Running a business is not easy, sometimes it feels like you’re constantly balancing on a tightrope with cash flow issues, competitors, declining sales and decreasing customer engagement trying to knock you off at every opportunity.
Sound familiar?
It might be time to consider pivoting your business model. How do you know when it’s time to make that change? Let’s dive into the world of business pivots and how they can help your business stay on track.
Key Takeaways
- Most businesses will have at least 1 business model pivot – in some cases this is unavoidable due to changes in economy, customer habits or sociological reasons.
- Follow your gut – if you’re constantly battling to make ends meet, your lifetime customer value is slow or you’re experiencing a lot of competition, these may be signs to pivot your business model.
- Some of the leading businesses in the world have been through a pivot – YouTube, Netflix, Slack, Instagram and Groupon to name a few. Understanding how and why to pivot could make your business even bigger and more successful!
What is a Business Pivot?
A business pivot is a strategic shift in your company’s direction. It could involve changing your product, service, target market, or revenue model. Think of it as steering the ship in a new direction based on the winds of market demand, feedback, or even new opportunities. While pivots can seem risky, they’re often necessary for long-term survival.
Some of the biggest companies today successfully pivoted. YouTube started as a video-dating platform, while Slack was originally a gaming company called Tiny Speck. And according to research 70% of startups make at least one pivot during their journey.
8 Signs It’s Time to Pivot Your Business Model
1. Stagnant or Declining Sales
If your revenue has plateaued or started to dip, it’s a serious indicator that something isn’t clicking. A Startup Genome report found that 74% of high-growth startups fail due to premature scaling, often because they didn’t pivot in time when initial growth slowed. If your product no longer excites customers or fits the market, it’s time to reconsider your approach.
2. Increased Competition
If your competitors are stealing all of your customers, it could mean they’ve hit on something you’re missing. Sometimes, they might be taking advantage of a niche you hadn’t considered or have found ways to serve your market more effectively. Companies that focus on differentiation during a pivot are 2.5 times more likely to see high returns than those that stick with the status quo.
3. Customer Feedback is Not Positive
Are you getting complaints, or worse, total silence? No one likes to be ghosted. Customers not giving feedback may indicate they aren’t engaged with your product. Approximately 90% of dissatisfied customers will leave without complaining, meaning by the time you notice it, many of your potential buyers are already gone.
4. You’re Losing Interest in Your Own Business
Passion drives creativity and perseverance! Are you constantly wishing you weren’t tied to your business? If so, you may need to reassess your path. Founders who lose enthusiasm for their product often struggle to inspire employees and customers which means your business will never flourish.
5. Burn Rate is Unsustainable
Your burn rate – AKA how fast you’re burning through your cash, is one of the most critical metrics for any startup. According to Forbes, 38% of startups fail due to running out of money. If your financial runway is shrinking and profitability feels out of reach, it might be time to pivot to a more sustainable business model. Take a step back and assess what isn’t working, and look to other companies for inspiration!
6. You’re Constantly Putting Out Fires
If it feels like you’re always solving one crisis after another, that could be a sign of underlying issues with your business model. A constant state of firefighting usually points to a lack of scalability or structural inefficiencies.
7. The Market is Changing
External factors like technological advances or changes in consumer behavior can make a once-viable business obsolete. For instance, the shift to digital-first operations during the COVID-19 pandemic saw countless businesses pivot to survive. 91% of businesses sped up their digital transformations as a result.
8. You’ve Found a Better Opportunity
Sometimes, during the course of running your business, a new, more profitable opportunity presents itself. Ignoring it because you’re too focused on the original plan could mean missing out on long-term growth. A Harvard Business Review study found that businesses that pivot effectively based on market insights are 36% more likely to succeed than those that don’t.
Questions to Ask Yourself Before Pivoting Your Business
Before you rush into a pivot, make sure it’s the right decision. Here are key questions to ask:
1. What’s the Root Cause of the Problem?
Is it a product issue or a marketing failure? Pinpoint where the problem lies. A failed marketing campaign doesn’t necessarily mean your product is flawed – it could just mean you’re not targeting the right audience. Take a look at this guide on the ultimate content marketing strategy for startups to help give you some inspiration!
2. Is There a Market for the New Direction?
A pivot without a clear market is risky. It’s like a blind date. You may get lucky, you may not! Ensure there’s demand for the direction you’re considering. 42% of startups fail because there’s no market need for their product, so it’s crucial to do your homework before changing course.
