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Why startups must pivot, and how to avoid pivoting too far

(Entrepreneur News) Pivoting is part of startup life, whether major or minor, but some companies go too far with it – how avoid going too far with your own brand.





Pivoting is part of business, but…

Many companies, particularly startups, end up pivoting at some point, and it can be a distraction and done poorly can pull founders into chasing their tail trying to do what they think is best, only to be a wasted effort.

How do you know when your new company is pivoting too far, and how do you prevent this in the future? We tapped the wisdom of Dan Hogan, CEO of Nashville-based Medalogix, a predictive modeling platform for the healthcare industry.

“I know of precisely zero entrepreneurs who have built a company without pivoting,” Hogan asserts. “It’s because a living, breathing business is never exactly as it was imagined on the back of the napkin.”

In his own words below, Hogan offers advice for startups to help each from pivoting too far:

Even Twitter pivoted

Pivoting is an essential part of every successful business’s timeline. While some company founders completely about-face their on-paper idea after activating it, others make 45 or 90-degree conceptual adjustments after launching and throughout development.

One of the most legendary pivot examples is multi-billion dollar social media giant, Twitter. The company was originally called Odeo and operated as a resource for researching and downloading podcasts. As it turned out, Odeo was a great idea—so great that a little company called iTunes (you may have heard of it) was concurrently developing their own podcast marketplace.

Not interested in competing with iTunes, and wanting their own unmapped territory, company execs pivoted Odeo to Twitter, a social micro-blogging network that’s valued at more than $30 billion today.

Starbucks’ pivot was minor but relevant

While Twitter epitomizes a 180-degree swivel, Starbucks exemplifies a minor pivot. The coffeehouse company on every corner started as an espresso machine and coffee bean retailer.

The company’s director of marketing at the time (CEO currently) visited Europe, experienced their coffeehouse culture and was convinced that Starbucks could capitalize on European-style espresso beverages. He eventually bought Starbucks and shifted the original concept into what it is today.

Pivoting is the fuel for success

Pivots are necessary and ubiquitous because it’s impossible to account for all your intended industry’s variables during conceptual development. Only once you take the leap from planning to action the market will define for you aspects of your business that hadn’t occurred to you to consider and plan for.

Further, only through flexibility and adaptation can a company survive long term. Company execs must be open and ready to shift to stay relevant in today’s ever-changing market landscape.

Founding several businesses, most recently a healthcare technology company, I’ve experienced my fair share of major and minor pivots. Here’s what I’ve learned about successfully adjusting your business:

Embrace the shift: As I mentioned, many of the most successful companies sustained major pivots. Don’t let fear or ego get in the way of making a change.

And my own story

My current company actually started as a high-risk medication identification technology. Although from my healthcare experience and vantage point it was a good idea, when I presented the concept to a potential client, she laughed at me and told me it was a terrible idea.

While it was tough to hear, I ended up taking her advice and experience into consideration and pivoted to something she said would be valuable—a technology that used analytics to identify patients at risk of hospital readmission. It worked out. Although it was tough to admit my original idea was flawed, and even tougher to conceptualize a new business, I’m glad I did.

Pivot continually

Big pivots are stressful to a company. Your company can best endure a big transition in its early stages while it’s still lean and agile. Once a company matures, continual minor pivots are essential to ensure you’re responding to evolving consumer and industry trends.

Blockbuster failed to keep a pulse on consumers’ changing habits and as result, tanked. By failing to continually make minor pivots, the movie rental empire was too out of touch and too late to regroup and sustain a major pivot—other innovators like Netflix had already successfully answered the market’s new requests.

In my case, my company’s minor pivots have come in the form of new products. Our first product, which I mentioned earlier, was a readmission reduction predictive modeling technology. This was especially relevant to the healthcare industry in 2008 when we launched, because the Affordable Care Act prioritized readmission reduction.

Fast forward to 2013, care providers in our space were looking for new ways to better identify patients who would benefit from hospice care. As an answer to patients and our clients’ new needs, we expanded and developed a hospice identification predictive technology.

And now, what you must do

To make sure your company is evolving in line with your industry, communicate with thought leaders in your field and stay in tune with your industry’s regulatory and news coverage.

Run a democracy. When Odeo leaders decided they didn’t want to compete with iTunes, they asked their team to submit pivot ideas. From the group’s feedback, Twitter was born in two weeks.

