Should you pivot your business and what exactly is a pivot? There are right ways and wrong ways to pivot.
Pivot Defined
A pivot is a change in the direction of your business. It can relate to the type of services you offer, clients/customers served, your role, and the overall business model.
Right Way to Pivot
The first step is to estimate what the impact of the pivot would be, including worst case scenarios, best case scenarios and likely scenarios. Plan for a worst case scenario, but put actions in place so that a likely or best case scenario is the outcome. You need to plan how you will implement these changes in a profitable manner.
If possible, start off small. For example, if you change the services you offer, then start it on a test basis using a small sample size. If it works out, then continue offering those services. If you want to change your role in your business, then slowly allocate your responsibilities to a capable staff member, while you transition to newer responsibilities. This may involve hiring a part-timer or outside vendor to handle these tasks.
Wrong Way to Pivot
There are more ways to pivot incorrectly, then there are right ways to pivot. Making a change that is too large for you to handle increases your expenses above your comfort level, or taking on too much risk if the pivot doesn’t work out are all bad ideas. The more profitable your business is, the more risk there is to making major changes. Some examples of the wrong way to pivot include:
- A healthcare provider opting out of their largest insurance network. A better choice would be to opt out of a small network with poor reimbursements to see the impact.
- Abdicating much of your day-to-day responsibilities all at once to a highly paid employee. This should be done little by little so as not to create a situation where your wage expenses outgrow the benefit of you changing your role (which should ultimately be to bring in more business and/or work less). You may be able to outsource some of your old tasks, such as marketing or bookkeeping for a much lower cost than having an employee perform them.
- Changing your customer/client demographics to a new target market. This sounds like a good idea, but what if it doesn’t work out? Depending upon your business model, you don’t want to alienate your existing customers at the expense of potential future customers who may never materialize. Usually, you can test these changes while still retaining your existing customers and marketing to your existing market simultaneously. This way, there is virtually no risk except for marketing costs.
- Changing your service or product too abruptly. A perfect example was when JCPenney did this several years back and alienated their already dwindling customer base. Test out changes at certain locations or introduce a few new products alongside your existing ones.
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