How Pivoting Your Business Can Help It Grow

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Image courtesy of tiverylucky at FreeDigitalPhotos.netMany of today’s well-known companies began life as something else entirely. Twitter started out of a podcast subscription company,  Nokia began life as a paper mill. Starbucks originally sold just espresso makers and coffee beans, not the hot beverages and Frappuccinos it’s known for today.

What do these companies have in common? They all pivoted. They saw that their original business idea wasn’t likely to continue to succeed due to increased competition or they fell in love with a new idea and decided to move in that direction. Pivoting can save a business from going under but it can also open the doors to growth for a business that is currently doing rather well. If you’re considering a pivot for your business, here’s what to ask and how to do it.

Questions to Ask Before a Pivot

The big question to ask before you pivot is “why?” Why should you pivot and what will your business gain from doing so? One answer to the question “why” might be to keep customers interested in your product or to stay one step ahead of the competition. Twitter, for example, decided to pivot away from being a podcast subscription company when it became clear that iTunes was going to be a leader in that category. Pocket Gems, a mobile game developer, decided to pivot once it learned that gamers were moving to more technologically advanced games and losing interest in the games offered by Pocket Gems.

Another question  to ask is “what does your business do that sets it apart from others?” What value does your company bring to the table that no other companies bring? If you can’t come up with an answer to the “what” question, it might be time to change course so that you can answer the question.

Finally, you want to ask yourself “how?” How can your company begin to better meet customer needs or fill in a gap in the marketplace?

Ways to Pivot Your Business

Once you’ve decided that pivoting your business can help it move to the next phase of growth, the tricky thing can be figuring out how to actually change direction. There are several paths your company can take, depending on what the ultimate goal of the pivot is.

For example, if you hope to attract new customers or want to work with a new demographic to increase revenue, take a close look at your current offering. If your primary customer is currently single, young adults, look at ways you can tweak the product or add a new product to make it appeal to older adults who might be married or have families. If you think that a product that originally appealed to young people can’t appeal to all, think again. Just take a look at Facebook. It was originally only for college students. Now people of all ages use the site and use it regularly.

Surveys or actually going out and talking to people on the street can help you see what you can do to reach a new demographic or alter your product to make it more appealing. You might think that you’re offering something that solves a problem. But it could be that the people that use your product or would use your product think otherwise.

Changing your business model is another way to pivot. For example, if you are a direct to consumer company, you might find more opportunities for growth if you start working with distributors. You’ll be able to get your products in stores, rather than selling them directly. That can reduce costs on your end and increase the size of your customer base.

You might also consider pivoting your business by changing your pricing structure. While offering your products at a high price point might make sense at first, you might find that you can easily broaden your customer based by introducing a lower priced option. You can still offer the higher priced item, but as a “premium” or “luxe” option. The lower priced option will bring more people in. Who knows, after some time, many of them might decide that they like your products so much that it is worth switching to the premium option.

The road to growth might be long and full of twists and turns. If you’re not sure what direction to take your business in or if a pivot is right for you, the team at New Direction Capital can help. We offer virtual CFO services to help your company achieve profitable growth. Contact us today to learn more.

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Although many businesses follow the maxim “the customer is always right,” there are occasionally times when the advice gets ignored or thrown out the window. When a big company is behind a customer service gaffe or PR disaster, coverage of the incident is all over the news. The recent case of United Airlines employees trying to forcibly remove a man from a plane, resulting in that man being hurt, is just one example of a poorly planned policy going wrong. Large or small, companies have customer service issues on a regular basis. How your company reacts and what you do determines whether or not your business will survive.

Respond to the Problem

The sooner you or another leader in your company issues a response acknowledging the issue, the better. How you respond depends on the nature of the problem, and there are good ways and bad ways to respond. Trying to pass blame off on the customer isn’t a good way to respond, for example. If the problem is a one-time situation, it’s best to find out what people are saying about the issue and craft a response based on the criticisms of your company and in an attempt to minimize any damage from the situation. If the issue is something that’s been ongoing, your response might include putting together a task force or group to look into the problem and figure out where it is coming from and how best to respond.

Be Empathetic to the Affected Customers

It took the CEO of United three attempts before he released a response that people thought was at least halfway appropriate in light of the incident. The first response ignored the issue entirely. The second response was worse — it put blame on the customer who was removed from the plane. By the time the company got around to issuing a third response, which was an apology, it started to seem as if they were trying to do damage control to avoid a potential lawsuit.

A more effective response would have empathized with the passenger right away and would have avoided the social media fallout that followed the first response. It might have also helped the company avoid the drop in stock prices that went with the incident.

Reach Out to Remaining Customers

Part of doing damage control after a customer service or PR disaster is to get in touch with other customers. When something goes wrong with a company, people’s first inclination is often to boycott that business. To keep your customers from flying to other brands, it’s up to you to initiate contact. You want to rebuild trust and relationships with your customers.

One option is to ask your customers for their feedback. Getting feedback can be particularly helpful in the case of an ongoing problem with customer service at your company. The people who buy from you and who want to continue to buy from you are the most likely to provide you with advice on what you can do to improve.

