How To Realize When Your Business Model Isn’t Working
As popularized by Silicon Valley, the word “pivot” is often a way to describe the readjusting of your business to improve market-fit. Sometimes things just aren’t working regardless of how great of an idea you have or how much effort you put into executing it. These are the times that it is important to self-reflect on what you have, determine what the bright spots are among the clouds, and move forward with a fresh perspective.
While this seems simple enough, most IT businesses don’t pivot simply because they haven’t identified that they have a problem. As Business Owners, we love turning our ideas into actual offerings and enjoy the thrill of the opportunities that come of them. Sometimes it is hard to admit when we are wrong and the customer isn’t reacting the way we had thought.
To help you become more self-aware about your market-fit, here are a few of the tell-tale signs that indicate the need for a possible pivot:
You Aren’t Focusing On What You Do Best
When an individual starts a business it is much like a newborn baby. The DNA is at it’s purest state and it is clear of the imperfections that it would acquire over time. Eventually the business grows and new opportunities arise with team members being added to fulfill them. Sometimes things click and it seams like everyone is doing what their best at and the results are compounding as a result of it.
Other times, the opposite can be true. People are put in uncomfortable positions in order to fulfill a need and generate revenue, but they are not doing so out of intention and will soon lack the motivation to execute at a high level. When a high percentage of your team winds up in this position, it is a clear sign that your business might be off track and you need to either reconsider your staffing choices or tune your offering to better reflect the talent you have.
You Have A High Customer Attrition
For some businesses, customer acquisition is more a means of survival than it is a means for growth. When customers decide to break their contract (or not renew your services) it can obviously hurt your business. If customers do this at a higher rate than you are organically acquiring new ones, it can be devastating.
In the Managed IT Industry, there is very few valid reasons that your customers should “jump-ship” in the middle of their contract. In fact, the complicated process of migrating from one provider to another makes this one of the “stickiest” industries in all of B2B. If your customers are bailing without your consent, you need to change something. It’s as simple as that.
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You Have A High Employee Turnover
Team morale is a genuine indicator as to whether or not your business is going in the right direction. As humans, our instinct is to always look for greener pastures. If an employee feels like the role they are fulfilling will not benefit them personally or professionally in the near future, they will inevitably leave in favor of something that will.
Seeing the way your employees approach their work is also an indication of what your customers experience on the other side. If your team is unhappy, there is a pretty good chance your customers are unhappy as well. Taking care of your internal issues and pivoting where necessary should be a top priority when improving your business.
You Find It Hard To Justify Your Price
Talking about pricing is never easy. Even the most experienced IT Sales Executives have times when it is difficult to justify their proposals. While this is natural in sales, it is certainly unnatural in the way of your existing customers. They experience your services everyday and thus that should be all the justification you need to provide.
I knew this was a problem for our business when a customer said to me “I’m not sure what I am even paying you for.” These words cut me in half as if I was a watermelon in a game of “fruit ninja.” Your customers should always understand the value of your services. If they don’t, you need to find a better way for them to experience it or you are at risk of losing them.
Your Revenue Doesn’t Match Your Position
Every time you send a quote to a customer and they accept it, you are essentially evolving the financial make-up of your business. As a Marketer, I always look to find the right “position” for a business as a way to stand out. While this is a great practice for a new business, it can be very challenging to re-invent the financial code of an existing one.
The bottom line is, you are what your revenue says you are. For example, we once decided to position ourselves as a vCIO/ High-Value consulting company with “white glove” service. The problem was, the majority of our revenue was from Help Desk and Managed Services, some of which was outsourced to a third party and did not meet any of those expectations. We eventually realized that we had a better chance of just being who we are instead of trying to portray something we are not, thus pivoting back to our current reality.
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Your Core Offering Is A “Hard Sell”
As an MSP, you rely heavily on recurring revenue and thus your core offering is generally a “per-head” managed services bundle. The problem with this is that sometimes this is exactly what prospects don’t want. Maybe they are interested in a project or particular offering, but they are not ready to put all their chips in at the time that you are courting them.
