Don’t get trapped in an obsolete business plan. Business and market conditions evolve. To succeed, so must you.
Six years ago, South African immigrant Gary Levitt started Mad Mimi, a New York City–based e-mail marketing company. A bass guitarist, he intended for the business to be aimed at musicians. But, over a period of several months, Levitt realized he needed to pivot. The concept, he saw, deserved a bigger market. So, he decided to change his target, to make it a more general business audience. It was a smart move. The business grew into about $5 million in revenues and 100,000 customers, and was acquired by GoDaddy in 2014.
The ability to recognize that your original concept needs to be recalibrated—or overhauled—is central to entrepreneurial success.
Levitt is by far not the only entrepreneur to change an initial business concept. In fact, such pivoting is common to many, if not most, new businesses. While Levitt’s approach focused on changing his target market, other companies do everything from tweaking their distribution systems to revamping their product design.
“If you’re failing in your original business model and you’re about to run out of money, it’s pretty late in the game to be making changes.”
Whatever the specific change, however, the ability to recognize that your original concept needs to be recalibrated—or overhauled—is central to entrepreneurial success, says Ken Gaebler, a small-company expert who heads Gaebler Ventures, a business incubator in Chicago. What’s more, getting the timing right is of critical importance. “You need to pivot when you have the resources to do it,” he says. “If you’re failing in your original business model and you’re about to run out of money, it’s pretty late in the game to be making changes.”
Fortunately, according to Gaebler, there are steps you can take to ensure you’re ready, willing and able to pivot, if the time comes. He suggests trying these six moves:
1. Talk to the market continually.
You can’t assume you know what your target audience wants. That means you constantly need to reach out to existing customers—or potential ones, if you don’t have any yet—as well as friends, family, and colleagues, looking for clues that could mean you need to take the business in a different direction.
2. Run structured pivot exercises.
Periodically ask yourself specific questions that could lead to a change in strategy. Some examples: If we were not successful in our original concept, what would our Plan B be? Is there another type of customer who might find value in what we’re doing and what would we need to do to deliver on that value? (For more questions, see below).
3. Get an outside perspective.
You shouldn’t go it alone. Bring in outsiders who can evaluate what you’re doing and provide insights about whether there might be a better way to tap your market or whether you should consider altering the business in another way. The same goes for your staff. Encourage a rich exchange of ideas among your team members—and questions about the current business model. “It’s from these candid discussions that great entrepreneurial concepts often emerge,” says Gaebler. You can consider compensating employees in some way for their participation, so they understand you’re sincere in your desire for them to speak up.
4. Keep an “assumptions” journal.
Write down all the assumptions you have about your business. Then play devil’s advocate and think through whether those considerations are justified. The goals is to ensure that you don’t let the heady euphoria of entrepreneurship get in the way of making smart decisions.
5. Watch the success of other entrepreneurs.
If you see a company in a similar industry that’s doing well, analyze why it’s successful. Your conclusion might be there’s nothing for you to learn. But, in some case, you might decide the other business is doing something you should be considering, too. “You want to see how to apply those same tactics to get similar results in your own business,” says Gaebler.
6. Budget time to refresh your brain.
The more weary and stressed out you are, the less likely it is you’ll be open to new, creative approaches. “If you’re working all the time, you’ll never be able to pivot,” says Gaebler.
Do You Need To Pivot? Answer theses questions to find out:
* Is my original business plan going the way I had hoped? If not, how can we fix it?
* Are we targeting the right market? What other audience could we consider? And what would we have to do to tap into that market?
* The last time I met with prospects, what did they say that was surprising and could be fodder for a change in my business plan?
* If we couldn’t sell to our target market, how could we reshape the company to be profitable?
* Is there a way to change our product or service radically? What are the possible ways to do that and what is the potential of each alternative?
* Is there something that could be done with respect to finance that could change our model for the better? What about our product mix? Pricing? Marketing? Sales channel?
* Would someone ever want to buy us? Is there another direction we could take that might increase our value?
* What could we do to stop a competitor from copying our business model and capturing market share? How could we stop that from happening?
