Pivoting to a New Market for Your Small Business
October 6, 2021
October 6, 2021
It is not uncommon for companies to face a time when a radical shift in business strategy is necessary. That change is in strategy is known as a pivot. “Pivot” is the right word, too. A pivot is a change of direction around a point. It’s the act of closing one door while turning on a single point toward a new one.
Entrepreneurs can find it terrifying to carry out a proper pivot. An effective one can mean throwing away a business model that has guided a company for years and embracing the new – a new idea, a new marketing strategy, a new customer base, or a new business idea altogether. For some, it will never feel like the right time.
But the ongoing coronavirus pandemic has forced small businesses to pivot in droves since the beginning of 2020. An American Express survey recently found that as many as 76% of small businesses have either pivoted already or are in the process of doing so. Covid-related lockdowns around the world have near-instantaneously forced universal reconstruction of the way thousands of small businesses around the world operate, strategize, market, and make money. The pandemic has created immediate, acute situations that used to take businesses years to reach.
It’s important to remember that a pivot is not simple diversification, and mistaking one for the other can be disastrous. Pivoting means a change of direction. It means closing off existing paths forward in pursuit of something new entirely, while diversification is more accurately seen as the creation of new products on top of an existing business model.
For example, let’s say you own and operate a yoga studio. You decide to offer high-quality coffee products for a small fee before and after your yoga classes. That’s diversification. You’re continuing to lead yoga classes while also offering a new and entirely different source of cash flow. You may find a new audience altogether – your coffee products might bring people in the door who are entirely uninterested in yoga classes.
A successful pivot, on the other hand, might require realizing that your yoga students were only showing up to stretch to get a cup of coffee afterward and turning your studio into a cafe first and foremost. It means cutting off an existing path and creating a new one.
Which strategy is right? Well, that’s different for every business. A lean and nimble startup might have an easier time with a full-on pivot than a decades-old mom-and-pop shop in the center of town.
There are as many reasons to pivot your small business as there are new strategies to pivot toward. A look back into the most famous and successful pivots in business history show reasons from an unexpectedly small market for air mattresses (Airbnb) to realizing your product works better as a toy than it does at cleaning walls (Play-Doh).
But in general, there are a few common reasons that small business owners find themselves seeking a new market.
Perhaps the most obvious sign that it’s time for your company to pivot is that progress or growth has stalled or slowed. There can be any number of reasons that progress can slow. Maybe you’ve reached market saturation based on your location, product, or services. Maybe a new product or expansion hasn’t panned out the way you envisioned.
That lack of progress can be accentuated and exacerbated by entrepreneurs falling prey to the sunk cost fallacy. “I’ve put a ton of money, effort, and care into the current business model,” they think. “I’ll do anything to make it work.” Unfortunately, putting additional capital or resources into an already-failing business model is a recipe for disaster, and might be an indication that it’s time to make a significant change.
There’s no hard and fast rule for what a lack of progress looks like. Maybe it’s a long-term slowdown, a sudden halt, or simple stagnation. Whatever a lack of progress means to you, analyze your data and determine if a change might jolt your company back to life.
Sometimes, it’s not the underperformance of the business as a whole, but the over-performance of one area, in particular, that can lead to an effective pivot. If you discover an area of unexpected profitability in the course of your self-examination, that new area might be a great area to pivot into more directly.
That doesn’t mean every unexpected short-term burst of productivity in some segment of your company should lead to a pivot. But it does mean that identifying trends, patterns, and opportunities could lead to greater long-term success.
Potbelly Sandwich Shop is a prime example of this style of pivoting. The company was originally started as an antique shop in the 1970s until the owners noticed that the sandwiches they made to provide to their customers became the main draw. Instead of clinging to the antiques, they decided to jump into the sandwich side of the business, and today have hundreds of locations as a publicly traded company.
Such a pivot doesn’t necessarily have to be so drastic as antiques to sandwiches. For the aforementioned coffee-hocking yoga studio, deciding to scrap the yoga entirely and focus on coffee fits the bill for this reason to pivot. If the coffee is what’s bringing people in the door, your customer needs are fairly obvious.
