Pivoting the Business
As a business starts to decline, it is important to consider a pivot. Rethinking the business or retooling how the business is run could help decide how to pivot. Would a new product help sustain the business? What is the business doing wrong? What could be improved? What is the issue—excessive expenses or declining revenues?
General Strategies
Let’s say after considering the above questions, that the decision has been made to pivot.
If consumer behavior has changed, develop new marketing strategies. If consumer needs have changed—as they did during the pandemic—respond to those changes with innovative ideas. If the target audience has changed, consider changing the marketing strategy.
If the competition has increased, analyzing what the competitors are doing differently can be helpful. Checking out their product or service together with their price points could make a difference.
If expenses are the issue, develop ways to work smarter and more cost-effectively. This will require a review of the financial statements and both short- and long-term goals. After the review, adjustments should be made. Perhaps renegotiating some contracts could be the answer.
Renegotiating Contracts
Maybe there is a way to reduce expenses through negotiating contracts. As an attorney, you can help with this. A review of the expiration dates of the contracts must be done. Did they renew on their own? When were they last renegotiated? What has worked well with this contract and what would your client like to see be done differently?
There are different types of contracts that your business clients may be involved in. Here are some examples:
- Lease agreements for buildings, real estate, equipment, vehicles, etc. (Negotiate for lower payments, spreading out payments, earlier outs, maybe a smaller space, etc.)
- Supplier agreements (Negotiate different payment terms or lower minimum purchase requirements)
- Employee benefits (Shop around for more cost-effective benefits providers.)
- IT-related contracts (Move to the cloud, shop around, work with any external programmer or web-designer payments for different terms and maybe lower payments.)
We can look at supplier agreements as an example. Aside from checking the contract for compliance (e.g., meeting deadlines) and any ambiguous language, does the contract capture the intent of the parties? Perhaps when the relationship was new, the contract terms made sense but now that they have a relationship, perhaps other terms make more sense.
Let’s say that your client (who makes hand-sewn stuffed animal doorstops) has an agreement that requires it to purchase 1,500 bolts of fabric each quarter. The agreement also provides for payment terms that your client pays within 20 days of receiving the order. Your client would benefit from the following changes:
- Lowering the minimum purchase requirement. While pivoting to smaller animals, the quantity of fabric needed is lower. Negotiating to lower the minimum purchase requirement, or removing it entirely, would help the client out.
- Payment terms. It would benefit the client if the payment terms could allow for time to make and sell the animals first. As such, renegotiating to maybe net 90, which would require payment within 90 days instead, would really help out your client from a cash flow standpoint.
If our client has good relations with this supplier, then these changes should be easy to negotiate. If the supplier is unwilling, then shopping for a new supplier may be the way to go.
Pivoting in Ukraine: War-Time Examples
Entrepreneurs in Kyiv have been forced to pivot their businesses due to the ongoing war that began with Russia’s invasion of Ukraine on February 24, 2022. These entrepreneurs are now using their resources to donate much-needed supplies to the Ukrainian military.
T.C. Pizza, for example, began preparing boxed meals only four days after closing down the shop. Volunteers deliver the meals to hospitals, the military, families, and the elderly, all the while trying to avoid hidden landmines on the road. Another business, Kachorovska, made women’s shoes before the war and pivoted the business to make combat boots for the first time ever to send to Ukrainian soldiers. Good Bread from Good People employs individuals with special needs and sold cupcakes, cookies, and pies prior to the war. Unfortunately, the business had to close its doors when the war began. However, on March 10, the bakery opened up again with the help of employees and volunteers to bake bread for the first time to donate to soldiers, police, hospitals, the elderly, and families. Finally, EdEra is an online education platform that made online courses and textbooks for students, teachers, and professionals before the war. When the war began, EdEra pivoted to educating on things such as how to give first aid, how to find a bomb shelter, and how to prepare for an evacuation.
All of these businesses are inspiring examples of how a business can pivot even in the worst of times.