Pivot or Pack Up
Startups are in constant search of fit.
Product with market, people with culture, exit plan with investors.
Sometimes, fit is elegant and easy, other times — not so much.
Sometimes figuring out what your product is, what your business is trying to solve and how to solve it is nothing but an uphill battle.
Pivoting is the art of re-positioning business when it becomes apparent that you haven’t nailed the proposition. That you don’t have customers wanting to buy what you’re selling.
And sometimes pivoting pays off — Flickr started off as a role playing game, Twitter as a site for podcasts.
Sometimes it doesn’t.
Most entrepreneurs will be loathe to admit failure so pivoting becomes the norm instead of the exception. But there are instances when you’ve got to know when it’s time to call it quits, pack up and go home.
I’m being a little extreme here, one could always continue down the path that the product or business is already on.
But something has prompted you to switch things up, chances are that you know that the current product or market or customer segment isn’t going to get you to where you need to be, and that’s where the decision to pivot or pack up comes into play.
Smoke Signals
There are multiple warning signs that will help you gauge when it is time to think about a change, here are some of them and some thoughts on what to do next.
You’ve got customers but they’re not really engaged
You’ve done the hard yards, you’ve acquired customers but when you come to analyse what’s going on you realise that they’re not spending much time in your product or on your platform.
Or maybe they purchase once but they lack stickiness — there’s nothing keeping them loyal to you, they switch to your competitor without much friction or you simply can’t on sell any services or products.
In this sort of a scenario, you would want to understand what the issue is — is there limited perceived value in what you are offering, is there a cheaper alternative, does your user journey make sense and is it seamless.
Some of these things may be solvable, however others like value perception may not be (at least not immediately). That’s the time when you’ll need to see if there is a way of changing up your offering to meet your users needs or considering whether it’s time to bin the product.
Lack of revenue (or more importantly bottom line)
In a world of cheap money, and investors — at least till recently — falling over themselves to find the next big thing; businesses can become complacent. We’ve all seen recent headlines around big valuations, big revenues but a distinct lack of profitability.
I’ve had to fight with investors and with banks to secure funding for my operations in the past, sweated over the repayments, restructured the business to give it a better change of success.
But in the process I also learned pragmatism. If you’ve been pushing sales but people aren’t buying what you’re selling, aren’t willing to pay enough for it, or it’s costing you too much to sell it to them — and there’s nothing you can do with your current product or market or model to change that — then chances are you need to take a swing at something new.
All your good people seem to be heading out of the door
This is a pretty easy one to spot. If your good (not necessarily senior) people have lost the enthusiasm they had when they joined. When they’ve got one foot outside the door and one eye on the next role then maybe they’re seeing something that you can’t.
Remember, they’re less invested in the success of what you’re doing than you are. They may want it to succeed but if they can see it’s on the wrong track, they are also more likely to choose a different path themselves.
Make sure that you touch all parts of your business, that you understand what your people are thinking and why. Some employees will always gripe, but others will care about the future, remember — they’ve chosen to spend a good third of their lives working with you.
You’re constantly looking for your next round
If you’re constantly on the lookout for additional investment or you’re burning cash at a higher rate than you expected, chances are that something in your plan is flawed.
Take a step back and understand your drivers properly, do your price points make sense, are you allowing for the right amount of churn. Have you underestimated how much it costs to acquire your users, or not understood how much overhead you need to carry to support your operations.
A change in business model may not necessarily lead to a product pivot. Get someone to look at your plans in detail, scrutinise your assumptions, maybe they’ll find something you didn’t that will nudge you back in the right direction.
If there are fundamental flaws though, you’ll probably need to back to first principles and consider alternatives.
Within all of these (and other) scenarios, pivoting or packing up are still valid options to consider. However for me there are times when pivoting is the wrong way to go.
When you lose sight of your vision
Startups should be hard work.
But they should also be fun and fulfilling in that you’re searching for a solution to a problem that you truly believe in. If pivoting has taken you so far away from your original vision that you can hardly see the other foot planted on the ground, maybe it’s time to reevaluate.
In fact, you could argue that this is exactly what a pivot shouldn’t be. At its core it’s a change in direction without losing sight of the destination.
When you’re doing it because you can’t get funded
This is a little counter intuitive and I’m sure there are some out there that’ll disagree with me. If investors tell you that you need to dramatically move away from your core proposition in order to get funding, then find another investor.
If lots of investors tell you that you need to dramatically move away from your core proposition in order to get funding, then maybe it’s time to consider going home.
For me, too many startups get lost in the chase for investment. If your vision (and your execution) is solid, then funding should follow.
When you’re doing it because you enjoy the process
Pivoting because you enjoy solving the challenges that the change in direction leads to is not a good reason.
Trust me, I’ve worked in the past with people who are constantly in search mode even when they don’t need to be. They take the business through a series of pivots that in turn take the business further and further away from the original proposition.
This leads to lack of clarity amongst team members, frustration and confusion amongst investors.
I’ve seen it and it takes a toll on your team and the business.
The purpose of changing things up at the very start of your business’ life cycle is to find a profitable and sustainable model for the future. If you’re getting a kick out of staying in search mode, that’s not going to do anyone any good.
Ultimately, as with so much in business, knowing when to change direction and when to shut up shop is just as much art as it is science.
But remember, neither option should be considered in any way negative. They are both valid responses to dealing with a product or business model that is not achieving the goals you set out to achieve.
They allow you to refocus your energies on building a product and a business that will give you the best opportunity to succeed.
So next time you can see that your business isn’t working in the way you expected it to, remember that you have choices beyond simply ploughing on. Pivot or pack up.