Any entrepreneur conducting market research can tell you that competition in a chosen sphere can be fierce. The identification of that competition can often expose the backbone of a successful pivot.
Say you own and operate a liquor store. Chances are, there are multiple liquor stores in the area. Yours might objectively be the best, but there’s any number of reasons the people in your target market may choose one of the others: convenience, habit, ignorance, selection, or some combination of factors.
A pivot could solve the problem of market competition by effectively erasing it – if you’re able to identify a new target audience and effectively message that pivot, you might find yourself alone in a market.
For a liquor store, that could mean producing your own spirits. For a yoga studio, that might mean embracing our modern social distancing and focusing on online classes and instruction.
These pivots allow businesses to opt-out of existing competition in order to find new niches and thrive.
Maybe the most common type of pivots in today’s market, identifying opportunities is a difficult art, but one that can be exceptionally lucrative.
Restaurants are experiencing this style of pivot in droves due to the Covid-19 pandemic. When the lockdowns of 2020 began, restaurants’ entire target markets were gone in an instant. The near-universal restriction of patrons from dining rooms led to dozens of new ideas which are now the target of successful pivots. Whether those new ideas are deliveries, DIY-style meals, a focus on a simpler menu, outdoor seating, or the conversion of restaurant space into a market, new opportunities have presented themselves to restaurants nationwide and allowed for entirely new business opportunities.
But you don’t have to be a restaurant to identify new opportunities in changing times. Look at BlockBuster, for an example. Back in its hay day, BlockBluster held an insurmountable market share for video rentals. According to Business Insider, BlockBuster operated over 6,000 locations and earned almost $6 billion in 2004. But trouble was on the horizon. It turns out, customers greatly preferred not having to travel to a retail location to probably rent the movie they were after, and then pay late fees if they couldn’t make it back to the store in time. Netflix offered an alternative to both issues, but BlockBuster failed to make that pivot. There was a new opportunity, and they failed to seize on it.
In some ways, identifying and executing a successful pivot is the easy part. Informing your customers that a change has occurred can be even harder. Human beings are creatures of habit, and a change to a known company can be difficult.
Do your best to tell the story. For example, customers might be asking: why is my favorite yoga studio going online-only? You need to help customers understand not only what your company will be doing in its new strategy, but why. Presumably, your values and your goals as an entrepreneur haven’t changed. So, help your customers understand why the new iteration of your company will have the same ethos, even if it’s in a new space, market, or product.
Really look over your marketing plan and create a list of all the spaces you’ll need to update. Any spaces that aren’t updated can lead to marketing issues and confusion for your new and existing customers. Social media is an obvious place to start, along with anywhere you’ve got an online presence, from your company’s website to Google, to LinkedIn, to whichever e-commerce host you use, if you do. Use all of these sites, resources, and pages to tell the story you’ve told above.
Pivoting to a new strategy, new market, or new product can be a daunting task. You’ve probably got dozens of online hosts to update, employees to align with, customers to communicate with, and a list of to-dos that can seem insurmountable.
Having a marketing plan for your pivot can be a great way to take one thing off your plate. Much like the marketing itself, your plan will be able to layout the whats, the whens, and the whys. Where will you announce your business’s new direction? On what day, at what time? Why that method? When will you update the rest of your online presence?
Having a plan in such a turbulent moment is like having a GPS unit for your company as a whole. Even if the weather’s nasty and you’re in a new town, you know the basics of when to turn to get where you need to go.
No doubt about it. But entrepreneurship often means rolling with the punches, and it means identifying the spots where you can throw a punch of your own. And that’s what a pivot is. It’s seeing an opportunity to reallocate resources in a way that leads to greater and continued success.
Make sure you know why you’re making the pivot you’re making. Do your research and understand your new market, your new customers, and your new products. And be open and communicative about the whys of your pivot. Doing so will lead to customer and employee buy-in, and a bright future in a new space.