Changing Business Direction – Four Steps to Consider as you Chart a New Course
Changing
the direction of your business - including altering your product or service
offering, selling to a new market, or opting for new distribution channels - is
no mean feat and requires significant planning and organizational buy in.
As
I look around my local small business community, it's very hard to find one
example of a business that has changed direction radically and achieved success
in the process. Many tweak their business models or add new services to stay
competitive and profitable. But few undergo a complete re-brand and
re-positioning in one fell swoop and succeed at it.
The
risks of changing business direction are high. Small business owners who do so
often find themselves back in start-up mode, running the risk of incurring the
financial and emotional stress associated with starting up for the first time.
They also run the risk of confusing customers and employees.
Nevertheless,
if you have reached the point where diversification has not worked, or your
business model simply isn't working for you anymore, how do you start going
about a change of business direction?
Here
are some steps to consider as you redirect your business acumen and investments
into a new venture.
1. Understand what
Went Wrong in the First Place
Before
you embark on a change, step back and honestly assess the state of your current
business and the reasons for your need to change direction.
If
economic conditions prevailed, question why and how your competitors managed to
ride out the tough times. Get feedback from both your customers as well as your
employees - even your suppliers can give you insight that may be valuable.
You
can also get useful objective feedback from online community forums where
consumers objectively comment on local businesses (restaurants and food service
industries are commonly reviewed on discussion boards), or find out what is
being said about your business or competing businesses in the press or by
independent bloggers.
2. Research and Plan
Your New Venture
Since
changing business direction is high risk, prior planning and research are a
must. Take time to prepare a documented
business plan that outline your new direction, goals, and plans to achieve
them. Then share key points with your employees, and investors. Remember to
revisit and fine tune the plan regularly.
You
can find a host of templates and advice for developing a sound business plan
specifically for small business owners from Business.gov here as well as information on business
and consumer data and statistics
to help with market research.
3. Prepare and Engage your
Employees
Proper
planning also includes preparing your employees for a change. Remember,
employee morale is likely to suffer significantly from even the most minor of
business changes, and short of closing the business down, shifting its
direction and implementing sweeping changes could be counter-productive for all
involved.
Instead
try to change direction slowly. This may involve the gradual introduction of a
new service, or the launch of a new business name, followed by the
decommissioning of legacy offerings or distribution channels.
Above
all, keep your employees in the loop.
Oftentimes they are the eyes and ears of the business and if the new
venture is not going to plan, they may be the first to spot it.
4. Tackle the Legal
Ramifications of Changing your Business Direction
If you have structured your business as a sole
proprietorship, you will only need to worry about letting your state or local
government know about your new business name (if you choose to change it). This
involves filing and releasing your existing "doing business as" name (DBA) and
filing for an additional DBA. The government provides clear information about
this process here.
If
your company is structured as an LLC, corporation, or other formalized
business structure, changing the
direction of your business and running a new line of business through that
entity is a little more complex. Each
state has different laws that determine whether you will need to file any
additional information about your business changes other than the business name registration form (DBA).
In
some instances you may need to get a new Employer Identification Number (EIN).
Read more about business structures and the tax ramifications of operating or
changing a formalized entity here.
If
in doubt, check your article of organization and state's business registration
Web site to see what laws apply in your locality.
Lastly,
check whether any local
zoning laws will restrict your new
business direction and be sure to obtain the right licenses and permits to
operate legally. You can easily do this using Business.gov's "Permit Me" tool, which allows you to get a listing of federal,
state and local permits, licenses, and registrations you'll need to run a
business.
Additional Resources
- Local Business Assistance - There are many resources- including SCORE, local SBA
offices, and Small
Business Development
Centers - that offer free
counseling and training programs to help small businesses through all stages of
business ownership. Find help near you here.
- 9 Tips to Change
Business Direction
(www.ezinearticles.com) - Managing Your Exit
Strategy
- This Small Business Administration (SBA) guideto managing a small business exit strategy includes information on selling your
business, transferring ownership,
liquidation, filing bankruptcy, and shutting your business down.
