Here's Why There's No Such Thing As A Good Pivot

Deciding to pivot your company is the absolute worst decision you can make as a struggling business owner. While you may have read the many success stories of companies becoming huge after a pivot, that won’t likely be you.

It’s nothing against you. Often when a business struggles, the notion of a pivot arises. By doing so, you’re altering where your core business comes from and in very few cases does this work out. It, instead, usually provides an expensive way to make a change for the sake of change.

I hate when people offer a pivot as a solution to a business problem you might have. By offering that suggestion, they’re saying you should move further away from your core expertise that gave you the confidence to start your business in the first place. It means shifting into an area you know less about. It forces an internal rebrand and a complete overhaul of all your processes. And, it also usually requires a complete external rebrand and sometimes a full name change. It, in essence, is starting an entirely new business while trying to maintain the shell of the former company. Not only that, if there’s not a structural cause to pivot, then there’s no proof your risk will even work.

Part of the reason there’s rarely a good pivot is because it means your original business is either falling behind or failing outright. Even in a successful pivot, it’s coming out of the ashes of a troubled business. My advice: don’t pivot. Either keep course or start a new business. Or do both!

This doesn’t mean you should never pivot. But it does mean it’s extraordinarily difficult and you should only do so in rare situations. That’s why, if you do have a business falling behind or failing outright, and pivoting is your best option to right the ship, then make sure it works within a long-term business plan.

If you HAVE to pivot — because of a shift or growth in your expertise, major technological change that upends your industry or due to a fundamental difference in the way your business processes — here’s how to make sure you put your company on the best possible path to become one of the few businesses that successfully pull off this tactic.

Pivot Towards Your Strengths

Entrepreneurs start businesses in areas that they’re experts in or deeply passionate about. Having experience in a field, along with access to the right contacts and strong existing relationships, gives a business a much better chance to succeed. That means the business you’re currently in was one you evaluated as having a great chance to do well when you opened it. It’s important to remember that. But there are two key factors to consider when pivoting. First, you can be good at more than one thing and, second, you likely have picked up new expertise since you launched your business. Essentially, your strengths have grown. It’s completely acceptable to pivot your company into an area or sector you now believe you have a strong background in, if it’ll help your business and it matches your new or core strengths.

If you sell music instruments, for example, but were actually a drummer by trade, then moving into a more specialized area of drum sales may make sense for you. The reverse scenario - going from niche drum business to a larger music shop - may also make sense, in certain situations, if you learned enough from operating the niche drum business. But, either way, only do so if it builds on your growing expertise.

You as a business owner and person will learn and grow. And if your business requires a pivot, don’t go in blind. Always pivot to your strengths.

Give Existing Customers A Chance To Adapt

As a young entrepreneur, I operated clothing stores. During this period, I learned a lot about being an entrepreneur, became a director of a board of local businesses and completed my MBA. When I then chose to open my financial business, I didn’t pivot the company but started an entirely new business. The reason I didn’t pivot my clothing stores into my financial management business was that my customers were not the same. In actual fact, they’re basically polar opposites. Trying to sell my clothing store patrons financial advice would have been deeply upsetting (and frankly awkward for everyone involved).

One amazing thing about having an existing business is that you have a core customer base and people that are connected with your brand. You need to protect that relationship, not only for future sales, but also because people become emotionally tied to brands, businesses and ownership. The reason I had successful clothing stores was 100% because of my customers. I did my best to listen to them and provide them the products they asked for at prices that they would pay. We had a relationship and dramatic changes would harm that connection.

Imagine going into Starbucks before work, as part of your daily routine, but instead of offering coffee the location suddenly only served tea-based drinks because Starbucks CEO Kevin Johnson decided the company needed a pivot. Starbucks has now wasted your time and not supplied you with your morning coffee. You’d not only be upset, but totally bewildered. You may never go back.

Your business — even if it’s struggling — likely has similar customers. Make sure to not only be respectful of them but also to help these patrons transition into your new business. In the above example, Starbucks could have continued to serve coffee for a period of time and provide incentives for customers to try the tea, as they adapt their life and routines before removing coffee as a menu item. It would give the new, pivoted, business a better chance to succeed.

While I’ve provided an extreme example, the concept remains: Do not alienate the people that already support you.

Calculate Your Runway

Another reason you shouldn’t alienate your customers is because you still need to make money while you transition the business. You can’t avoid all setbacks, though. Instead, you have to plan for some reduction in revenues since you’ll experience initial loss when undergoing a structural shift in the way you do business. Therefore, you need to know how much money you have to support the transition. This is called your runway.

Your runway is how much money you have available to pay your bills, employees and other fixed expenses until you’re no longer solvent. If you don’t have any money in the bank, and therefore zero runway, it probably isn’t time to pivot. You need to be able to cover fixed expenses as you shift, which would normally be covered by your regular cash flow.

Within this analysis, you should also understand how much money you’ll need for employee training, brand management and new goods or supplies. Once you have that number removed from your accounts, how much remains? If the answer is little to none, then you need very quick cash flow from your new pivot, or it will fail. If you know you won’t see enough cash flow in time from the pivot, then don’t do so. You likely have a better idea available to you.

Understand What You Offer, Even If That Means Not Pivoting

If, in your current business, you know what you offer and who your clients are, you’ll likely find that you’re better served by improving the way you market, package and provide those services to that core group. You’ll save a lot of money, time and stress if you can invest what you would spend on a pivot, and simply improve your existing business. Undergoing a significant pivot within an existing business is arguably harder than just starting a new business from scratch.

You can still call it a pivot, even if what you’re really doing is focusing on what your company does best.

By Timm McLean, MBA |

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