A fintech's pivot from B2C to B2B (Part II)

Carey Ransom is a SaaS entrepreneur, executive, investor and advisor, and has started, grown and/or led 8 B2B and consumer SaaS companies during startup and growth phases. He is currently President of Operate and the Managing Director of BankTech Ventures, a newly launched strategic investment fund focused on compelling technologies for community banks, and founded and funded by leaders in the community bank ecosystem.

Welcome back to “Can Fintech Startups Navigate the Pivot from B2C to B2B.” In Part I,  I described what might be motivating the pivot and some key questions to consider. Now we’ll proceed in Part II with the assumption that enough answers have led to a pivot being a plausible idea. There will be a number of changes that the startup will need to make to successfully execute the pivot. Here we go!

1.     Plan for a transition of direct customers to a business customer or partner.

One way to begin this pivot is to offer direct consumer customers to a potential early partner or business customer. Assuming these customers have value, there is likely someone willing to give them a home. Here are some key things to remember:

a.     Don’t get caught in your sunk costs. You spent money, time and effort on these customers, so they are meaningful to you, but they’ll really only be valuable to someone else for their ongoing value. Know your numbers – revenue, margin, and cost to serve.

b.     If the numbers are decent, you can use them as a subsidy to offer to line up the first B2B customer or distribution partner. You’ll likely need that, as getting that first one is usually the hardest part, especially in financial services. You need to be prepared to give some value away in the short term.

c.     Along the lines of the first customer or partner, you may also want to consider providing a key product person to the first partner/customer as GM or business leader, if they need one. Their role may be more consistent this way anyway vs. the more dramatic role change they may have to undergo in your organization (to be discussed in Part III).

2.     Shift from a marketing organization to a business development partnership one.

If the business was successful in acquiring consumer customers, then you had a focus on marketing – offers, campaigns, funnels, conversions and activation; all of this might still be helpful in the future, but the pivot will require more complex business development and sales. Here are some things to consider:

A.    Your brand will largely fade into the background. Make sure the team understands and doesn’t fight that change. You now have to shift into the business of helping other businesses to succeed, and your efforts should be focused there.

B.    Some of your strong strategic and operational talent may still be good candidates to drive those business development conversations, and the best ones will act almost like re-founders of the company.

C.     Use the marketing experiences you had to assess the likely success potential of other partners and customers. Are they better at it than you? Can you help them succeed or do better? Where can your 2 groups collaborate to provide even better outcomes?

 3.     Know the key functions your customer will use to make your product successful and eliminate redundancy on your side. In any pivot, you should be changing the structure of your organization. One way to look at it is that your company plus your new customer or partner will equal a whole organization that resembles your prior one.

A.    You were just operating a “full-stack business” (such as all parts of a bank) and now you’ll want to eliminate every part you can and don’t need, especially if the partner or customer will do that work.

B.    The better you understand how your customer or partner will use you, the better you can redesign your organization to support and make them successful, which tends to look like complementary and supplementary capabilities, and not redundant ones.

C.     This change might be the hardest one, and requires adaptable people on your side, and more objective decision-making than most founders typically want to make about the new organizational design.

4.     Consider outsourcing and fractional staff during the pivot.

As part of a pivot, your fixed and variable costs will also change. Finding ways to help you identify and manage through those changes will save you time and money. A few thoughts:

A.    You’ll likely need to significantly change the team you have, and often it’s easier to use help that has less history and emotion about the company, and possibly more experience to offer ideas and best practices. If you can define the needed work and goals clearly, this might be a cleaner transition. I once hired a group of consultants, both full-time and fractional, to establish new roles in the beginning as I transitioned the business from one type to another.

B.    Eventually you can determine what the new organization will need to look like and you can plan and hire a team with a clearer sense of what’s needed. For me the consultants were more objective in evaluating the situation and getting new capabilities going, and then helped me identify what the new permanent team should probably be. It made both the transition and planning for the future organization cleaner and more time-efficient.

C.     Certain capabilities may be more predictable and scalable with outsourcing. You can generally get a better sense of market costs and service levels, and better determine if you should rent or own those functions. Default for most founders is to control and own capabilities, but you can’t do everything great, nor should that be the goal. Be best at the very core of your business and what makes you special. In a pivot you may be rediscovering what that is, or focusing more clearly on it for the first time, so being open to using others for what they do best might be a great decision. It will definitely provide great learning and solid benchmarks.

A pivot begins with many decisions and changes to make, so hopefully this list gets you going in the right direction. In Part III I’ll delve even deeper into the likely team, operating and cultural changes that will be required to be successful. For example, how will you assess if your team can identify what to do in their day-to-day work, and be successful doing it? Please come back for more!