How to Pivot to a Business Model with a Smaller Staff

Successful managers are willing to make changes, in order to respond to business conditions. During challenging times, you may conclude that a business pivot is the best option to move forward. This discussion defines a business pivot, walks readers through a pivot example, and explains why Stampli’s accounts payable (AP) automation solution is a valuable tool for a successful pivot.

Defining a Business Pivot

TMS explains that: “Pivoting a business means to make a shift or turn in a new direction.” A pivot is a strategic decision that may impact the target customer, market segment, pricing strategy, or distribution channel. Here are some well-known businesses and how they pivoted:

• Netflix: CEO Reed Hastings “describes the journey from the company’s roots as an online DVD rental business in 1997 to its launch of a video streaming service in 2007, explaining that a culture valuing innovation over efficiency, context over controls and people over process has been critical to Netflix’s outsized performance over the years.”

• PayPal: In this 2012 article, Reid Hoffman explains that “PayPal pivoted not once, not twice, but at least five times before finding the innovative business model that led to its success.”

• Instagram: A 2021 article explains that the business is pivoting toward an emphasis on video and away from photos, due to changing customer preferences.

In recent years, the coronavirus pandemic forced thousands of companies to pivot to new business models. Firms in many industries found ways to serve customers remotely, including restaurants that moved from in-person dining to delivery. In each case, company leadership recognized that the current business model wasn’t working, and pivoted to a new way of doing business. 

Addressing Business Challenges

In late 2022, businesses face a number of challenges, including higher inflation, supply chain disruptions, strained vendor relationships, and production bottlenecks. To succeed during an economic slowdown, many companies are pivoting to a more sustainable business model.

The transition from one business model to another can be painful, particularly if you have to reduce your workforce. Layoffs may cause anxiety for the employees who remain, and productivity can decline. A pivot may cause vendors and customers to question whether or not your business will survive moving forward.

However, the long-term benefits of the pivot can far outweigh the short-term difficulties of a transition. What’s needed is a detailed plan that defines why the pivot is necessary, how changes will be implemented, and how your firm will be better positioned to succeed. In The CFO’s Playbook for the 2023 Economy webinar, three veteran CFOs explain the pros and cons of business pivots.

A Business Pivot Example

Hillside Restaurants operates ten locations in metro Denver, and each location offers an extensive menu of items. During the pandemic, Hillside closed its dining rooms and developed a large carryout business. The leases on eight of Hillside’s ten locations are ending in two months, and the new leases are expected to be far more expensive.  

Management has worked to create a smooth process to place orders online, and many Hillside customers have continued to order using carryout. Hillside marketing efforts have sharply increased traffic to the website, and the company markets using an email newsletter and social media posts.

How the company will pivot

Sally, the owner of Hillside, meets with her CPA, the company attorney, and a number of other advisors regarding a business pivot. If Hillside continues to operate in-person dining locations, lease expenses will be much higher, and the business is also paying higher wages to staff the restaurants. 

Sally decides to shift the majority of Hillside’s sales to a carryout and delivery business. She does not renew the eight restaurant leases and instead finds smaller spaces to operate kitchens. Hillside will keep in-person dining open at the other two locations until the end of each lease.

Hillside will take orders by phone or online, and prepare meals at four kitchen locations in Denver. Orders will be prepared at the location closest to the customer, and the business will also offer food delivery.

Change in financials

Here is the financial impact of the pivot:

• Lease payments: The lease payments on the smaller kitchen spaces will be much lower than the in-person dining locations. 

• Payroll: Hillside will not need servers and other dining room employees, but the firm will retain cooks and staff to process orders, serve carryout customers, and to make deliveries. Total payroll will decline.

• IT costs: The business will increase spending to maintain the website, and to install a more powerful online ordering and payment processing system.

The management team believes that loyal customers will continue to order from Hillside, and that the delivery business can expand. In order to generate profits over time, Sally’s business must grow sales at a much faster rate than operating costs.

Managing operating costs

The last component of Hillside’s business pivot is to control operating costs, those costs that are incurred to complete routine tasks. Embracing technology allows businesses to complete more tasks in less time, and with fewer errors. Technology has the biggest impact on those tasks that require the most time and effort, including payroll processing, inventory management, and accounts payable.

Stampli’s end-to-end AP platform gives you full control and visibility over all your corporate spending from cards to invoices to payments – all in one place.

Pivot the Business Using Stampli

Take control over invoice and bill processing with smart, intuitive, and actionable AP Automation. Here are some of Stampli’s cutting-edge benefits:

• Stampli brings together AP communications, documentation and payments in one place. 

• By centering communications on top of the invoice itself, AP departments collaborate and communicate better with approvers, vendors and other stakeholders, allowing approval to happen 5X faster.

• Stampli’s artificial intelligence learns an organization’s unique patterns to simplify GL coding, automate approval, and to identify duplicate invoices.

Use Stampli to control the cost of AP, process payables in less time, and to scale your operation. Add Stampli to your technology stack, in order to minimize operational costs during a business pivot.