Is This Situation Familiar to You?
Many companies over their lifetime of their business cycle will reach a situation where their business runs into trouble. It could be as a result of a severe economic downturn (as experienced by many companies from 2008-2012) or it could be other causes such as increased competition, cash flow crisis, loss of key management personnel, operating an outdated business model or something as grass rooted as a lack of demand for your product or service which may have become dated. Whatever the reason in most cases it is fair to say that the business situation is unlikely to improve unless corrective action is taken. We have encountered many situations where business owners are highly competent professionals, very knowledgeable in their business, very business savvy and more than capable of running a successful company. Yet many still find themselves in a situation where the business is struggling. What’s needed is a step by step process of action plans designed to remedy the problems faced by the business and to get the company back on track.
Step 1 – Take a cold hard look at the business & identify the problems
Take a look at the situation from an independent perspective as if you were evaluating someone else’s business. What kind of picture do you see? Are the problems short term or have they been brewing for a long period of time? Have problems been caught early or have they been allowed to fester over a long period of time? (In most cases the answer is the latter). Are the issues faced Internal or external or both? How much of the problems lie with the company itself and how much is environmental? What areas can the company change and how much is tied in with the economy? Is the strategic focus the company is following the right path going forward? Does the company have the right people in place to drive the business forward and are they working in the right ways? Are the company’s products/services innovative or outdated? Is the business profitable? These are all starting points for the evaluation process and some answers can be difficulty for management to take. However a full and honest evaluation is critical if forward progress is to be made.
Step 2 – Decide if you can tackle the restructure yourself or do you need some help
Is management capable of turning things around internally or do they need some external assistance? It can be difficult for head strong business owners to admit there is a problem yet alone ask for help. Sometimes seeking help is the best possible decision that can be made for the well-being of the business. An external professional (be they a consultant, a mentor or another business owner) can give a different perspective on what needs to change and how best to make this happen. As they are detached from the day to day running of the business they can sometimes see the issues in a clearer context. In some instances where the problems are more cosmetic than structural the business owner may be in a position to sort things out internally. In most cases though some form of external support can be very advantageous, particularly if the business is at a very low ebb. One key question is how does the company get back the spark it once had? Working towards that goal will determine what supports are required.
Step 3 – Make a decision on what restructures need to take place and stick with it!
One of the great benefits of a small business is that it is inherently more flexible than larger organisations and change can take place very quickly if the will is there. This is a real positive for any small business as improvements can be made fairly quickly. Past mistakes and missed opportunities must be analysed in order to decide on the best course of action for the future. However in deciding what went wrong in the past it is important that blame doesn’t become a smothering negativity for the team. List out all of the areas and changes that have to be made. Then group them into categories for action. Some will be short term areas that can be tackled quickly while others will be ongoing. Make timelines for the most critical areas to tackle first. When your finished it might be a long list but broken down you will start to feel that the problems have been isolated and are manageable. Now it’s time to put some structure on things.
Step 4 – Draft a turnaround plan that outlines the actions and goals of the restructuring
Effective planning is never the wrong the approach to take and putting structures, timelines and resources in place will greatly increase the degree to which turnaround strategies work. Normally a 100 day turnaround plan is devised in order to tackle the most time sensitive areas first. Start with the priorities and work backwards. One important consideration is to consider the immediate short term wins the company can get under their belts? Some wins early on can have a huge positive impact on morale and greatly help smooth the transition. Finance is always an issue to some degree so build into the plan some short term cash flow goals or money management areas that can be tackled for immediate impact? Once the plans have been devised they need to be resourced. Who is going to do what and when? Communication is critical if there are a number of people working together on a project as if one area breaks down it can have a negative impact on the work plan of another. Be precise with your planning as no detail is too small. The more detailed the plans the greater the chances of full implementation.
Step 5 – Implement the Change Programme
Getting your hands dirty and down to business!
