6 Questions to Ask Yourself Before Pivoting Your Business
In business terms, changing the direction of your business is commonly referred to as a pivot. While it is most common to pivot your business in its earlier days, there is no reason why you cannot pivot your business at a later stage to respond to market forces.
If you are a business owner who owns a pizza shop that makes ice cream sandwiches, and you notice your customers spend more money on your ice cream sandwiches than they do on your pizza, you may consider re-inventing yourself as an ice cream sandwich company. But is this smart? Will people buy ice cream sandwiches in the dead of winter? If your product-market fit isn’t measuring up at any stage of your business, young or old, then you might consider pivoting.
How to know if you might need to pivot your business
One way to consider whether or not it is an appropriate time to pivot your business would be by running a SWOT analysis. If this a new term for you, SWOT stands for: Strengths, Weaknesses, Opportunities, and Threats. Here are a few key questions you can consider to help you think about your business and if a pivot may be in your future.
- Which factors help you make your sales?
- What is your company’s unique selling proposition?
- How is your company better than any other company?
Remember: It is necessary to consider your strengths from your perspective, but also from the perspectives of both your customers and competitors.
- What elements of your business need improvement?
- How do you lose sales?
- What do your competitors view as your weaknesses?
Again, remember to be realistic and factor in customer metrics you can track.
- What interesting trends are forming or changing within your industry?
- How can you implement technology to make your business more efficient?
- What changes in social patterns may influence your business?
Be prepared to do some heavy research to look under the surface about how you can improve your business.
- What are your competitors doing that you are not doing?
- Are there environmental, economic or industry developments that may hurt your business?
- What short, medium and long term obstacles to growth do you think you may face?
Again, being truthful about your position relative to others may be to your benefit.
Reasons Businesses Pivot
If you decide your business is at risk from competitors, technology, or changing consumer habits, here are additional questions to help determine whether or not to pivot your business:
1. Where are your sales slumping?
Look at which products or services are selling well and which are failing. Ask yourself why each is or isn’t working, and consider alternatives.
2. Are your competitors gaining ground?
Imitation may be the sincerest form of flattery, but if you were first to market with a product or service, and now you have several imitators, it might be time to figure out how to solidify your position in the market.
3. Is new technology challenging your business?
Technology companies like Uber have been challenging traditional car services and taxis year over year. With most consumers using one or more screens a day, technology has the ability to rapidly change your business.
4. Are there any large trends with the potential to impact your business?
Changing demographics and birth rates may affect your sales, for example, if you own a business focused on children. Economic forecasts, demographic surveys and industry insights may all provide data to help you plan ahead.
5. Are your costs increasing dramatically, decreasing your profit margins?
In some cases, there may be little you can do to preserve your current business’s profits unless you find alternative products. For example, if you are an electric battery manufacturer and one of your primary supply ingredients is cobalt, and the cost of cobalt has increased 4X year-over-year, then you may have to increase your pricing dramatically or consider diversifying into other products.
6. Is your product-market fit appropriate?
For example, if you own a yoga studio but your customers only want to pay $10 per class, even though you require them to pay $20 per class to be profitable, the business may not have an appropriate product-market fit.
Regardless of the reasons behind needing to pivot, you can successfully change up your business model. Just know that changes of this magnitude can’t happen over night. You need to spend time doing your due diligence and you need to be sure you keep an open mind – it can be hard when the business you originally imagined isn’t living up to your expectations. But take heart, because many big brands that you know today had successful pivots. These pivots took place, when the companies were small and or maneuvering through the lean startup world. It’s a pretty impressive roster! Starbucks, Twitter, YouTube, Suzuki, Avon, Wrigley. Check out their stories and get inspired!