Signs That It’s Time to Pivot Your Business and How to Do It
Businesses pivot all the time, to capitalize on new trends, extend their product lines, or cut back on expenses. But how do you know if you need to pivot?
Well, some aspects of your business may tell you — weak sales or consistently selling out of one product are both indicators worth paying attention to. Take iconic Wrigley chewing gum, for example. The product was originally a giveaway, included for free with William Wrigley, Jr.’s business product — baking powder. But when the chewing gum proved more popular, he pivoted his entire business to accommodate his customers.
Positive or negative results like these are great indicators of shifting business landscapes. Keeping a close watch on all aspects of your company can help you adapt accordingly.
Should you pivot your business?
Statistically, more than 20% of small businesses fail in the first year, and roughly half fail within five years. Staying flexible and identifying what is and isn’t working can prevent one weakness from torpedoing the whole company.
Some common reasons for business pivots are:
One product is outselling the others.
Break down your sales and cash flow by product. If one or two products bring in more profit, focus more on them.
You’re losing customers.
Weak demand is the number one reason small businesses fail. If customers are not returning, a pivot strategy could bring them back.
Your product is outdated.
Products aren’t eternal. Outdated products could be a major reason why demand falls. Pivot to execute a product refresh and rebrand.
You’re experiencing cash flow problems.
Cash flow issues are the second most common reason for small business failure. Cash flow can weaken for many reasons, including poor sales and high costs.
Your team could be better utilized.
The wrong team is the third most common reason for small business failure. Highlight the chef and unique dishes more if you have a crackerjack chef in your restaurant.
How to be strategic about your business changes
Now, identifying potential reasons to pivot is just the first step. To be successful, a pivot needs to fulfill three conditions.
1. It must align with a sustainable long-term trend
Many businesses pivoted due to the COVID-19 pandemic. Identify trends with staying power and look for opportunities to cater to those needs. A flexible line of funding could help you finance your changes.
2. It must focus on a lateral extension of what your company does
Remember your company’s strengths and harmonize with the strategy you already have in place. Don’t stray too far from them.
3. It must have a sustainable path to profitability
Research and estimate revenue opportunities thoroughly before you pivot. Develop profitability forecasts for several years.
Ask yourself the following questions:
Does inflation of potential material costs pose a concern for my company?
Create multiple forecasts that reflect that concern. That can help you identify whether or not your pivot will be successful in different economic conditions.
Do I have the team I need, or will a pivot necessitate more hiring?
Bring in fresh blood if your team is not aligned with the new model.
What is the competitive landscape like?
Conduct competitor research to identify threats to profitability. Consider whether you’ll be creating new competitors with your changing business plan.
Be strategic when you pivot
A pivot can strengthen a flourishing business and save a floundering one. Pay attention to trends and think strategically when making a change. Review your business strategy, forecast potential scenarios, and follow the steps outlined above. It will ensure that your pivot is a sound decision and improve your likelihood of success.
Hello!
I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
My career is built on a foundation of helping individuals and businesses thrive financially in an ever-changing economic landscape. At phonenumber247.com, my aim is to demystify the complex world of finance, providing clear, actionable advice that can help you navigate your financial journey with confidence. Whether it’s personal finance management, investment strategies, or understanding the nuances of market dynamics, I’m here to share insights and tools that can propel you towards your financial goals.
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