Your team members read industry news, communicate with clients and understand gaps in your current product or service. You hired your team members because they’re smart, capable and innovative. Ask for their feedback and put it into action as you work to consistently evolve and improve your company.

The American Genius is news, insights, tools, and inspiration for business owners and professionals. AG condenses information on technology, business, social media, startups, economics and more, so you don’t have to.

Business Entrepreneur

Why receiving big funding doesn’t guarantee startup success

(BUSINESS ENTREPRENEUR) You finally got that big funding check that allows you to make your dreams come true, but most startups fail because they shoot for the moon.



funding box

The first thing every startup needs to get off the ground is funding. It’s crucial to have enough capital to cover equipment, inventory, and employee salaries, along with other basic expenses unique to the industry. Most startups cover these initial costs through business loans and capital from private investors.

Some business owners perceive getting funded as the first milestone toward success. While receiving capital is critical for success, being well-funded doesn’t guarantee success. Plenty of well-funded startups have failed, gone bankrupt, and all but disappeared.

How could so many well-funded startups possibly go under? The 90% failure rate for startups is due to a variety of factors including bad timing, no market, and most of all – mishandling of finances.

Here’s why receiving big capital doesn’t guarantee success.

Getting investment capital provides false hope

Getting funded can make you feel invincible and cause you to be too relaxed about spending money. It’s a powerful feeling to have plenty of money and know an investor believes in your business. Investors are smart; they wouldn’t throw money at a startup unless they had every reason to believe it will succeed, right? Not exactly.

Startups in big tech areas like Silicon Valley and San Francisco often have an easy time generating large amounts of capital from investors who can’t wait to throw money at the latest startup. Many investors ignore risk and throw their money at long-shot bets hoping to invest in the next Facebook or Instagram. The size of the pot is too mesmerizing not to take the risk.

These long-shot bets carry similar odds to winning a “Pick 6” bet in horse racing. The Pick 6 is one of the hardest bets to win because you have to pick the winning horses for six consecutive races. What if the top horse becomes injured before the sixth race? Investors who toss money at random startups have to pick a startup that will continue to meet all the right circumstances to become profitable long-term. Some of those circumstances are unpredictable.

No business owner wants to view their startup as a long-shot bet. However, the reality is that many startups are. You can’t gauge your potential for success based on how much funding you receive.

Having plenty of cash encourages premature scaling

When you’ve got the cash to scale your startup it seems like a waste not to dive in. Just one look around the internet reveals plenty of videos and articles encouraging entrepreneurs to scale their business. Advice online gives the impression that if you’re not scaling your business, you’re falling behind. However, scaling too soon can tank your startup.

Research conducted by Startup Genome found premature scaling to be the number one cause of startup failure. Nathan Furr from explains this finding and what it means for businesses. Premature scaling is defined as “spending money beyond the essentials on growing the business (e.g., hiring sales personnel, expensive marketing, perfecting the product, leasing offices, etc.) before nailing the product/market fit.” Furr says any business is susceptible to premature scaling – not just startups.

The problem is that premature scaling depletes your cash reserves more quickly. This leaves you with less cash to fix mistakes and readjust as you go along. Failure is what happens when you don’t have the necessary cash to fix mistakes and move toward success.

How to make the most of your funding and increase your odds of success

To increase the odds of developing a long-term successful startup, here’s what you can do:

Save as much money as possible. For instance, you don’t need a giant office with expensive furniture right away. Work from home and hire a remote team until an office is absolutely necessary.

Make sure the cost of acquiring each customer makes sense. Know how much money you’re spending to acquire each customer. Track all marketing efforts and eliminate the avenues that don’t generate paying, loyal customers. If the cost to acquire a customer is more than what they spend with your company, revisit your marketing strategy.

Aim for an order-of-magnitude improvement with your innovation. Skip Prichard advises startups to strive for a 10x increase in the value of whatever innovation is being provided to the world. For example, if your company is offering a lower price for a greater value, aim to increase the value 10x. Attract the early adopters who want big improvements and they will validate you.

Money is a tool – use it wisely

Celebrate when you get your funding, but keep that money in the bank for necessary expenses. Money is a tool that doesn’t guarantee success, but if you budget wisely, you’ll have a better chance at beating the startup odds.

