Aaron Schwartz is Founder and CEO of Modify, which partners with influencers, nonprofits, brands and more to create custom merchandise shops. He loves working on startup ideas and has spent innumerable (happy) hours advising friends and former students on how to grow their ideas.
In the summer of 2015, we were on pace to double the revenue for our consumer products brand. Things were going well: Our team was happy, our board was pleased with our progress, and I was enjoying work immensely. Yet every day I felt we had a huge opportunity to become a leader in the customer merchandise space if only we could throw away all our successes and start over.
We were receiving a consistent stream of inbound requests from customers asking us to sell them new products in a new way. There were two ways to answer: "Sorry, we don't do that," or, "Tell me more, I'd love to help!" I kept taking the inquisitive route, and I realized this drip-feed of requests was actually a window into a huge opportunity.
After much deliberation, on February 28, 2016, we launched the new Modify.com, which we're building to be the best place for brands, causes and influencers to create merchandise -- a complete pivot from our original model. Below are the key issues we had to wrestle with to take this plunge and some tactical decisions you'll need to make if you do the same.
Mitigate Your Risk
Any significant strategic change carries a certain level of risk. Those first few customers might just be unique, and there could be no meaningful market behind them. You might spread your team thin running in too many directions, and if you take your focus off your current customer base, you might lose them. Here are a few ways you can mitigate your risk:
- Test the new model within your old site. Instead of investing in coding an entirely new experience, choose the expediency of retaining the same brand and technology back-end.
- Create a defined time period to figure it out. We chose to give the new model a one-month test, and no employee was allowed to put more than 25 percent of their time into this. Similarly, you should try to know very quickly if the new model merits meaningful investment.
Align Your Team
Launching a new business is not easy and requires 100 percent commitment. After you run the test, you'll need to align two different groups: your internal team and your board.
We had 10 employees at the time. In the two weeks after our test run, I spent more time making sure our entire team was aligned on switching. I asked them to expect one-on-one meetings, company-wide meetings, and a whole bunch of emails about the shift.
As for your board, it has fiduciary responsibility on behalf of all the stakeholders, including investors. Once your board agrees with your vision, don't forget to contact your investors. Having their buy-in will be critical as you seek to raise money for the "new" venture.
...And Ensure Your Team Is Happy
Alignment is about making sure that everyone is on the same page. But does your team care about your new vision?
Our team signed up to build a consumer brand. Did they really want to build a custom merchandise platform? You need to chat one-on-one with all of your employees and make sure they're actually excited about your pivot. Fortunately, our team was happy with this momentous change and what it would mean for their careers.
Redefine Your Vision for the Future
Once we mitigated our risk, made sure our team was aligned and confirmed everyone was happy with the pivot, we ran into several questions that I think are crucial for any company in a similar position. Namely:
- Do you create a new brand for the pivot or keep the brand? If the businesses are aligned and you have a strong following, I recommend keeping your brand. If it's a 180-degree switch, consider restarting.
- Should you continue to run both businesses or kill one? Do you have the capital/resources to run both? Focus is critical, so unless you have enough resources, I recommend you focus 100 percent of your resources on the pivot.
- What should you do with the cap table? Entrepreneurship is a long-term game. Unless there's a really compelling reason outside of greed, I believe strongly that your existing investors and team should retain their equity.
- How do you redefine roles? Make sure everyone lands into a new position that "feels right," with a clear understanding that you'll revisit after three months. At the start, you need hustle. Once you get going, you might need to hire for expertise.
- How can you get the team to move fast? When you pivot, you're effectively moving from a "big" company with a product-market fit into a small, scrappy startup. You need to go back to first principles, ask a ton of questions, run a lot of experiments and be open to feedback. We applied for the NFX Guild, an incredible accelerator focused on marketplaces and network effects companies. Figure out what it takes to get your team sprinting.
No one starts a business hoping that they'll one day completely transform it. It's important, however, that you keep your head up and consider other opportunities while you're on your startup journey. We had a great business; we just happened to stumble onto a better one.