When Small Business Owners Should Pivot — Or Call It Quits
A business pivot means making changes to take advantage of a new opportunity or adapting to conditions that force a transformation. Whether you streamline your product offering, target a new customer demographic or alter your revenue model, you’d be making a pivot.
The coronavirus pandemic has forced many small businesses in the U.S. to pivot in order to survive. With their in-person operations closed down or limited during reopening, a number of companies have switched to curbside pickup or home delivery to get products to customers. Others have shifted their entire operation online. But in some instances, pivoting can be an expensive last-ditch effort that only delays an inevitable closure. Before pouring resources into a pivot, make sure it’s the right move for your small business.
When a pivot in business may be a smart move
Pivoting is often a sound strategy when business progress has been delayed for some reason, possibly from an inefficient strategy or an unoriginal product. Sometimes, a major event like the coronavirus pandemic or an economic recession could push a business toward a pivot. But that doesn’t have to be a bad thing.
“There’s every opportunity with bad news to make big changes that are long overdue,” said Bill Gallagher, business coach and host of the Scaling Up Business podcast.
Pivoting typically encompasses a change in business strategy, a culmination of additions to or subtractions from your current structure. When you need to find new ways to grow and expand the business, pivoting away from your original path may be the best way to secure long-term sustainability for the company.
Business pivot examples
Following the coronavirus outbreak, many companies put a timely spin on existing products and materials. Cycling apparel brand Kitsbow used its manufacturing plants to produce plastic face shields and fabric face masks. SnackNation, a snack delivery service for offices and workplaces, created a Work-From-Home Wellness Box, allowing employers to send treats to remote workers.
When a business pivot is a bad idea
Pivoting should put your business in a better position to succeed. But if that’s not possible, closing the business may be the right decision. Watch out for these signs that you should close your business rather than pivot.
Few ideas for growth
The changes you make to the business should produce profits and growth. If you’re not confident your ideas would generate that outcome, then you may need to make a decision based on past evidence. Any prior experiments you’ve done regarding products and customers could indicate whether it would be worthwhile to try a new strategy.
To conduct new market research, you would need to identify competitors in your space and analyze their customer experience, market position and pricing. Evaluating customer reviews would be useful as well. Understanding your competition would give you an idea of what changes may be necessary for you to compete in the market.
Poor working relationship with your partners
Buy-in from your co-founders or other company leaders is crucial to a successful pivot. If you no longer wish to work with your partners, shutting down a struggling business may be the best move. Otherwise, you’d need to figure out a way to pivot and grow the business on your own or with a new team.
Lack of motivation
To make a successful pivot as an entrepreneur, you must remain emotionally invested in the company as it takes on a new form. The pivot may be a financial success, but if it’s so severe that you’d lose your attachment to your business, then it may not make sense to see things through.
“There’s always an opportunity to pivot,” Gallagher said. “But if emotionally you can’t create a story that’s of interest to you, then why bother?”
How to pivot
Pivoting can follow one of two strategies:
- Selling new products or services to existing customers; or
- Reaching new customers with existing products
A business pivot can be temporary, especially if it’s in response to a changing economic climate. For instance, companies that introduced virus-related products may drop those items from their lineup when the coronavirus pandemic passes. Other times, a pivot may involve a more permanent change to the business model as a whole.
In either case, identify aspects of the business that will remain relevant after the pivot. Though emotional attachment is important, not everything you feel connected to is automatically worthy of keeping
Pivoting vs. starting a new business
Changing any other core aspect of your business would likely create a new venture. For instance, dropping an obsolete product and targeting a new demographic with a new product line may be too drastic of a change to be considered a pivot. You could be better off dissolving your existing company and starting a new business.
Tips for a successful business pivot
A pivot is essentially an adaptation to changing circumstances. How you choose to pivot would depend on your situation. When making changes to your business model, here are a few things to keep in mind.
Cut out what you don’t like.
Consider what you’re passionate about within your business. Discard the useless parts of the business that you dislike. When pivoting, you have the opportunity to set new goals that better align with your overall mission for the company and your personal career.
Maintain high quality standards.
Delivering quality goods and services should remain a priority. If you’re navigating a new industry, make sure you comply with standards that governing agencies have set.
For instance, many businesses began selling personal protective equipment like fabric face masks during the coronavirus pandemic. Businesses owners must include a disclaimer on product descriptions indicating whether the masks meet medical-grade standards.
Focus on the core strengths of the business.
Evaluate your business’s strengths and weaknesses as they relate to broad trends in your industry. Lean into stronger areas of the business that would allow you to succeed in relation to a current trend. Abandon weak areas of the business that are not likely to change, no matter how much you work on them.
Stay true to your core competencies. Reaching too far beyond your skill set could have negative consequences. You could make a mistake or deliver poor results, ultimately hurting your business and undoing your efforts.
Bolster your brand loyalty.
Although you may want to target a new audience when you pivot, hold on to those customers who have remained loyal to your business. Be mindful of your initial customer community. Look for ways to reach new demographics without alienating those who have trusted your business from the start.
There’s often a mourning period for entrepreneurs when making major changes, Gallagher said, especially when the business is in trouble. But facing a crisis head on could lead to innovative changes that you would otherwise avoid.
“Things being bleak can really bolster your boldness in placing bets in your business,” he said.