If you find that you are constantly losing new deals because you are pushing managed services onto an unwelcoming pipeline of prospects then it is probably time for a change. Either creating smaller bundles to fill price gaps or finding a way to source better prospects could be potential pivots for this scenario.
You Have Customers “Outgrow” Your Business
As we previously mentioned, it always hurts when your customers decide to leave. It is especially problematic if your customers “outgrow” you. In IT, this can happen when a customer’s needs become more complex and they don’t feel as though your company is fit for the task.
At this point, you need to look yourself in the mirror and figure out how you can prevent this from happening in the future. If a company has experienced growth while under your care, you know that you have contributed to this success in some way. It is important to be able to demonstrate this value to customers and put the resources in place to be able to retain them further along their growth trajectory.
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You Say “Yes” To Every Opportunity
About every other article I write, I always try to include the saying “not every opportunity is a good opportunity in Managed IT.” At this rate, it will probably make it onto my tombstone for lack of a more satisfying quip. I say this because there was a point where our business took on several “unique opportunities” that ended up pulling the business in multiple directions and causing a complete identity crisis that was difficult to overcome.
If you find that your revenue streams are too diverse and your Profit & Loss Statement is just a collection of random opportunities then it is probably time to pivot. Figure out how these things tie together and what the most successful parts of these opportunities are and look to rebuild your business around these pieces. For those revenue streams that don’t quite fit, it may be worth it to trim the fat to better prepare your business to move forward.
You Struggle To Tell People What You Do
In my opinion, the “elevator pitch” is one of the most frustrating things in business. Whether it is at a children’s birthday party or in the middle of a networking event, you will inevitably be asked “what do you do?” and if you are like me you will probably trip over every word and make the person immediately regret that they asked.
While my issues revolve mostly around my social inabilities, some struggle to give an elevator pitch because they legitimately do not understand the value that their business provides to others. As technical-minded folk, it is commonplace to complicate things that are otherwise quite simple. If “what you do” is entirely too complex for the benefits that it provides then it may be time to pivot to an offering with fewer moving parts and higher market acceptance.
You Blame Your Competition For Slow Growth
Over the last year that I have spent talking to MSPs and helping them grow their businesses, I have come across several that truly believe that they are doing everything right but the competition is too fierce. This has been a real challenge for me to get through to these individuals and help them understand that competition matters in the details (price, value proposition, etc.) but it should never be a reason you cannot succeed.
Amazon did not decide that Borders was already doing a great job at selling books, and decide they should do something else. Instead, they figured out how to sell books a different way and took one of the most mature industries in existence and flipped it upside down. The truth is, for every competitor you know about there is at least ten more that you have never heard of. This is reality and the best thing you do can do is keep pivoting until you end up in a lane by yourself.
Your Customers Under-Utilize Your Services
Offering technical support as a service is a complicated business. When you service a customer often, it means things are not working. It also means that when you resolve these issues on a regular basis, a customer gets to experience tangible value of your services. On the other hand, if they do not have issues, it means that you have done your job well at preventing them. But unfortunately, some customers think that this is when they “don’t need you” and fail to recognize the value that you have demonstrated in your absence.
While it is difficult to prevent people from thinking this way, there are ways to ensure that your services are always being utilized. Pivoting toward a more “pro-active” (or at least communicative) service offering is one way to do this. This means that you should increase the frequency of customer interactions so that they know that you are actively doing your job and not just sitting around and collecting their check.
You Struggle To Make Payroll
Poor cash flow can suck the life out of a business, even if it appears that your customers are happy and you are doing everything else right. For our business, this became a constant issue, as we had several large customers that made up a significant portion of our revenue and they all seemed to be prone to making late payment at what appeared to be the worst times.
We made a lot of simultaneous changes to help cure these issues, but changing the way we accepted payments was one of the most impactful. At the time we were primarily receiving checks by mail which is no doubt the least efficient means of acceptance. After deploying a payment portal and making a hard push toward autopay (including offering incentives) we found that our cash improved significantly. New customers were presented this option immediately and it became the expectation when they were on-boarded. This proved to be one of the best pivots we made on the back end of our business.