Startup 101—Lesson 4: Knowing How and When to Pivot Your Startup

By Denny Bulcao

When focusing on how to grow a startup, it’s easy to become so committed to growth that you lose sight of the big picture. When revenues and traction aren’t where they need to be, many startup owners continue to push and revise sales plans in an attempt to resolve the problem. However, many of them never stop to consider that their entire business model may have fundamental flaws and that a complete pivot is necessary. Knowing when and how to pivot, therefore, is the startup lesson that we’ll discuss in the fourth installment of our Startup 101 series.

How to Know If a Pivot is Necessary

Did you know that mega-successful startup Groupon started out as a fundraising company called The Point? When the leadership realized that group fundraising was not achieving their goals and that they would have better success in the consumer arena, they performed a successful pivot and are now valued at $15 billion. How did Groupon know their initial business plan wasn’t working? Limited revenue and lack of new customers were the red flags that tipped them off and are the most common warning signs that a pivot is necessary.

Startup consultants, however, will make sure you don’t confuse a bad sales and marketing plan with a flawed business model. To identify which needs to be altered, compare your business model to similar startups that are experiencing success. If it’s similar, your problem may be in the sales and marketing arena. However, if your sales and marketing are on point, and you still don’t have interest from your target market, a pivot may be in order.

Steps to a Successful Pivot

When discovered that their API aimed at helping marketing departments scale handwritten communications was not generating the clients they needed, they successfully pivoted to a new offering of helping individuals send digital communications in their own handwriting style. How did they do it? Startup consultants surmise they used the following steps:

Step 1: Figure Out All of the Reasons It’s Not Working

Do you have the wrong type of product or service? Are your service and target audience a mismatch? Is your product too similar to a competitor’s with too few unique advantages? Sit down with your team and write down all of the reasons why your business plan is not executing properly. All of these will need to be addressed in your next iteration of your plan.

Step 2: Revise Goals and Visions

As one of your initial startup growth strategies, you developed goals and a vision for your company. These may or may not still fit when you pivot your startup. Make sure you ensure that your goals and visions align with your new business plan and strategy. If they don’t, you may need to revise them to make sure they coincide.

Step 3: Develop a List of Ideas to Accomplish New Goals

This is the step where your pivot really begins to take shape. You know what’s gone wrong and where you need to make changes. You’ve also aligned your goals so that you can see a clear destination. Now is the time to develop your plan to get there. Have a brainstorming session with your team and compile a list of ideas for your new product or service. This is not the time to analyze them all, just get down as many ideas as you can.

Step 4: Create a Clearly Defined Plan

In this step, you and your team will narrow down the list that you created in step three and define your new startup development plan. Make sure you have clear goals and know what success of this new plan will look like. Do you want to hit a certain number of customers? Generate a set amount of revenue? These benchmarks will help you determine if your pivot is successful—or if another is needed.

Step 5: Explain and Embrace the New Plan

Once you have a clear plan in place, it’s time to bring in all the necessary players. This includes your staff as well as any investors or mentors you are working with. Fully explain your plan, answer any questions, and ask for feedback. Rally the troops so you’re all ready to take on the next step in your startup journey.

Step 6: Watch the Metrics

As you roll out your new plan, keep an eye on the metrics. Are you hitting small goals on the way to your ultimate goal? Are you exceeding the sales of your previous business model? This is key to knowing if your pivot plan has been a success. If you aren’t seeing the numbers, it may be time to start again from Step 1.

No startup wants to admit their business plan is not currently succeeding and needs to be overhauled. However, it’s a fact in the startup community that flexibility is often the determining factor in success, and knowing when and how to correctly pivot could be your key to crushing the competition. If you would like to meet with one of our experienced advisors for startup expert help in this or another area, please visit our website.


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