When it comes to corporate turnarounds, time is of the essence. Act quickly and you may be able to staunch the bleeding and turn things around. Move too slowly and the companymay run out of cash or lose key talent.
So what are some telltale signs that a business is in distress?
- Sales decrease is more than a “trend” or the industry average.
- Accounts Payable is reaching Accounts Receivable. The strength of the balance sheet is deteriorating.
- Customer satisfaction and quality are decreasing.
- Morale of the team is diminishing. Many times, the mid-level managers see the writing on the wall before the owners.
- Lost focus on core business. The team has developed a “fire-fighting” mentality. There is no meaningful strategic plan in place.
- Debt level and line of credit are a daily concern.
If these signs areprevalentinyour organization, be proactive and start assessing the health of your business. For instance, you need to:
Make a plan.
Write a formal business plan that addresses sales/marketing, financials, and operational issues. Rarely do companies who prepare and maintain plans on an annual basis get into trouble.
The plan should not be written in a vacuum. Work with your advisors to ensure you are making valid assumptions. Engage employees, customers, vendors, banks, attorneys, and accountants so they can see where they fit in, how they can help, and share suggestions based on their expertise that will help your company succeed. These plans are the foundation for your success. If you believe that you cannot execute the necessary plans in a timely manner, then seek outside assistance.
Track, monitor, control.
You cannot change if you don’t know what’s going on within your business. So on a daily, weekly and monthly basis, track, monitor, and control the key performance statistics that are required to alter the direction of the company for the better. Be sure to track the right controls; otherwise, the information and process is useless. Also,ensure that management is willing and able to make rapid changes as issues arise.
Make change part of your business model.
Change is a vital component of a business’s success. However, a business in a turnaround situation requires change on steroids. Empower the team to change the processes.
On a regular basis (ideally monthly), keep stakeholders formerly apprised of all developments; that means “the good, the bad, and the ugly.” Nobody wants surprises and candor and credibility can go a long way toward improving difficult situations.
While these actions will play a crucial role in the turnaround, you’ll still need help from an outside expert. Dealing with distressed entities requires unique skills to deliver rapid and tangible results. Similar to an ER doctor, an experienced turnaround professional will be able to quickly check the vitals of an organization and apply sound turnaround strategies and drive the necessary execution of the plans.