Along with asking for feedback, you want to make a plan to actually put some of that advice into practice. Once your company has made some of the improvements people have suggested, let them know. Respond to specific pieces of feedback and point out what your company has done to improve those areas.

Focus on the Positive

While you don’t want to look like you’re sweeping the gaffe under the rug, it can be helpful to shine a light on the good things your company is doing after a customer service meltdown. A major PR problem can also be an opportunity for your business to find something positive to work on. For example, if you find that one of your company’s products is being manufactured in a factory with known safety issues, you can partner with an organization that works to improve factory conditions. If your company already does a lot of good for your community, you can issue press releases and social media posts calling people’s attention to those products.

You can’t grow your business if customers are jumping ship. Having a disaster plan in place in case something should go wrong should be part of your business’ plan. To learn more about how to put together a plan and map for growth, contact New Direction Capital today.

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Image courtesy of Pong at FreeDigitalPhotos.netBusinesses that want to succeed need to find some source of funding to get them off of the ground and to help them grow. But, for many newer businesses, it can be difficult to obtain traditional types of financing, such as debt or equity financing. A newer or fledgling business usually doesn’t have the track record to prove to lenders that it will be able to repay any loans. Additionally, it might not have access to traditional investments firms that often back more established companies.

Enter venture capital, a different type of equity financing. Venture capital might not be the funding option for all businesses, or even a funding option that is appropriate for all new businesses. But for the right company, it can provide the financing and leg up that the business needs to get going.

What is Venture Capital?

Venture capital is a type of equity financing, which means that investors provide a company with money in exchange for a stake in the business, or a portion of its shares. Companies that receive venture capital don’t repay the money they’re given.

There are a variety of ways in which venture capital is different from other types of equity financing.  For one thing, venture capitalists typically only provide funding to a specific type of company, namely start-ups. Companies that have the potential for high growth are of particular interest into venture capitalists.

Often, the investors who offer venture capitals to entrepreneurs and start-ups also take a very active role in the company, including having a say in major decisions made by executives and stakeholders. Since there is a higher risk for venture capitalists compared to investing in more established businesses or businesses with a proven track record, it’s usually expected that the return on investment will also be considerably higher than average. Additionally, most venture capital financing is long term financing, meaning that investors are willing to wait to see a considerable return on their initial contribution.

Where Does the Financing Come From?

There are two main sources of venture capital financing: High net worth individuals (also known as angel investors) and actual venture capital firms. Although the show isn’t necessarily an accurate depiction of how the pitching and investing process works, the people you see making offers or dashing entrepreneur’s hopes on “Shark Tank” are examples of angel investors. In many cases, an angel investor is often a former entrepreneur who earned considerable wealth by launching a successful business or series of businesses.

What Do Venture Capital Firms or Angel Investors Look For in a Company?

Although venture capital tends to go to start-ups, not every start-up is a good match for financing. It’s also not only start-ups that qualify for venture capital. The financing can also go towards companies that are already established and are looking to expand in some way or towards research and development projects.

Generally speaking, angel investors and other venture capitalists typically look for several characteristics in a company before they decide to invest. Having the potential for substantial or considerable growth is just one qualification. Investors are also on the look out for a well written and clear business plan and a strong and competent management team. Since many angel investors are also former entrepreneurs, many tend to seek out companies that are in their former industry. A tech entrepreneur turned investor is likely to finance tech companies while a doctor who’s also an investor is likely to look for businesses in the healthcare field.

Angel investors who have experience in a particular industry are also more likely to take a more active role with the companies they invest in. For newer businesses or less experienced entrepreneurs, having guidance and mentorship from an investor can be very valuable.

What Other Options Does a Business Have?

Like debt financing and other types of equity financing, venture capital is just one financing option available. Figuring out which financing options are best for your business will allow it to grow and scale.

If you are unsure about financing or need assistance choosing which options are most appropriate for your company, New Direction Capital can help. Working with a virtual CFO can help your company navigate the often tricky waters of financing and finding capital. To learn more, contact us today.

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Image courtesy of nalinratphi at FreeDigitalPhotos.netIf there’s one type of work that’s been growing by leaps and bounds in recent years, it’s freelance work. By the year 2020, it’s expected that a significant portion (more than 40 percent) of the workforce in the US will be classified as contingent or freelance workers.

There are benefits to freelance work for both the contractor and the employer. People who work as independent contractors often enjoy greater flexibility and can schedule their work around their lives, not the other way around. Working with contractors can help a business meet specific needs at a particular time and can save companies a considerable amount of money.

Independent Contractors Cost Less

Even if your business only offers benefits such as retirement matches and healthcare to a few employees, hiring people on a full or part-time basis can get pretty pricey. Employers are responsible for paying half of an employee’s Medicare and Social Security taxes (7.65 percent of an employee’s compensation). Employers also need to pay for worker’s compensation insurance and state unemployment insurance.

But when you decide to work with a freelance, your company doesn’t have to contribute to those three items. A contractor is technically his or her own employer and needs to pay the full amount of Medicare and Social Security taxes. It’s also up to the contractor to purchase insurance if he or she chooses.

