Transitions can be tough, but waiting too long to make them can be catastrophic.Twitter
If your industry has been shifting or you’re uncertain how your company can grow, don’t assume you’ve failed. You may have simply outgrown that industry and need to pursue another, or you may need to change your business model.
Long-term success is dependent on your ability to recognize problems early and make changes before hard times set in.
Recognizing When It’s Time to Go
When a party’s winding down, the cool kids don’t stick around, desperately trying to keep things going—they take the party somewhere else. If your industry is dwindling or you’ve maxed out your time there, you need to find another place to party. Here are three areas to watch for decline:
1.Your Customer Base
Look out for financial disruption. I used to deal with cell phone retailers that earned high commissions from carriers. When commissions began to drop, we knew our customers’ pain would soon become our pain if we didn’t adjust. We found a fresh start with security software that reached a broader customer base across various industries.
It’s difficult to accurately predict the costs of customer acquisition and maintenance before launching. But once you’re live, measurements become straightforward. Revisit your numbers. If you see that servicing an industry isn’t profitable, it’s time to consider other options.
Morale is a great litmus test for how well a business is doing. In my previous company, we dealt with a lot of small business owners who took out their frustrations on our customer service team. Their frustrations were rooted in problems their respective businesses were suffering. That created stress for our staff, and employee morale and retention became a concern. If your once-content team is becoming unhappy, determine whether it’s a result of problems with true costs or your customer base.
Getting a Fresh Start
If you’ve outgrown your industry, it’s only a matter of time before you’re forced to call it quits. But entering a new industry is the same as starting a new business: The possibility of failure is high, and you have to get investors and team members on board with a new vision. You might as well prepare for the impending storm and come out ahead. But remember that you’re not the first to switch industries, so it can be done.
The folks behind Twitter began hosting a forum for finding and distributing podcasts, then iTunes filled that gap. The company’s founders quickly changed direction. They tried a number of ideas, and eventually the messaging platform we know today took off. The original business model probably could have survived, but the company would have been mediocre at best.
Nintendo started as a playing card manufacturer in the late 18th century in Japan, but it evolved with the times to become a household name for video games in the late ’80s.
The factor that makes this transition different from starting your first company is you. You will take your experiences into your new endeavor. Personal growth, lessons learned, and the networking connections you’ve gained will help you create more successful ventures.
Making the Call
Once you’ve decided that you’re ready to make the switch, these steps can help you find your new focus and minimize risk:
- Focus on a business problem you think you can solve.
- Identify your resources (people, intellectual property, personal skills, etc.), and figure out how you can utilize them to solve the problem.
- Launch your new venture without destroying your current one if you can. This will provide a safety net in case you need more time or the new venture doesn’t work out.
If you’re seeing red flags, don’t wait too long to change or expand industries. When there are storm clouds on the horizon, you want to invest in new opportunities and diversify while times are still good so you can weather the coming storm.
Do you think switching industries is an effective business strategy? If so, what other tips and tricks can entrepreneurs use when making the transition?
Published: July 2, 2014