- The first thing to keep in mind are that any changes that need to be made must be done quickly and decisively. Make the tough decisions up front and take the pain now to avoid continued pain down the line. Watering down an action plan because it’s a tough decision will have a negative impact all round. Tackle the tough decisions head on and lead by example. You will be respected for it in the long run. Don’t delay, stall or play safe.
- Secondly keep in mind that solutions being out forward must be different than what was been done in the past. Be conscious of what has been tried previously. Don’t set the business up for failure by repeating past mistakes. A new approach is needed and even if similar issues are been tackled, do it differently this time. Staff will see the changes and will be more likely to row in behind you if they know it’s not just the same old strategies.
- The third consideration when making changes relates to staff. Most people don’t like change and may react negatively no matter its purpose or the positive benefits it will bring. Some companies have been weeks away from closing their doors and still employees have refused to change their ways or even accept that things need to change at all. Know that some resistance is likely. Have answers prepared and ready. If you can portray a level of confidence in the outcome staff will pick up on your positivity. Fear is normally quelled by knowledge.
- Fourthly keep specific on actions and ensure they are followed through. There is nothing more demotivating than talk with no action. Carry out your tasks in a timely and efficient manner and this will put the onus on others to do the same. Success breed success.
Step 6 – Evaluate on an Ongoing Basis
Once chance starts to happen and the business gets its momentum back it is critical to keep setting regular tasks and evaluating success on a weekly and monthly basis. Don’t take your foot off the accelerator once things start to pick up as that’s a sure fire way to derail the process. Keep asking the right questions and keep on top of key areas. At this stage start thinking about future direction. Will the business require a new direction after 6 months from now? Does the company need to adapt a different business model for 1 years’ time (low cost, premium, full range, etc)? In many cases more than one change cycle is required to get the business to its ultimate goal. Often one turnaround programme gets the business back to a healthy stage after 6-9 months and then another strategy is required to push the business on beyond merely surviving and into thriving.
Step 7 – Don’t allow the Same Issues to Creep Back into the Company in the Future
We all have short term memories and it can be easy to creep back to old habits and patterns. It can happen so slowly that it is hardly recognised until history starts to repeat itself and the business finds itself in trouble again. Learn from mistakes made in the past as however hard it is to make the turnaround work the first time around, it is infinitely harder to have to pick yourself up and go again a second time. This can be soul destroying and means all of the good work done in the past has counted for nothing . Don’t let this happen to you. Stay strong and focused on new goals. Keep in touch with your advisors as they will keep you on your toes. Set up a monthly evaluation session after the turnaround programme has concluded. Keep focused on what’s ahead and you will be fine!
Real Life Case Study – Turnaround success story from the private educational sector
Avid Partners have been working closely with a private college to help them re-ignite their business, address the problems holding back the company and put in place a plan of action to get the business growing again. The first step was to identify the underlining issues causing difficulties. In this case they were identified as: cash flow inefficiencies, high levels of bad debts, poor internal communication in the company, lack of focus on core products, high levels of staff turnover and individual rather than a team focus. Each area was addressed in detail with procedures put in place to tackle each problem. New resources were allocated to deal with the key financial areas and accountability was increased to make each department responsible for their area.
Three key Avid Partners personnel are involved in the project and occupy high management positions within the company for the duration of the turnaround plan. 4 months into the project and sales are up, bad debts have been drastically reduced and cash flow systems have been improved significantly. There is now a greater sense of achievement and purpose to the company. The feel good factor has been restored. The next stage involves bringing in additional staffing resources of highly skilled specialists to further improve the business and increase sales through strategic partnerships, creating an international focus and a back to basics campaign to start doing the right things more often. This involves getting the phones ringing and taking registrations for the courses. By making the tough decisions up front positive change has taken place and the business is in line for its most profitable year to date as a result.
Contact Avid Partners Today to See How We Can Help You Turnaround Your Business. Call us on 01 4286900. email@example.com