How to finance a pivot to achieve business growth
To achieve business growth in the current economic climate you may need to pivot your business. But does the change require capital? We explore your options.
A lot of Australian businesses have been forced to make a business pivot amid the COVID-19 pandemic – from gin distilleries making hand sanitiser to fashion companies creating scrubs for healthcare workers, to name a few.
While it’s a viable option to keep your business afloat until the economy returns to normal, pivoting typically requires money. Finding additional capital to float a new business idea can be challenging, but it is possible. Here are a few strategies to consider.
When a brilliant idea strikes, it can be easy to throw yourself into a new project. But there’s a risk that any dramatic change could alienate your current customer base or even cause your staff to jump ship.
For Sylvain Mansotte, CEO of whistleblowing platform Whispli, pivoting his business by funding new offerings during the COVID-19 pandemic, was the right thing to do. But, in 2018, an opportunity to pivot Whispli sent him down a path that didn’t match his ethos.
“Three of our clients wanted us to build a product to disclose gifts and entertainment,” Mansotte explains. “We realised it could be the same type of platform as Whispli, just not anonymous.”
After three months working on a project that would have earned the business a hefty chunk of cash, Mansotte pulled the plug. “Whispli was a platform to help people in need – people who needed to speak up about their wellbeing, about fraud and corruption, and here we were building a product just to make money. I was so uncomfortable with it in the end that we stopped.”
Despite that, Mansotte is a big proponent for businesses pivoting, especially when the idea aligns with your business’s core values. When it comes to financing a good pivot, he has a few suggestions.
While not a viable strategy for all business owners, if you can stay out of debt when pivoting then you should try to.
“You may have already raised money from those investors before,” says Mansotte, “so if they still believe in what you are doing, it’s a good idea to reach out and say, ‘This pivot is going to earn us X amount of money in X months – do you want to chip in and get a bigger return on your investment?’”
One of the easiest ways to fund a pivot is to look at your company’s finances and find ways to trim the fat. That doesn’t always mean making staff redundant; Mansotte recommends taking a look at your outgoings and highlighting expenses you no longer need.
“You can save money by stopping subscriptions, reducing business trips, allowing people to work from home to save on overheads or not upgrading devices unnecessarily,” he says.
A small business loan from your lender is a quicker – and sometimes simpler – alternative for when your pivot needs to happen fast. At Westpac, for example, owners can borrow $20,000 or more to fund their business growth idea. Some lenders, like Westpac, have loans tailored to businesses owners weathering the pandemic.
Their COVID-19 Unsecured Business Loan is designed for eligible businesses with annual turnover less than $50m that have been impacted by the pandemic. The loan offers fixed or variable interest rates and a repayment deferral of up to six months with interest to be capitalised.
These are just a few ways to fund a business pivot to encourage business growth. A pivot aligned to your business’s values, and smart capital-raising, is key to surviving and thriving.
This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business. Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.