Opportunity Cost and Letting Go: How to Profit from Your Stalled Projects

I ran across this tweet recently, and it sparked this post …

For the past years, I've worked on multiple products simultaneously.

Two iOS apps and one web app.

In 2020 I switched my iOS apps to subscriptions and grew them to $7.5k MRR.

In 2022 I created my first web app, which has a lot of potential, but only makes a little decent…

— Florian Mielke (@FlorianMielke) June 21, 2023

This is a fantastic question… Do you continue to work on something even though your time could be better spent elsewhere?‬

‪The ultimate root cause, in my own personal analysis for the same situation, has been opportunity cost. This could be the opportunity cost that’s lost by not paying attention to a project more, or it could be the opportunity cost that is related not spending my time on something else. ‬

‪For me, I found that it was ultimately the fear of losing out on something that I built. ‬

In other words, I was confident in the thing I built and I didn’t want to lose out on “what it could be”.

Thankfully, I figured out a way to not lose out on the project, yet also allow it to live while also letting go of the responsibility of it (for the most part).

Reframing your Mental Model around Stalled Projects

‪To get over this, I had to reframe things …

For instance, if product X functions properly but fails to generate significant revenue or grow fast enough despite its potential, I will experience mental conflict about how to continue developing and expanding it while also giving adequate attention to the products that are profitable and deserving of more or all of my attention.

‪So, there is a way around this …

Find and Replace the Bottleneck – Yourself

‪Ultimately, it works like this….‬

‪Think of it like the old traditional VC model:

Would you rather have a small share of an asset that has value, or a large share of an asset that has no value?

‬

‪The answer, to me, is obvious… I’d rather have a small share of an asset that’s worth something vs nothing at all. ‬

So what do you do next?

You have to find someone to partner with.

Someone that will replace you as the operator of the business.

‪There are tons of people out there who want to build a product and build a business, yet they don’t have any good ideas. You see these posts all the time and I’ve talked to tons of these people. They’re hungry and want to build and grow and opportunity, but they just don’t have a product. They’re often coders who are great at coding but cant see the forest through the trees for many problems and haven’t been able to come up with a product of their own.

These are the exact people you should partner with.

I know what you’re thinking …

But wait, if I partner with these people and I give them some of my business aren’t I leaving my self open to be taken advantage of?

Indeed you are… thats why you need to follow other traditional startup methods of vesting. Here’s how …

Protect and Vest

Protecting your asset is simple when you think about it in terms of equity vesting via a contract.

You’d develop a simple contract (example) that states that there is a vesting period of a few years with a one year cliff, which will eventually give them 51% ownership (or whatever you desire). I feel you’ll want to go 51% or more, I’ll explain why below.

e.g. Equity Split: 51% (New Owner) – 49% (You):

• 0-11 Months: 0% Equity (with revenue share – covered below)
• 12 Month Anniversary: 33% Equity
• Year 1-2: 66% Equity
• Year 2-3: 100% (They now own 51% of the company)

What does that mean?

This means that after a one year cliff the partner will get a % of the company, and then after every 3 months (or whatever time you set) the new owner will get an additional share of the company until they reach the total share amount set in your contract.

I’ve generated an example contract like this with ChatGPT here:

https://chat.openai.com/share/8650a416-3411-4aea-b908-8097e5e1081f

Moving On and Letting Go

Remember how I said 51% (or more, like 60-80%?)

Why?

The reason is simple, you want your time back so you can focus on other things.

You need to LET go of this business and let someone else run it.

Who is going to want to run a business they actually don’t have majority stake in? In a small startup like this, no one would. At that point it’s another job for them. If they have majority stake in it then they know its “their business”. People treat things differently that they know “they own”. Remember that.

Also, your goal here is to absolve yourself as much as possible from this business. You still want to reap some benefits from it because you came up with the idea and built it, but you don’t want to run it anymore.

You need to let go of the business.

You also give them a good chunk of revenue out of the gate. Maybe upwards of 50% of the revenue. You’ll maybe change this after the vesting is over or change it during the vesting schedules so it matches the equity distribution percent – you’ll have to play with this to see what fits for your situation.

The goal is for the person taking over the business to feel ownership and for you to provide initial onboarding support rather than having them function as an employee. If they own it, they’ll make it perform better.

You need to let them run it. This means they may screw up and crash and burn it into the ground. They may decide to not do anything and they let it wither and die (they don’t do anything).

You have to be ok with this, but also have some guardrails built in.

Guard Rails to Prevent Failure with Termination and Buy Back Clauses

You’ll need a termination and buy back clause in your contract (also in the ChatGPT link above).

These clauses protect you so that just in case your new partner is not performing you can terminate them (with proper documentation, etc) and buy back any shares of the company that may have vested in that time.

This gives you a piece of mind that just in case things go sideways, you can still get the company back and try a different partner (hey, not everyone is meant to run a company).

Just Let Go

Ultimately the goal here is to just let go of the company and let someone else run it.

You don’t want to be involved in the day to day operations.

You don’t want to make the decisions.

You don’t want to be the leader of that team.

You want to hire someone else (a new owner) who will run the company in your absence.

Eventually they’ll have majority stake of ownership of the company.

If the company continues to generate income (and more), you’ll get some of that as a revenue share.

If the company gets acquired/sold, then you’ll get that percentage of the sale.

Win for you.

Win for them.

This is a true symbiotic relationship.

Ultimately this lets you take your time back without losing out on the opportunity.

Disclaimer: The contract generated above by ChatGPT needs to be reviewed by a lawyer, its merely an example of something you could create so that you can put yourself into a great position for any products you create.