brand requires significant marketing or operational resources to maintain flat sales, Crocs may question whether the return on investment is worthwhile.
2. When the Money Isn’t Worth the Burden
Profitability alone doesn’t justify keeping a product or service if the effort involved outweighs its rewards. Some questions to consider for this include:
Is It Stressing Your Team? A difficult-to-manage product or service can lead to employee burnout, decreased morale, or strained client relationships. And one of the greatest ways to verify if you’re going in a good direction with your business is by listening to your team. If you drag your team to your goals, you might not have them for much longer! If your business offers multiple services and one consistently demands late nights, complex logistics, or excessive troubleshooting, you need to ask whether it’s worth the toll on your team—and yourself.
Is It Distracting You from Higher Priorities? Some offerings require disproportionate amounts of time, energy, or resources to manage, when you could be spending your time on improving a key service you already do. If the payoff is minor compared to the strain, it might be time to let go.
3. When It Makes Sense to Branch Off or Sell
In some cases, a stagnant product or service might still hold value—but not within your business. Consider spinning it off as a separate entity or selling it entirely.
- Evaluate Market Potential: Is the product or service underperforming because it doesn’t fit your business model, or because it’s genuinely losing consumer interest? If it’s the former, it might thrive as a standalone brand with a different approach.
- Seek Buyers: Larger businesses or niche players may see potential where you don’t. Selling allows you to recoup some of your investment and reallocate those funds into your core business.
Crocs may eventually consider this path with HeyDude if they’re unwilling to invest heavily in revitalizing the brand. While the initial growth was impressive, maintaining a plateaued product may not align with their broader strategy.
Practical Steps to Decide What to Drop
When you’re debating whether to discontinue a product or service, take these steps to make an informed decision:
Analyze the Numbers
- What is the profit margin?
- What are the fixed and variable costs associated with maintaining this offering?
Evaluate the Effort Required
- How much time, labor, and resources does it consume?
- Does it align with your team’s strengths and expertise?
Consider Opportunity Cost
- What could you achieve by reallocating resources to other areas of your business?
- What’s the true potential for this service or product you are considering stopping?
Seek Feedback
- Talk to customers, employees, and trusted advisors. Their insights can help you assess whether the product or service is worth keeping.
- Test out various ads, pricing structures and changes that could verify if the product or service just needs a pivot, versus being completely shut down.
