3 questions to consider before pivoting your business model

A little pivot here. A little twist there. There's no better way to successfully navigate today's ever-changing marketplace. Yet all that pivoting could lead you down disastrous paths if you're not careful. It's fine to be creative, but you don't want to take big leaps without doing your due diligence.

The problem, of course, is that major changes can be hard to resist. When your industry is pushed around by a competitor, you might be tempted to follow suit. Or maybe you're worried about missing an opportunity if you don't embrace the latest trend. Although both cases may be true, they are not always true. Sometimes taking the time to consider your options makes more sense. You don't want to pivot too recklessly, quickly, or dramatically.

That doesn't mean you should rest on your laurels and let the world rush by. Obviously, pivoting can be a good decision. YouTube was originally a dating site, after all. Without a pivot, you could swipe left on videos rather than binge-watch TED talks. The point is, you need to pivot, but you need to do it in a way that protects your business rather than exposing it.

To determine if you should pivot, ask yourself the following three questions. They are designed to help you assess the situation and refocus on your core business.

1. Is it worth productizing your service?

Many pivots involve companies producing their services. For example, suppose you have a service that you want to scale. Your first instinct? Turn it into a product. This way, you can mass-sell the product, especially if you can set up subscriptions or another recurring revenue stream. There is no doubt that production can be your ticket to more money. However, you don't always have to produce, as noted by Greg Alexander.

As the founder of the Mastermind Collective 54 networking group, Alexander works with many other founders. He admits that one thing they often say is that they want to be software companies. For what? “Some founders believe that service businesses are more work-intensive, and that somehow building a SaaS business means a better work-life balance,” he explains. But according to research, the five-year survival rate of professional services firms is 47.6%. In contrast, the five-year survival rate for product companies is 23.%. "It's wiser to take the odds and build a service business rather than a product business," says Alexander.

That doesn't mean you can't produce. Just make sure you've exhausted all service opportunities in your business niche. You may have overlooked some possibilities by assuming that productization was the only way to achieve your goals. If you're still committed to producing, carefully test your product on a small audience before scaling it.

2. Can your target market absorb another player?

You see your competitors engaging in similar pivots that involve a market you've never tried. Is it your turn at bat? Maybe, or maybe not.

Did your parents ever ask you, "If everyone jumped off a bridge, would you jump too?" They feared that you were giving in to peer pressure. When your peers seem to appeal to a specific target market, you'll notice. What you may not think, however, is that the market may just be a mirage. As the CB Insights study noted, one of the main reasons 35% of startups fail is poor market fit.

The way to avoid this is to be certain that you (1) identify a real market with a real need and (2) the identified market can support you and all of your competitors. This is where you need to get your hands dirty and do some serious focus groups and market research. Your job is to figure out the total addressable market, because you can't use it to support your organization if it's too small. Joseph DeWoody, CEO and co-founder of Valor,