Author Katrina Shanks, CEO Financial Advice NZ. Article originally published in stuff.co.nz.

OPINION: A Small Business Insight report by accounting firm Xero sums up perfectly the dilemma facing businesses in the current cost of living crisis: “Consumer confidence,” it said “is an important economic indicator for small businesses that mainly sell to households, because ‘consumers’ is really just another word for your ‘customers’.”

The consumer confidence it was talking about was highlighted by an OECD Consumer Confidence Index report that revealed right now there are more consumers feeling negative about the future than are feeling positive.

And though there were signs confidence levels had started to improve in three of the countries surveyed, in New Zealand and the level was unchanged.

All of which is worrying for business.

You don’t have to look too far to find evidence of this.

A report last week by Stuff highlighted problems faced by two small businesses: one selling a range of keepsake wedding planners, journals, and baby books; the other was a fashion consultant/retailer.

One said being a small business owner had never been tougher as consumers had pulled back their spending, the other described it as a crisis.

Their business response to the trading conditions was exactly the same: to think outside the square to change the direction of their business.

The keepsake journals owner, whose sales had halved since the start of the year, began experimenting with a gold foil embossing machine she planning to use for a future range of notebooks, and within weeks launched a new personalised service.

Now two in every three buyers want this service, and though it’s losing money, she did it to separate herself from competitors and to build a relationship with customers. A long-term strategy.

The fashion consultant/retailer countered the slowdown in foot traffic in her store by turning to hosting styling events to increase sales, and by designing and producing her own fashion range. Sales increased as a result.

As she said, to survive “we need to be more proactive”.

One way for businesses to be more proactive to survive is to change what they do – in business parlance this is called pivoting.

To someone who has founded and built a business from an idea, changing can sound a bit scary, because it feels like they’re giving up on their vision and leaping into something they may not know much about. 

But if it’s well planned and done carefully, it can be the difference between failure and success – perhaps even success you may not have achieved using your original plan.

And like my two examples, it doesn’t necessarily have to be a radical pivot.

Most business owners will know when it’s time to re-evaluate where they are headed.

Perhaps sales are down and they’re not making enough money, the company isn’t growing, it’s losing market share to competitors, not all its products or services are generating a profit, staff are unhappy, and the industry has changed and it’s not attracting the customers it once did.

If this is you, and your business is struggling for whatever the reason, perhaps it’s time to re-think your strategy; to consider ditching some of those plans and dreams and try something new, or at least a variation of it.

As I said, it doesn’t necessarily have to be radical.

I’ve seen it described something like a cake shop deciding to add sandwiches to its offering, so all of a sudden you’re attracting not just customers having birthdays, but also those looking for lunch.

That’s a product pivot and it can be extremely effective.

Or maybe a service pivot suits you better, where you change from a physical store to an e-commerce website that includes free delivery with orders over a certain amount.

So, where to start?

First, identify the problem and what’s holding your business back.

Once you’ve done that, you’ll be better placed to find potential solutions.

Secondly, talk to your customers to make sure you’re delivering exactly what they want. If you’re not, consider changes that work for both of you.

Thirdly, look closely at what your competitors are doing and see if you can pick up an ideas or spot any points of difference.

It could be pricing, marketing, special package deals, or maybe there’s a gap you can fill. Go on the hunt for new product lines you could introduce to your local market.

It also always a good idea to make sure you’re up with latest trends and products. Perhaps join your industry association where you can get ideas from similar businesses from out of town.

Once you’ve decided on your pivot, it’s always a good idea to test it with experienced people you trust: another business, your accountant, a business adviser.

The worst thing you can do is make a change that has unintended consequences and means you could over-stretch and actually make things worse.

Once you’re ready, set realistic, even conservative, targets to help make sure you don’t get too far ahead of yourself. Your targets should be achievable.

Then stick to them and realise that big change will take time.

Remember, pivoting a business usually involves risk, so tread carefully and be patient.

The key is to pay attention to the parts of the business that are performing well while you bed in your changes.

And remain flexible.

Perhaps later you will want to re-look at the whole operation to see how it’s all fitting in together and meeting your targets. Being pro-active will empower you to take control in an economic environment which is out of your control.