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Business Entrepreneur

‘Small’ business was once a stigma, but is now a growing point of pride

(BUSINESS ENTREPRENEUR) Small businesses make up the majority of companies, employers, and money makers of the American economy, that’s something to be proud of.



American small business

Prior to the Industrial Revolution, all businesses were small businesses. Independent craftsmen served communities with vital services. Small merchants opened shops to provide the community with goods. Lawyers, doctors, and other professionals hung out a shingle to offer their services to neighbors. Small businesses were the norm. Some of the most beloved American companies started out local. John Deere, Harley Davidson, and King Arthur Flour, all got their start as small businesses.

Business changes led to a attitude change

It wasn’t until manufacturing allowed businesses to scale and produce more efficiently that the idea of big business became more important. Post-World War II, the idea of a small business became derogatory. It was the age of big government. Media was growing. Everyone wanted to be on top. Small businesses took a back seat as people moved from rural to urban communities. Small business growth plateaued for a number of years in the mid-20th century. Fortunately, the stigma of small business is fading.

Small businesses are the backbone of the economy

According to the Small Business & Entrepreneurship Council, the “American business is overwhelmingly small business.” In 2016, 99.7% of firms in American had fewer than 500 workers. Firms with 20 workers or less accounted for 89.0% of the 5.6 million employer firms. The SBE also reports that “Small businesses accounted for 61.8% of net new jobs from the first quarter of 1993 until the third quarter of 2016.” Small businesses account for a huge portion of innovation and growth in today’s economy.

Modern consumers support small businesses

According to a Guidant Financial survey, the most common reason for opening a small business is to be your own boss. Small business owners are also dissatisfied with corporate America. Consumers also want to support small businesses. SCORE reports that 91% of Americans patronize a small business at least once a week. Almost half of Americans (47%) frequent small businesses 2 to 4 times a week.

Be proud of small business status

Small businesses are the innovators of tomorrow. Your neighbors want to support small businesses, knowing that their tax dollars stay in the community, and that they’re creating opportunities within their own city. Your small business status isn’t a slight. It’s a source of pride in today’s economy. Celebrate the fact that you’ve stepped out on your own in uncertain times. Celebrate the dirt under your fingernails, literally, or figuratively, that made you take a risk to do what mattered to you.

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Business Entrepreneur

3 types of clients you should fire as a freelancer (without feeling guilty)

(BUSINESS ENTREPRENEUR) Being a freelancer, it can feel like a luxury to fire a client, especially in 2020. But there’s a few clear signs they’re not worth your time.



Freelancer woman with her head down on the laptop in front of her.

Freelancers often bend over backward to accommodate clients, many times to the detriment to the freelancer. Bad clients are toxic. It’s never easy to say “you’re fired” to anyone, but as a freelancer, sometimes, you need to weigh the cash value of a client against your time, mental health, and sleepless nights. Here are some reasons you can fire a client without feeling guilty.

Clients who aren’t paying on time

Clients who don’t pay or avoid you when there’s a problem need to go. You waste a lot of mental energy chasing down payments and juggling your bills. I know it can look like a bird in the hand kind of situation, but if your client isn’t paying your bill, the bird isn’t really in your hand. My best clients have been with me for over five years. Both consistently meet the payment schedule. Not to say there haven’t been glitches, but they’ve always taken the initiative to explain and got it fixed right away.

Clients who become more demanding without offering more payment

There are always jobs that need to be done right away or need more work. A client who puts demands on your time without compensation is hurting you. When you say yes to one thing, a short deadline, you’re putting other work off. You may be able to deliver to other clients within their deadline, but if you’re tired and grumpy, will it be your best work? High maintenance clients who want to micro-manage are another type of client you may want to kick to the curb. At the very least, raise your rates to account for the extra time it takes to mentally deal with them.

Clients who don’t act professionally

You need to set good boundaries with clients who may be your friends. It’s hard to find that line, but if you don’t set up good professional rules at the onset, you’re going to find yourself doing more for a client out of “friendship.” You’ll become resentful because you’re doing favors and not getting anything in return. Clients who violate contracts aren’t any better, regardless of any outside relationship.

It isn’t easy to fire a client. It’s your paycheck on the line. If you’ve got a bad client, think about the hours you waste worrying about them. Believe me, they are not spending the same energy. Use your energy to find better clients who appreciate you and your work.

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