Since contractors often work from home or usually bring their own equipment, your business is able to save on other costs as well. For example, you won’t have to purchase a laptop or smartphone for a contractor and you won’t have to reserve a desk for him or her.

Freelancers Can Come and Go

The nature of a freelance agreement is that a worker can come and go as you need. When you hire someone on a contract basis, you specify the terms of the agreement from the start. For example, you might hire a freelancer to work on one single project with an open ended time frame. Once the project is over, you can part ways amicably, until you have another project you’d like the contractor to work on. Another option is to hire someone to work with your company for a set period, such as three months or a year. You might decide to renew the contract at the end of the period, decide to hire the person full-time or decide to part ways.

Since you’re not working with an employee, you aren’t actually firing anyone at the end of the contract. You also don’t have to worry about scrambling to find a new employee or someone to take that contractor’s place.

Remember There’s a Line Between Freelancer and Employee

There’s a big difference between an employee and a freelancer or independent contractor. Your company can’t hire someone as a contractor then expect him or her to behave like an employee. Since a contractor is taking on a certain amount of risk and responsibility, it’s recognized that he or she should have a certain degree of say over when and how he or she works.

It’s fairly common for companies to misclassify employees as freelancers. The Department of Labor and the IRS take this pretty seriously, and have required companies that misclassified their workers to pay a combined $79 million back wages in recent years.

Three factors generally decide whether a person is really an employee or can be classified as a contractor. One is the financial factor, which includes things such as how the person is paid, who pays for expenses, and so on. Another factor looks at the behavior of the employer and contractor/employee. If an employer has a lot of say or control over where and how a person performs the work, that person is usually an employee. Employees are also told what types of products to use, where to buy those products, and the exact tasks he or she must complete.

The third factor is the relationship between the employer and the person. If the working relationship is going to be ongoing and the employer expects to provide benefits, the person is an employee. Usually, contractors are hired for specific projects.

Did you know that you can hire contractors to perform the role of certain executive level positions? For example, New Direction Capital serves as a virtual CFO for companies that can’t afford or don’t yet require a full-time CFO. Contact us today to learn more.

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Image courtesy of hywards at FreeDigitalPhotos.netWhen you think of scaling or growing your business, what comes to mind? For many business owners, growth means adding new employees, moving into a new market, or adding new products, all with the goal of increasing profits and revenue. But your company doesn’t have to grow on its own. Another option is to join forces with, or merge with, another business. Whether the company you merge with is a bigger business or a similar-sized competitor, the move can have benefits for both of you.

1. Increased Cash Flow

One of the biggest benefits of a merger, especially for the smaller business, is increased access to financing and cash. If your company is relatively new and struggling to get debt financing or investor interest, but then joins with a business that has a long history or an established reputation, you might find that it becomes easier to attract investors or to get banks to lend to you. Alternatively, the merger might make it so that you no longer need to work with individual investors or seek out loans. The company you partner with might have deep enough pockets that it’s able to provide enough cash to keep your business afloat.

2. Improved Efficiencies

Another way that a merge can help your business is by making it more efficient. Instead of having to pay for two of everything, which was the case when you and the business you are considering merging with were separate companies, you can have just one of everything. That can lower your overhead, the amount you need to pay for employees, and the time it takes to complete certain processes.

3. Broader Customer Base

When you merge with a company, you get to expand your customer base without having to do extensive demographic or marketing research. If two similar companies are coming together, they can combine their customer lists to create one master list. If you’re joining with a larger company that covers a variety of niches and demographics, you can gain access to some or all of that business’ customers. For example, if you are a smaller retail outlet that sells clothing for women and you merge with a larger department store, your store suddenly has access to the women who might have frequented the department store, but not your boutique.

You can also expand your customer base by merging with a company that is based on the other side of the country or in a different market from your own. For example, if a small chain of stores on the West Coast merges with a chain based on the East Coast, the stores are now able to reach customers that they wouldn’t have connected with previously.

4. Add New Products to the Mix

Researching and developing new products is one way for a company to grow. But research and develop costs time and money. Merging with a similar or larger company allows your business to diversify or increase its product offerings without having to spend an extensive amount of time or money on developing those products. In this case, it helps to merge with a business to seems to be a natural fit or extension of your own. For example, the smaller boutique that merged with the larger department store will be able to offer its customers related products, such as jewelry and accessories, in addition to the clothing it was selling previously.

Even if two similar-sized, related companies join forces, offering new products becomes easier. You benefit from having an increased budget for product development, for example.

5. Benefit from Experience at the Other Company

One big benefit of merging with a more established, larger business than your own is that you are able to take advantage of the years of experience and expertise people working for that company have. In some cases, it’s as if merging with a bigger company means gaining a mentor or two in the industry. Plus, once you merge, you are all working towards the same goal: the common good and growth of your two companies, instead of competing against each other.

Although a merger can benefit your business in several ways, it’s possible for the process to go off the rails or to face challenges. A virtual chief financial officer can help you through the negotiation process, creating a merger that benefits both parties. To learn more about how to successfully navigate the merger process, contact New Direction Capital today.

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