We talk a lot about the importance of having a solid business plan — one that starts with a good operating agreement and ends with a proactive exit strategy. However, the thing about these types of plans is they’re just that: plans. And plans change. The message we want to drive home today is that it is just as important to be flexible in your operations as it is to plan for success.
Pivot, Pivot, Pivot!
No, we haven’t interviewed Ross Gellar. However, we couldn’t agree more with this mildly famous line. Your business needs to be able to pivot if something goes awry in the market, your plan or your execution. If you think about it, your first pivot was what made you become an entrepreneur in the first place as you turned away from traditional working environments to carve out a special niche for yourself and your product or service. Why be a stick in the mud now?
Your pivots might not even be that big. They can be something simple such as altering the offerings on your menu or even changing locations when a better (cheaper, more local, more dramatic, whatever floats your boat) piece of real estate presents itself. Ideally, you’ll have such a good handle on your business operations that pivoting isn’t so much reactionary as it is anticipatory — you know your business and your market so well you are able to almost predict what your next steps need to be.
We’ve talked about business roles before. At the moment, you may not be the visionary in your company; that’s okay! Your visionary person should be looking at the big picture and at growth in your company. If they’re looking with eyes wide open, chances are they’re going to recognize an opportunity or a risk before it becomes critical to your business as a going concern.
Ryan Born — founder of AdRev/AudioMicro Inc. which he sold for an insanely good number, and who is now running Haawk — let us in on his pivotal moments (not sorry for the pun) and why he doesn’t think failing is a bad thing. He shared his homerun exit story as well as his business failures as a way to elaborate on the “if you don’t try, nothing gets done” idea. To borrow from football, you need to put some skin in the game if you want to win.
No team can win every game it plays, however, so it’s important to plan for failure. Something will happen that you didn’t anticipate and having contingency plans in place will save you a lot of headaches down the road.
So That Didn’t Go to Plan…
You tried something new and it failed. Let us be the first to say, “Congratulations!” What did you learn? Are you going to try something similar or change paths completely? The only real failures you’ll have in business are the ones you didn’t learn from. Whether you messed up the terms and conditions of your sale or you invested in a product that didn’t turn out, there’s always a nugget you can carry forward with you into your next endeavor.
What makes a good contingency plan? How do you recover from a blunder? As with all things business, it comes back to planning and hard work. You may have to make some pivots with ownership shares (meaning you may have to give some up for financing) or even with which market you’re targeting, but if you want another kick at the can, you’ll do what it takes. After all, isn’t that what being an entrepreneur is all about?
Know When to Fold ‘em
On the tail of things not going to plan comes knowing when to get out of Dodge. Sometimes you’re not going to have a favorable recovery. Sometimes you’re going to have to take your licks and spend some time recouping yourself and your entrepreneurial spirit. That being said, recognizing when to get out of a risky situation is critical to your success.
Before you go into any enterprise, you should be doing your research. Market research, R&D, cost analysis, etc. are all great tools at your disposal that will help you figure out how much money, time and mental stress you’re going to put into a project before getting in too deep. If you’re going to skimp on this aspect and run with your vision anyway because you have a good feeling about it, be prepared that it might blow up in your face. If that happens, it’s a good idea to know where your line in the sand is.
If you have limited capital, that line is likely to be money. If you have excellent equity backing, perhaps it’s the man hours or logistics of it. Whatever your huge hurtle is, define it. Your investors, employees and loved ones will thank you, and you’re likely going to thank yourself for your foresight.
One Man’s Junk Is Another Man’s Treasure
Hey, so that venture was no good for you. But Company X saw it and it has synergy with their current offerings and they want to pick it up. Remember that value to you and value to a buyer are rarely the same thing — in this case, it works in your favor. Before you burn your company to the ground, is there someone out there who would want to buy it or at least its parts?
So often we talk about business value to owner and how we as entrepreneurs think of our businesses as our children. This is true, we can’t deny it. But the thing to keep in mind is that eventually you have to exit, so it’s a good idea to get a bit of emotional distance between yourself and your company. If you’re a serial entrepreneur, you’re better at that than most and truly enjoy the challenge of building and growing a business. But, if you’re sitting in your first company and you’re staring at an impasse, you need to start looking at your business the way an outsider would.
If you can’t pivot your way out of a situation, it might be time to pivot your way into an exit. Use the opportunity to grow and develop something new, focus on your family or simply recharge your battery. You might not have a World Series-ready team this year, but you can certainly start training and building the team that will take you there.
Where do you sit in regards to being pivot ready? Do you know what your absolutes are and are you prepared to take action if your next move doesn’t pan out? Looking back, how and when did you first make a pivot and what were the consequences of it?