When, how and why a startup needs to pivot

By Stakh Vozniak , Co-founder and CEO at Cargofy

After six years of successfully running and growing my startup, I faced a crisis that could have led to collapse. I could already see myself with a broken business and a broken heart.

Luckily, I pivoted.

I work in the trucking industry, and 2023 was one of the most challenging years for us. I'll spare you the details, but it was a nightmare for companies like mine. Consequently, I had just a couple of months’ worth of runway and no chance to raise new funding.

I took a bold step: I completely changed my business model from a sales-led to a product-led approach and started offering subscriptions. This decision saved the business and made it more scalable.

Here’s my step-by-step pivot plan.

Find out why startup can’t grow faster

Less than 100% year-over-year growth is a sign to worry that your business model doesn’t work. My company’s growth was 70% at the time, which meant less chances to become a market leader and raise new round of investments.?

The first thing to do before making a change is to find out why your startup can’t grow.

There can be different reasons for limited growth. In my case, the company was over-reliant on third-party services — on dispatchers who connect carriers with companies that need to ship goods. Because of that, we were essentially an offline company with limited software-driven potential.

The second reason was my dependence on market conditions. Key industry metrics — load per truck and rate per mile — were falling, meaning there were too many carriers in the market. Since I operate on their side, the drop in freight hit my startup’s profits.

If pivoting, I had to make sure my company could tackle these two challenges.

Brainstorm options to survive

Talking to a team without having a plan can be detrimental. There’s a chance you will scare people and leave them uncertain about their future.

The best thing to do before announcing anything is to assess the situation with the C-level. Once you know the challenges the business is facing, you need to understand what your company has to overcome them.

In my case, we had an incredible amount of market data, strong tech expertise, and a working product. We understood that, without a contract with us, the average carrier couldn’t quickly find a load, calculate cost per mile, find the best route, etc. We already saw what to sell.

We switched to a subscription model, created a co-pilot for carriers, and added premium loads to the app. This helped us get more clients, become less dependent on market conditions and third-party dispatchers.

Even when the economic environment has changed, and it seems that there’s no place for your business, think about what makes your company special. Use your strong sides and adapt.

Pitch idea to your team

For any startup team, pivoting means twice as much work as when you initially start a company. Consider this: People have to develop a new product while maintaining the old one, and they’re probably getting paid the same.

Prepare your plan, numbers, and arguments. Armed with a presentation, I pitched the pivot to the team as if they were investors (in a way, they are).

First, I told them the truth: We were running low on funds, and within three months, we’d all be out of work, just like many players in the market.

Then, I presented the plan: How the new subscription-based product would help us generate profits, and how stronger metrics would aid us in raising Series A funding.

Finally, I talked about sacrifices: we had to downsize the team, and the remaining employees would need to work a lot.

At this point, if you haven’t done it before, it’s usually a good idea to offer your employees stock options. Loyalty is a two-way street.

F**ck details, focus on core product

Pivoting means you switch to tunnel vision for a period.

All the team’s efforts must go into developing the core product — there’s neither time nor resources for extra details. If you find it difficult to discard features you've worked hard on, remember that Google shut down over a hundred unprofitable products to move faster.

When launching my first startup, I remember spending an entire year developing a product. It was packed with dozens of features; our website was named the best on Behance. But when we finally started working with clients, it turned out they didn’t need half of the tools we spent time developing.

Given my experience, my advice is to avoid fussing about the details during the pivot. My team created a new logo based on the old one and used elements from the Google Material for the website. The product development took us just two months.

When you are pivoting, you are surviving. When you are surviving, you don’t have much time.

Sell first, then polish

I started selling as soon as the raw version of the service was ready.

I did all the demos myself, without a sales representative. Why? I understood the product's potential and capabilities better than anyone else and could talk to clients about it.

I’m also almost sure a sales rep would quit after two weeks of selling an unstable product with bugs that popped out even during presentations.

Eventually, I arranged cooperation with a large company with 10,000 tenders per month. We spent days and nights fixing bugs based on their feedback, adding the necessary tools, and improving it to suit their needs. Hectic? Hell, yeah! Fast? Very fast.

After 4 months, the new product was up and running. When pivoting, it’s like you are playing the same video game for a second time. Maybe it isn’t that interesting, but you pass the levels faster.

This article originally appeared on Vestbee.

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