As the trusted source of jobs and economic growth across the U.S., small business owners (now more than ever) must remain committed to exploring new opportunities, innovative thinking, resourcefulness, and leveraging their strengths as leaders. After careful and honest consideration, many entrepreneurs (treps) may find themselves evaluating the need to pivot their business model. This is true not just for startups, but also for seasoned entrepreneurs with mature businesses.
Entrepreneurs are running the US economy! From website development firms to coffee roasters to online clothing retailers - small businesses are having a profound impact on economic growth and job creation in this country. The Small Business Administration reports that in the US, there are 28.8 million small businesses (those with less than 500 employees) which account for 99.7 percent of all businesses. Small businesses employ 56.8 million people, or 48 percent of all US employees. Let's stop here for a minute. Think about that! It is safe to say that we are definitely in the era of the entrepreneurial economy. Entrepreneurs are the drivers of the US economy and have the power to create jobs and spin the economic wheels of their communities. And of course, with this power comes great responsibility.
As economic leaders in the U.S., treps must remain dedicated to building profitable, sustainable businesses that last beyond themselves. To do this, they must stay focused on innovation, flexibility, and continuous improvement. The economic, political and environmental landscape of this country will continue to change; and entrepreneurs must recommit themselves to growth and profitability if they want to survive. At a certain point, this may require a complete pivot, or change, from the original business plan or the current business model.
So what is pivoting and how do business owners know when it's time to do it? Pivoting in business means to change course from the original plan. This change may come in many different forms and at varying degrees of complexity. It can be a change in the products and services offered, where they are delivered, how they are delivered, who they are delivered to, etc.
In the start-up world, this is done after a series of customer interactions and hypotheses testing to obtain feedback and assess the viability of the business concept. In other words, the work to identify whether or not a business or product should be launched is done on the front-end and is based on information. Real information. This approach has been proven effective, and works well for startups. However, this concept is equally applicable to those more seasoned business owners who may be crawling out from under a rock while their businesses have been on cruise control for years and are now starting to veer off into the ravine. With dwindling customer bases, tight cash flows, and low employee morale, for many businesses the question of sinking or swimming may point towards pivoting.For an established business in the maturity phase of its lifecycle, here are a few signs that you may need to explore pivoting:
- Sustained decreases in revenue
- Decreased profitability over time
- Fleeing customers due to the inability to consistently meet customer demands
- Product or service has become obsolete or irrelevant
- Changing demographics in your market that you have not prepared for
- Competition has won the battle at 'Market Share'
- Political or legal threats have shifted customer access to your product or service (and you failed to prepare and/or respond)
In the event that one or more of these circumstances have become reality, entrepreneurs may find it good business sense to explore new opportunities, new products, new processes, etc. For example, if a business has failed to respond to changing customer demands, it's important to understand where the mark has been missed. This may require customer surveys or one on one interviews to uncover the root cause of customer dissatisfaction. Once the issue is determined, treps need to find profitable ways to create value for their customers. This may mean offering a new service to complement current product offerings, or diversifying current services to reach more customers in the market. Also, pivoting does not have to be as dramatic as some treps may think. You don't necessarily have to do away with your entire vision or business model. Sometimes pivoting is just as simple as offering products online as well as in a retail location.
This points to one of the most common challenges that many small businesses face today. Online competition has given small business retailers a run for their money and their customers. A recent report by Forrester predicts that online sales in the US will reach $523 billion, up 56 percent from 2015. The key driver of this growth is, of course, online retailers, specifically via the use of mobile devices.
As many small business retailers have discovered, ignoring the online retail phenomenon is a huge mistake. While the in-store, brick-and-mortar model has its value, the number of consumers opting to compare prices and shop online has skyrocketed. There are many ways that small business retailers can respond. There are options to create an e-commerce platform to complement the storefront, offering in-store services, or hosting special events to draw in potential customers. Whatever the pivot, sitting idly by and doing nothing is not an option. Ask the many retail outlets that have had to close their doors due to a lack of response to the onset and rise of online sales.
Furthermore, to all my treps out there - don't believe the hype! Just because you change course and your business model becomes different from what you originally planned doesn't mean that you have somehow failed. This is not failure. This is being an entrepreneurial leader - someone who continues to identify and assess (or reassess) opportunities, deploys the right resources, and leverages their strengths as a leader to move the business to the next level. That's being an entrepreneur, not a failure. Failure comes when we do not respond to changing circumstances in an appropriate and timely manner due to fear or complacency; and as a result the business suffers, jobs are loss, and value is not created in the community. In fact, small businesses are much more nimble than large businesses and therefore it is much easier for them to change course. Don't let fear get in the way. Remember that you are the leader!
There may be many red flags that could be signaling that it is time for a business pivot. The question becomes whether or not the entrepreneur is a leader who is responsible, fearless, and flexible enough to assess the need and make the necessary adjustments.
Entrepreneurs are the drivers of the US economy and have the power to create jobs and economic value within their communities. With this power comes a great responsibility to create and grow profitable and sustainable businesses. If small business owners are finding themselves at a crossroads, they must step into the entrepreneurial mindset. They must be responsible. They must be leaders and ask themselves - "is it time to pivot?"
This blogger is an administrator of Goldman Sachs' 10,000 Small Businesses program. Goldman Sachs is a partner of the What Is Working: Small Businesses section.