Save Your Troubled Company Now
I am absolutely, positively certain that our economy will rebound and that your will survive. We’ve been through worse and we’ll get through this. Our choice now is to survive the storm and stay healthy for the sunny days which lay ahead.
Over the years I have returned several companies to profitability and have learned a few tricks along the way. The patterns are always the same but these days the economy is certainly giving us stiffer headwinds.
You probably have all the necessary components for survival already in your possession. Likely you have customers, decent products, prior (hopefully recent) profitability, prior and hopefully recent positive cashflow. That’s all we need.
So here are the simple steps;
1. You need to assume full management control of your company. You built it once, now do it again. If you have not personally guaranteed your debt, breathe a sigh of relief and skip to #2. (If you do have a personal guarantee, you may need to understand just how committed you really are to this turnaround. I suggest reading your signed guarantee and looking up your state’s bankruptcy schedules online. You’ll realize that most states will let you keep one livestock, one gun, wedding bands and maybe a couple bucks worth of home equity – assuming you still have some. That’s it. Okay, now that we agree on your level of commitment, let’s work on the fix).
2. Make a short list of everything you really want to keep; Marriage, mental health, physical health, relationships with your family. All these things and your business can be preserved. Let your family know your true situation and enlist their emotional support. Let pride be the first casualty of your turnaround plan. You may have gotten into this mess by yourself but you are unlikely to fix it alone.
3. Stop all payments and expansion plans immediately. Not forever, just for now. During my first turnaround, I had a Marketing VP nearly in tears when I put a halt to his new showroom. “When you find yourself in a hole – stop digging.” That’s all we’re doing here, taking a break to clear your head and get a new direction.
You are probably behind on your bills. Some you must pay, the others you should. There are ways to deal with all of your payables and keep things moving. I recently worked with a company who was six months past due with their vendors and struggling to make payroll. Together we crafted a plan to reduce breakeven 60%. I then coached them on how to present this plan to their bank and to their vendors.
4. Start building your plan – quickly. We all know the saying that, “Hope is not a plan”. You need a real plan. No smoke and mirrors, no hope, no If-Then statements. You have to show your bankers, your vendors, your employees and your spouse how you can survive another 20% drop in sales. We’re going to build a plan now that will still make sense when this economy finally does hit bottom.
Here is the magical secret of Turnarounds – most business owners don’t want to make the cuts that need to be taken. And 100% of them afterwards say they should have cut deeper-faster. My experience tells me that you can’t cut too deep or too fast. On my second turnaround, I cut overhead 80% in 2.5 days. Seriously. On Day 3 I had a profitable company and a future. Three years later, this business was still producing profits and positive cashflow.
5. Now that you have a plan, here’s the final part; you personally have to give first and give most. Sorry, this entrepreneur thing is not all fancy dinners and fast cars. The next couple years will require heroic leadership. You need to be out front and leading by example. This hurts but you will need to downsize the car, the lifestyle and the paycheck. Everyone is watching – especially your banker.
The essence of your turnaround is pretty simple; Hoard your cash. It’s your oxygen and the only thing which matters in the coming years. Truth be told, it was the only thing that ever really mattered.
You need to be a bold leader. Fake it if necessary, just don’t let folks know how scared you really are. You now have a good plan which makes sense. Stick to that plan and nothing else. Evangelize your plan to everyone who will listen. “Yep, the economy may be going off a cliff, but I have taken the steps to assure our survival”.
Keep your cool and celebrate your victories. There are five steps to a turnaround and each one is cause for celebration. The first three; Management Change, Objective Analysis and Emergency Action will not feel like cause for celebration but they are. They are critical and valuable steps to your survival. And they are proof of your courage, leadership and determination.
Watch your health and hug your loved ones often. Sunny days will indeed return to our lives and our great nation needs you and your business there when this happens.
---------------------------------
Jeff Sands is a Director with Dorset Partners LLC, (www.DorsetPartners.com), an advisory firm specializing in corporate turnarounds, financial restructuring, revenue revitalization and profit improvements. The team at Dorset Partners has guided hundreds of business turnarounds in dozens of industries over the past 35 years. Much of this knowledge is outlined in the recently published Turnaround Roadmap™ which is available as a Free download on their website.