3. Do You Have the Resources to Pivot?
Pivoting isn’t free. It requires time, capital, and often new hires or technology. Make sure you have the resources necessary for a successful transition.
4. Will This Pivot Align with Your Long-Term Goals?
A pivot is a short-term move that should set you up for long-term success. Ensure that your new direction supports your broader vision. You don’t want to pivot just for immediate survival if it sacrifices your company’s future potential. If you want some top-tips for how to set profitable business goals, read this quick guide!
5. How Will Your Existing Customers React?
Will your loyal customers still be interested in your new direction? While some customers may embrace the change, others might leave, which could affect your revenue in the short term. Weigh the risks and rewards of losing versus gaining customers.
The Different Types of Pivots to Consider
If you’ve decided that a pivot is in order, the next step is deciding what kind of pivot makes the most sense for your business.
1. Zoom-In Pivot
Is your product the right fit for your market? Take a look at this guide on how to find the right fit for your start-up. A great tip is to focus on one successful feature of your product and make it the core of your business. For instance, Instagram started as Burbn, a complicated check-in app, crazy, right?! When users gravitated toward the photo-sharing feature, they zoomed in on that, leading to massive success.
2. Zoom-Out Pivot
Opposite to zooming in, a zoom-out pivot expands your offering to provide more value to your customers. If customers are asking for more, or if your current product feels too niche, zooming out might help broaden your appeal.
3. Customer Segment Pivot
Sometimes, the problem isn’t your product but who you’re selling it to. Pivoting to target a new customer segment can open new doors. Airbnb originally targeted a niche market of conference-goers, but when they broadened their audience to anyone needing short-term lodging, their business took off. And let’s be honest, how many times have you used Airbnb?
4. Technology Pivot
Switching to a new technology or platform to improve performance or scalability can be a game-changer. This kind of pivot is especially common in software and tech companies where rapid advancements can quickly render old solutions useless and not cost-effective anymore.
5. Revenue Model Pivot
Are you monetizing the right way? Is your business making any money at all? No? Well, if you need to shed some light on why that may be, read this guide. A revenue model pivot involves changing how you make money. For example, many software companies have moved from one-time purchases to subscription models, capitalizing on a more consistent cash flow.
6. Channel Pivot
Switching how you deliver your product, whether that means moving from physical retail to e-commerce or changing your sales strategy, can unlock growth. Shopify saw explosive growth by helping brick-and-mortar businesses pivot to online sales during the COVID-19 pandemic, contributing to their 96% revenue growth in 2020.
7. Product Pivot
This involves using your existing technology or platform to solve a different problem. For example, Twitter started as a podcasting platform called Odeo before pivoting to microblogging when podcasting became oversaturated. And then it got bought for $44 BILLION, so don’t be afraid to change your tactics.
8. Complete Business Model Pivot
The most dramatic of all pivots, this involves completely changing how your business operates. It’s risky but can be transformative if done correctly. Netflix, for instance, pivoted from DVD rentals to streaming, and now, their streaming revenue exceeds $31 billion annually.
Pivoting your business model isn’t about admitting failure – it’s about learning and adapting. Recognizing the signs, asking the right questions, and choosing the right type of pivot can set you up for future success. Remember, some of the world’s most successful companies, from Slack to Netflix, only found their stride after a well-timed pivot. So, don’t be afraid to make that change, it might just save your business!
Want more advice on whether or not pivoting your business model is a good idea? Joining Foundr+ for $1 will give you access to 1000+ business lessons, 30+ courses and not to mention, world-class instructors and live coaching sessions. If you’re unsure about the right next step for youtube business, join the Foundr+ community!
FAQs:
What are the signs it’s time to pivot?
Signs that it’s time to pivot include:
- Declining revenue or customer base.
- Constant firefighting of issues.
- Major shifts in the market, like technological advancements or new competitors.
- Financial troubles, such as running out of cash. If your business isn’t growing or maintaining traction, it may be time to reassess your model.
What is the difference between a pivot and a business model change?
A pivot is a specific, strategic shift to improve an existing business model, while a business model change involves completely reworking how the company delivers value, earns revenue, or interacts with customers. A pivot is generally more focused and aims to refine a part of the business, while a model change is broader and may involve starting from scratch in some areas.
How risky is it to pivot a business?
Pivoting involves risks, as it requires investment in time, money, and resources. However, it’s often necessary for long-term survival, especially when market conditions change. The key is to base your pivot on data and feedback. According to research, startups that pivot early have a much higher success rate compared to those that stick too long with a failing strategy.
