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Why Some Small Businesses Choose to Execute a Pivot Strategy

When you hear the term “pivot,” you might think of a politician changing their stance on an issue or a group of friends awkwardly maneuvering a couch down a narrow staircase. But small businesses also choose to pivot.

Under a formal pivot strategy, a company intentionally shifts its strategic focus through a series of well-considered and executed moves. This is not a decision to be made lightly or impulsively, but it's wise to consider and explore the feasibility of a pivot strategy under certain circumstances.

Five Common Situations

Many businesses are prompted to pivot due to one of five common situations:

  1. Financial Distress: When revenue streams decline and cash flow slows, it’s crucial to identify the causes promptly. While temporary market conditions or seasonal drops might be to blame, sometimes it's due to the permanent loss of a “unique selling proposition.” In such cases, a pivot strategy might be necessary. Regularly generating accurate financial statements and projections is essential to making informed decisions about whether a pivot is needed.

  2. Lack of Identity: If your business offers a variety of products or services but only one clearly stands out, you might consider pivoting to focus on that primary offering — or even making it your sole offering. This typically involves cost-cutting and process streamlining to increase efficiency, potentially reducing investment while maximizing returns.

  3. Weak Demand: A steady decline in demand for your products or services may indicate the need to reimagine your strategic goals and pivot to something that generates more reliable revenue. Pivoting doesn’t always mean starting from scratch. Often, it involves targeted changes to production, pricing, and marketing. You might redefine your target audience and reposition your offerings as budget-friendly alternatives or, conversely, as high-end boutique options.

  4. Tougher Competition: Many industries face disruptors that change the competitive landscape, alongside the perennial threat of large companies that are difficult to compete against. A pivot can help differentiate you from dominant market players. For instance, you might shift to a different niche or exploit competitors' weaknesses by offering more personalized service or faster delivery times.

  5. Change of Heart: Sometimes, a pivot strategy comes from within. A shift in your values or perspective, or a new vision for your business that you feel passionate about, can prompt a pivot. This type of pivot carries significant risk, especially if your company has been profitable. It's also important to consider the impact on your employees. Nevertheless, one advantage of owning a business is the freedom to make these decisions.

Contact Us

A pivot strategy should never be a whimsical decision. It requires thorough research, discussion, and careful implementation. For assistance with applying detailed financial analyses to any strategic planning moves you're considering, feel free to reach out by  scheduling a meeting with your VAAS Tax Consultant. We look forward to working with you.

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