Recently, I read a story about an owner of a $2M specialty vodka and gourmet tea company pivoting her business to sell hand sanitizers. This provides a good case for businesses to leverage existing capabilities to pivot into a new market. As many small businesses are exploring how to sustain their growth post COVID, I think we can all learn from this story and develop our own plan to strive for success.
Pre-pandemic, Vanessa Braxton, founder and CEO of Long Island based Black Mama Brands, was doing well selling artisan vodka and gourmet tea. With revenue at around $2M, she was planning to franchise the “Black Mama” brand of café concept to drive further growth. When the pandemic hit, Braxton wanted to do something to help the community. She decided to use her distillery and manufacturing facility to produce hand sanitizers. Within 2 weeks, she was selling 1000 bottles a day, with an 8 oz bottle of sanitizer retailing at $13.99. “The demand is not just high, it’s astronomical,” said Vanessa Braxton. While the pandemic posed a challenge for the café concept in the near term, Braxton has found a new product line to grow her business. With the hand sanitizer market growing dramatically in the next couple of years, the business has executed a promising pivot.
The COVID-19 pandemic has presented an existential crisis for many businesses and the need to pivot. The pre-pandemic assumptions for how people consume services have changed, social distancing efforts have been implemented, and working from home is the new norm. This sudden change of consumer behavior has impacted small businesses un-proportionally because they have less time and resources to respond. For many small businesses, the past 3 months were spent on figuring out how to obtain Paycheck Protection Program loans to keep the lights on in their offices and get their employees paid. Their only focus was survival.
Now, with most states lifting the lock-down orders, businesses need to think about how they can sustain a viable business beyond the pandemic. Sustaining business growth is always a tough game, with winners taking shares from losers. That was true even before the pandemic; the pandemic just made it harder.
In order to win, businesses need to develop a plan quickly.
Assess your current business model to determine its viability. Have the customer's needs changed? Is the demand increasing or decreasing? Do you need to change the way you serve the customers? Do you have the tools to serve the customers differently? To illustrate the points, let’s use the restaurant business as an example. Coming out of the pandemic, fewer customers will be eating at restaurants and take-out orders will increase. To serve take-out orders, restaurants cannot rely on the same menu items. So what does this mean for their profit margin? How are they going to adjust their operations to support that?
Assess your capabilities to see if there is a different market you can serve. What assets and skills do you have? What other things can you make from your existing assets? What customers would want to buy these things? What distribution channels do you have access to? In the case of Black Mama Brands, the company has a distillery and manufacturing facility. Since producing hand sanitizer requires alcohol and a manufacturing facility, expanding to hand sanitizer production is a good fit. Growing a new line of product will require selling to new types of customers. Black Mama Brands is learning to sell to government agencies and hospitals.
Ask for help as you work through these tough times. During this pandemic, many business owners are facing a lot of stress. It seems like the survival of the business and the livelihood of their employees all rest on their shoulders and it could feel overwhelming. Don’t be afraid to ask for help. Try to reach out to mentors, advisors, and board of directors. You can also engage in external consultants. Engage help to assess your opportunities objectively and develop a course of action.
It is a challenging time for many small business owners. But like Albert Einstein said, “In the midst of every crisis, lies great opportunity”. Great opportunities are waiting for the business owners who will use this time to reassess their business and pivot successfully.
Written by Jackie Luo, Partner, TCV Partners