For many entrepreneurs, building a profitable venture is hard, even with a killer product or service offering. From raising capital and putting together a competent team to converting that first lead into a sale, turning any idea into a business outfit can be an unnerving process. So, when that original idea turns out to be a bad fit for the market, it can be quite painful to consider pivoting, especially for entrepreneurs who've poured their hearts and minds into a business idea.
Contrary to popular belief, however, pivoting doesn't usually mean failure. It often means that your business is evolving and taking on a life of its own, with you as the entrepreneur incorporating various lessons you’ve learned along the way. In fact, when implemented correctly, pivoting can offer your investors and other stakeholders a refreshing perspective of your business model, which could set you up for long-term success.
That said, a successful pivot requires a carefully-choreographed approach that ultimately keeps investors and other stakeholders happy, especially if your business runs on significant funding from external sources. Because pivoting involves significant and capital-intensive changes to your business model, investor relations should always play a central role within your pivoting strategy.
So, if you feel like a pivot is the next best move for your business, here are a few strategies to help you with the transition while keeping your investors happy.
1. Keep them informed
Any drastic change to the company strategy should be a well-communicated affair. Your investors, management team, shareholders, board of directors, and any party with significant interest within your company should be notified of your intentions to pivot early enough to avoid any surprises. Surprise changes to your business structure can strain existing relationships with key stakeholders within your company, thus making the pivot feel like an impossible task.
It is especially important to keep investors in the loop if you hope to raise funds for your newly-restructured company. Any soured relationship with one or more investors can severely compromise your fundraising abilities, not to mention losing out on the wisdom and guidance that comes with having an experienced investor on your side during the restructuring process.
To this end, it's always good practice to include the details of your pivot in your monthly or quarterly investors' briefing at least 3-4 months before you restructure, even though a call, email or presentation will also work.
2. Use your go-to-market and content strategies to make your case
A go-to-market strategy is a tactical, hyper-focused version of your overall marketing strategy that maintains a narrow scope into marketing-related aspects of your pivot. When paired with an audience-specific content marketing strategy, your go-to-market strategy can help you improve reach and illustrate how your new business structure aligns with your overall business strategy, thus helping you make the case of your pivot to investors.
Content offers a powerful way to get your brand in front of potential customers. For businesses going through a pivot, your content strategy should be focused on maintaining that link between your old brand and the remodeled business structure. One way to do this is by repurposing content from your old brand and infusing the repurposed material into your go-to-market strategy. According to one analysis, repurposing content offers one of the best ways to improve trust not only from search engines but also from your audience, which can help make for a smooth transition.
At the same time, your content strategy can be used to show investors and other stakeholders how you're planning to reintroduce your brand to the market. Elements of content marketing like storytelling can even be used to win over jittery investors who are still not fully on board with the idea of a pivot.
3. Make your pivot all about the data
For your pivot to be truly successful, you must make sure all your decisions are based on solid, rational data. When starting out, it's quite normal for entrepreneurs to get attached to their business ideas, even in the absence of immediately actionable data. And while most investors often fall in love with the passion and vision that accompany those initial, deal-clinching pitches, you need accurate and appropriate data to validate your plans for pivoting if you hope to carry your investors to the next phase of your business.
Some of the data that should form part of your analysis include sales figures, conversion rates, profit margins, online or physical traffic, and other key performance indicators that are sourced from within your business. External data, including market dynamics, customer demographics, surveys, and competitor analysis should also be used to come up with projections that'll eventually be used to brief your investors.
You should also remember to be as objective as possible with your analysis. Before diving into the data, it is important to switch off that instinctual habit to spin data that comes with being an overzealous, sales-oriented entrepreneur. Having an objective look into the data can give you valuable insights into current plans for a pivot, which is why you should learn to tame your inner salesperson when evaluating your product or service.
4. Pay attention to legal and tax ramifications
Any business that goes through a pivot must often incorporate elements of legal, operational, or management-related realignments. These may include ownership and structural changes, renegotiating contracts, asset disposal or acquisition, the addition of new verticals, and other elements of your business that entail a pivot. Because these elements are core to the business, your investors will want to see that you have a firm grasp of some of these issues before they support your pivot.
You also need to align your pivot or restructure with the most efficient tax strategies. Most businesses that go through a restructure often render taxes an afterthought. This is a mistake that can put off investors who value their bottom lines. To stay on their good books, make sure to keep up with the IRS's updates for the seven tax rates and brackets, which, according to this tax guide, could affect how you prepare your tax returns and ultimately, the contents of your financial report to investors.
It is also important to incorporate techniques for establishing a tax-free reorganization during your pivot. These techniques generally let you, your investors, or other partners transfer, defer or minimize income tax, for example during trading of company shares, thus helping your company mitigate any tax consequences associated with the restructuring.
5. Stay true to your vision
In the end and in addition to great planning and execution, a successful pivot boils down to the degree to which you convince your investors to believe in you and your team. When sales dwindle and your business is struggling to stay alive, there'll be no shortage of advice from family, friends, and business associates who believe they know what's best for your company. The true test, however, will be how well you stick to a vision that may not make sense to everyone else, a vision that probably helped land the same investors you’re hoping to carry over into your remodeled business outfit.
To help align your investor-backed vision with any plans for a pivot, make sure you aren't blinded by what you personally think is the way forward. Listen to your customers and employees, internalize their sentiments and criticisms, and use this information to enrich your vision for the pivot.
Most importantly, don't turn back once you've decided to pivot. Indecisiveness is one of the best ways to give investors cold feet, so make sure you give this process your complete support and attention. You should also make sure everyone is on board with the pivot once the decision has been made. This way, you'll present a united front that investors will trust to take them down the new path.