Business Model

My Company's Business Model Was Holding Us Back From Bigger Opportunities, So We Evolved. Here's What We Learned.

Even though we had initial success, we knew we had to make some changes to win in the long-term.
My Company's Business Model Was Holding Us Back From Bigger Opportunities, So We Evolved. Here's What We Learned.
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Guest Writer
Co-Founder and Head of Marketing at Haven
6 min read
Opinions expressed by Entrepreneur contributors are their own.

The early days of starting a company are all about finding the right product-market fit. Sometimes you find a market, build a great product and then come to realize that although early growth numbers look great, your business model needs to evolve in order to give you the best possible positioning for the long haul. I was previously a VC and am now part of the founding team at Haven, so I know how hard it can be hard to recognize this no matter which side of the table you're on.

Related: After Realizing Customers Didn't Share Her Vision, an Entrepreneur Makes a Big Change -- And Sales Grew More Than $3 Million

Evolving is a little bit different from pivoting; pivoting usually means you're drastically changing plans because you're running low on money or early traction isn't great, so you need to try something else. Evolving a model is sometimes more difficult, because you have to consciously decide to walk away from the path that led to early success to take a bigger gamble. Here are a few tips:

1. Read the writing on the wall in your industry -- know where your market is going.

Industries are constantly changing. The drivers may vary -- a major shift can happen in response to new technologies, geopolitical issues, corporate events and even environmental changes. If you're building a company, it's critical to keep your finger on the pulse of these drivers. Even founders who do thorough market research prior to starting a company or raising a round tend to pay less attention to the broader industry once they're building a product; this is understandable, but it's still a mistake. If your sales cycle is on the longer side, particularly as a B2B company, you may find that purchase-influencing factors have shifted before you get to that close.

The best solution is to have a product road map that has both "short-term" offerings that provide immediate value, and also a long-term vision that adapts and evolves with your industry. Haven spent its first year focused on one product: a marketplace for shippers of all sizes to book freight using real-time market prices from large carriers. We grew incredibly quickly because our offering solved a real pain point for very large companies, and the early product enabled us to capture data on customer needs. But, by watching usage patterns over time, and diligently monitoring industry news, we noticed that the supply demand imbalances that had made our marketplace so appealing were highly dependent on macroeconomic forces. And so, we evolved.

Related: When This Company Stopped Selling Directly, Its Customer Base Increased by 700 Percent

2. You may need to break up with early customers.

Your market may change, and so may your buyer. About a year in, we began to realize that our booking marketplace was a feature -- a feature in a larger offering, solving a much bigger problem. The real value came in the time we saved customers by automating workflows, coordinating teams and helping them unlock their data. Haven evolved into a transportation management system -- a CRM for logistics. Building that offering changed our positioning in the market; it made us less of a fit for some of our early small business customers, who didn't have lots of shipments to manage.

Unfortunately, the customer who buys your initial product offering may not be able to afford -- or have the authority to adopt -- a more robust offering. We ultimately made the hard decision to stop servicing customers who couldn't make the transition to the new SaaS platform. Focusing on the market you want, not just the market you have, is key. Your customers should share your vision; if you work with them to deliver a great experience, they'll be your biggest champions. Sometimes that requires gently releasing other customers that are no longer a fit.

3. Manage your investors and sell the long-term vision.

It's a common saying that seed stage investors back teams, not products. When I was a VC, the team was the biggest single factor when we were deciding whether or not to invest. That said, investors also do have an opinion on the product; it has to fit their mental model of where the world is headed in order for it to resonate. And they want to see growth.

Related: If Your First Idea Doesn't Work, Change It

For a founder, this means that if you're seeing high engagement in an early business model, it can often be difficult to convince your board that the best decision is to walk away from that model simply because you've come to hold a different conviction about the future. It's important to keep the channels of communication open with your investors, particularly if you want to build something that's a bit different from what they originally backed. If you make a decision to shut down an existing line of business, try to have a reassuring amount of data that will get them excited about your new direction.

4. Build the team that fits your vision, even if your vision changes.

Team turnover is hard, but sometimes necessary. Your early team shapes your culture. When you decide to sunset a product or feature, it won't be a pleasant experience for everyone. Some may not align with the new vision. Others may find their roles have shifted as the target customer changes. This is particularly true in sales, marketing and business development jobs. Employee turnover is costly, but waiting to make changes is even more expensive. Clear communication is critical, as is communicating the type of team the new product requires. Creating a shared vision of success is critical to ensuring that the focus shift doesn't impact your company culture.

Evolving a business model can be a challenge, but it's worth it when you've uncovered an even bigger opportunity. To help you, your team and stakeholders through the process, keep reminding yourself that the short-term pain is worth the long-term gain.

Related Video: How to Figure Out Job Titles That Evolve With Your Business

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