It has been a difficult few years for many businesses, some have not been able to sustain and have closed their doors, but many have been able to tread water and make it through. Of these most find themselves in precarious situations of a lack of adequate cash flow, lost customers or market share or operating expenses that are inappropriately high for the current level of business.
While it may be natural to continue along and hope for the best, the perceptive CEO will recognize the need to reassess, retrench and move forward from a position of strength. The following steps are critical to a successful turnaround/restructuring.
1 – Recognizing the need. The first, and in some ways, most important step towards solving a problem is realizing that you have one, how urgent it is, what is causing it and the need to face up to it.
2 – Being around to do it. This essentially means that to have a future, you have to survive the immediate cash crisis and quickly get a strong grip on what your business’s finances are and what these are telling you about its performance, the reasons for any problems, and possible solutions.
3 – Deciding what to do. This involves taking an objective look at what you want to do with your business, its industry, markets, products, competitive strengths and weaknesses, and coming up with a broad picture of the key issues and your proposed strategy and priorities long and short term. This then needs to be used to generate the detailed action plans for who is going to do what, when, and with what projected results.
Often you will need to do ‘diagnostic work’, drilling down into your performance in certain cases to get a better understanding of the cause of underperformance and its remedy.
Marketing plans and forecasts need to be prepared and you need to organize (or perhaps reorganize) your management team so as to achieve the planned milestones, budgets and objectives.
4 – Doing it. You need to lock in the support you need from your suppliers, customers, employees, the bank (‘stakeholders’), to ensure that the plan can happen and ensure the required financing facilities are in place.
Manage the people: obviously yourself and your team, but also the stakeholders, by keeping them involved and informed in the process as it unfolds and develops.
Manage the process: constantly identify and capture the value of the next ‘quick win’ so that the plan shows positive results all the way through. Monitor progress and take steps to identify and deal with any slippages but also keep an eye on the overall realism of the plan. Circumstances will change over time, and if they do, your plan also has to change. But if it does, ensure that you communicate this change and the reasons for it to the stakeholders.
Manage the business: don’t forget to keep an eye on the numbers and ensure that the process of change does not distract from the need to continue to manage the day-to-day business as well, if not better, than before.
Manage the turnaround risks: keep an eye on the risks that you may be running while operating a business in difficulty and ensure that you cover yourself against potential problems.
5 – Keep on succeeding. Once your business is heading back in the right direction, don’t stop there. Use the skills and approaches you have adapted to return it to being a successful business to ensure that it continues to prosper and keep on using the business’s numbers to assess its performance and keep the strategy and business development plan under regular review.
Louis Partenza is a business turnaround consultant and partner of Activate Group Inc, based in Miami, Florida. His firm works with companies to deliver transformational management and business processes to their executive leadership. To learn more about business turnaround consulting through AGI, please contact Lou at [phone link=”true”] or email him.