Studio Juaso | Knowing When to Pivot or Close Your Business: Key Factors for Making the Right Decision

Running a business is a journey of constant assessment, growth, and adaptation. While the goal is often to achieve lasting success, there are times when a business may need a shift in direction or even a complete shutdown. Recognizing these moments can be challenging, especially for young and creative entrepreneurs who are deeply invested in their vision. Here’s how to evaluate when it might be time to pivot or close your business, along with essential factors to consider in making that decision.

1. Monitor Your Profit Margins for Signs of Decline

Profit margins are one of the clearest indicators of a business’s health. When profits start to drop significantly—especially by 50% or more—it’s usually a signal that something isn’t working.

• Evaluate Revenue and Expenses: Regularly review both revenue and expenses to ensure your profit margins remain healthy. Declining profits can be a sign that customer interest is waning, costs are rising, or market conditions have shifted. Identifying the cause of reduced margins can help you decide if there’s a fixable issue or if a more significant change is needed.

• Look for Sustainable Profit Growth: Ideally, your business should show consistent growth or, at the very least, stable revenue. If profit margins have been declining for multiple quarters despite your best efforts, it may indicate that your business model needs a pivot or an overhaul.

• Consider Profitability as a Priority: Remember that business success ultimately depends on sustainable profitability. While temporary dips can happen, ongoing losses require decisive action. Sometimes, this may mean refocusing on high-margin products or services, adjusting your pricing strategy, or even closing down an unprofitable venture.

2. Set Milestones and Track Progress

Milestones serve as measurable goals for your business’s growth, such as reaching a certain revenue target, launching a new product, or expanding your customer base. When these milestones aren’t being met, it may be time to reassess your strategy.

• Establish Quarterly Milestones: Set specific milestones to assess progress every quarter. If you consistently miss these milestones, it’s a red flag that your current strategy may not be working. Take the time to review why these goals weren’t met and whether a pivot could help you achieve them.

• Analyze the Gaps in Reaching Milestones: If milestones aren’t met, analyze what went wrong. Are there issues with the product, marketing, or operational inefficiencies? Understanding the root causes can help you determine if a pivot or a complete business shift is necessary.

• Redefine Milestones if Needed: Sometimes, unmet milestones indicate that your goals were too ambitious or misaligned with market demand. Adjusting your targets or focusing on new milestones that better reflect current conditions may provide the direction your business needs.

3. Assess Your Network Growth and Market Presence

A growing network and expanding market presence are signs that your business is gaining traction. However, if your network remains stagnant or shrinks, it may be a sign that your current business model isn’t resonating.

• Evaluate Customer and Partner Engagement: Assess the growth of your customer base, partnerships, and industry connections. A lack of network expansion may suggest that your business isn’t meeting the needs of its audience. Consider whether your offerings or messaging should be adjusted to attract more interest.

• Observe Market Trends and Competitor Success: Pay attention to competitors in your industry. If others in your field are experiencing growth while your business remains stagnant, identify what they’re doing differently. Sometimes, this insight can reveal opportunities to pivot your approach and re-enter the market with a fresh perspective.

• Reevaluate Your Audience and Niche: Ensure that you’re operating in a space where there’s demand for your product or service. If the network isn’t growing, it may be worth shifting to a different target market or niche with more potential for growth. Moving into a “bigger pond” or a more receptive market may be necessary to realize your business’s potential.

4. Look for Signs of Progress, Growth, and Sustainability

When deciding whether to pivot or close a business, look for signs of forward momentum. Progress, growth, and sustainability are essential indicators of a healthy business. If these elements are lacking, it may be time to consider a new direction.

• Seek Consistent Growth: Consistent growth is a positive sign that a business is moving in the right direction. If growth has plateaued or declined, analyze why and determine if a pivot might help reignite progress. Look for emerging trends or customer needs that your business could adapt to meet.

• Ensure Long-Term Sustainability: A successful business isn’t only about short-term gains but also about building a sustainable model. Evaluate whether your current approach is one that can be sustained in the long term, both financially and operationally. Sustainability issues often signal a need for change.

• Be Ready to Scale Up or Down: Sometimes, growth and sustainability require adjusting the scale of your operations. You may need to expand resources if you’re in a small market, or conversely, streamline operations to focus on your core offerings. Finding the right scale can help your business thrive within its niche.

5. Recognize When You’re a “Big Fish in a Small Pond” or a “Small Fish in a Big Pond”

Sometimes, businesses reach a point where they outgrow their market or, conversely, struggle to make an impact in a crowded space. Knowing when to pivot or exit often depends on understanding your position within the market.

• Evaluate Market Saturation: If you’re finding it difficult to stand out in a highly competitive market, it may be because your business is a “small fish in a big pond.” Consider pivoting to a niche market where your offerings may be more valuable and unique.

• Identify if You’re a Big Fish in a Small Pond: If your business is excelling but seems to have reached its full potential within a limited market, it may be time to expand into a larger market. This might involve introducing new products or targeting a broader audience.

• Decide Whether to Grow or Refocus: Both scenarios require thoughtful consideration. If you’re a small fish, focus on differentiation to stand out in a big market. If you’re a big fish, look for ways to replicate your success in new markets while maintaining your core strengths.

6. Acknowledge When It’s Time for a Personal Shift

As a young or creative entrepreneur, it’s natural to feel attached to your business. However, your goals, values, and priorities can evolve over time, and sometimes this change means it’s time to let go.

• Assess Your Personal Investment: Running a business can be demanding, especially for young entrepreneurs or those in creative fields. If the business begins to detract from your personal well-being or no longer aligns with your values, it may be worth considering a change.

• Consider the Potential for Personal Growth in a New Direction: Sometimes, the skills, knowledge, and experiences gained from a business can serve as a stepping stone to new opportunities. If you feel you’ve reached the end of what this business can offer you personally or professionally, it might be time to explore a new path.

• Don’t Be Afraid to Evolve: Many successful entrepreneurs go through several iterations of businesses before finding the right fit. Recognize that change is part of the journey and that closing or pivoting your business can be a positive step forward.

Conclusion

Deciding to pivot or close a business is never easy, especially when you’ve invested time, effort, and passion into it. By monitoring profit margins, setting and evaluating milestones, assessing network growth, seeking progress and sustainability, understanding your market position, and acknowledging personal shifts, you can make a well-informed decision that aligns with your goals and future ambitions. Remember, success in business is not just about perseverance but also about knowing when to adapt, change direction, or even let go to make room for new opportunities.