68 - 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.

Read the full article here: SBA

All the best!

Patty Block