Strategies for turning around a troubled business
Exit Strategies For Business Owners & Directors
Strategies a troubled business
In today's day and age, management turnarounds are in high demand. Companies that are being faced with issues of competition, shrinking markets or management that need help in guiding the business to be successful. Businesses need a specialist in workouts. Establishing a course of action, then implementing it to revive and invigorate the once thriving company back to fiscal health. So, what's involved in a management turnaround? More information on this important sector to follow.
Suppose your business finds itself awash in red ink from continuing losses and plagued by sinking employee morale, this scenario fits any business. What steps should you consider to succeed with a turnaround in both profits and morale?
When the company is in trouble, resist the temptation to bring in outside equity capital unless you are willing to let someone new take over the reins of the business. Sources of rescue capital will demand to make the rules and run the show. Take on board specialist people who have already taken organisations to success to help you implement new strategies for turning around your business.
Your business will be much stronger if you can do it yourself with the help of others, which usually means bringing in additional personal capital.
First things first. Analyse what is causing your cash haemorrhaging and fix it fast. Focus on short-term cash stabilisation and long-term cash annuities. To accomplish this, your restoration strategies should have two immediate points of focus: (1) to reduce expenses, and (2) to increase sales, followed by a third longer-term focus to lean-down the business.
Expense reduction must be implemented immediately. To reduce expenses, possible tactics `may` include stretching out payables, pulling in receivables, renegotiating contracts, offering discounts for advance payments, eliminating unnecessary expenses and perks, farming out certain activities for cost savings, reducing staff to a lean configuration (more on this later), freezing salaries, and eliminating bonuses not tied to overall performance.
However, expense reduction alone will not solve the problem. It may stop the bleeding, but the patient is still anaemic. What is also needed is a transfusion of additional sales.
Evaluate and modify your sales strategy. A business with an ailing cash balance should pursue two avenues: (1) opportunities that optimise short-term cash flow, and (2) high-margin opportunities for the long term.
To meet immediate needs, pursue larger rather than smaller orders, with near-term rather than far-term prospective closure, that provide some upfront cash inflow. Secure contracts with major down payments, rather than contracts requiring you to buy-in with your own cash. Even if profit margins are smaller, you will have urgently needed cash, and employee morale will improve as workers will see production and sales volume increasing.
Then turn your attention to large potential customers that will require longer-term efforts to close (probably with some customising or private-labelling required) but which will result in higher margins for several years.
Finally, as company growth resumes and profitability seems looming, start focusing on leaning down the company structure. Minimise the layers of management. Restructure the company in a manner that will maximise your returns. Outsource activities wherever practical. Eliminate positions to do little to contribute to the bottom line — this does not mean letting good people go, but rather trying to find more productive positions for them within the business.
A focus on lean thinking is a focus on eliminating waste in everything: sales, production, operations, administration, processes and paperwork. In a lean environment, "waste" is defined as any step in your company processes that your customer would not be willing to pay for.
Strive to pare down your business to a core of employees (both management and hourly) who are committed to the success of the company. If a few devoted workers have clear deficiencies, train them before considering laying them off. When you finally have a dedicated, driven core of key people left, institute a strong stock option plan to reward them. You need people with passion for the business to be successful.
Throughout all these steps, you must also do two critical things:
1. Instill and reinforce a passionate commitment to customer service within every employee, because satisfied customers keep coming back. Remember to fix all issues to the customers' satisfaction.
2. Demonstrate a fervent loyalty to your employees, and ensure this attitude permeates throughout all management ranks. You want to do all you can to ensure employee satisfaction, because your experienced, dedicated employees are your most important resource.
Follow these steps and you should have a strong chance of returning to strong profitability with a staff of loyal committed employees.
"You cannot be a success in any business without believing that it is the greatest business in the world... You have to put your heart in the business and the business in your heart."
Thomas J. Watson Sr - American industrialist who built the International Business Machines Corporation (IBM)
Exit Strategies For Business Owners & Directors
As an entrepreneur, where do you want to be in five years time? Still chained to your company? On a beach? In your garden? Planning how to fit your choice of business interests into your social life?
If you are thinking about selling your company, you have some basic questions to answer:
* What is my business worth?
* What do I need when I retire, and when should that be?
* How can my business achieve this?
* How do I sell it?
* What is my succession plan?
The Need to Plan
"I want it all, I want it all, I want it now" are great lyrics for a country western song.
However, in the real world, obtaining top price "now" for a business is only obtained with proper timing, preparation and planning.
Questions which must have clear answers are:
· What is happening in your market right now
· What is likely to happen over the next year or two
· Political/government/legislation factors/taxation
· Technology developments and competition.
Get a professional valuation of the company. Spend time on grooming the business for sale by dealing with:
· overdue debtors
· unnecessary expense
· organisation/staffing issues
· cash flow
· lining up activities with a wider strategy
In theory these activities are what you do all the time, but they acquire a new urgency at this critical time.
Keeping it Confidential
You need to be certain that your business will be marketed without current employees, customers or competitors being aware that the business is for sale. All meetings regarding the sale of the business should remain confidential.
As a seller, you will be discussing the sale of your business with a host of people; accountants, bankers, lawyers, family members and various other business associates, so at some point the cat may be let out of the bag, so expect it will occur. When and if it does, you MUST decide in advance how you are going to handle inquiries and questions if you intend to field them yourself.
A response might be: "we are always interested in listening to offers from serious buyers", which leaves the door open to pursue discussions and continue to manage the communication process.
Business As Usual
You have to manage the sale project which is perhaps a once in a lifetime activity for you as well as managing your business. At this point, you could be forgiven for having a slight feeling of nausea.
Large corporations use their advisers, major accounting firm, stockbroker, and lawyers to manage the sale. However, while most, not all of the major headaches are removed, major fees are paid in return for these professional services.
Alternatively, there are Business Advisors who provide a confidential full service, providing valuation advice, grooming, buyer identification and vetting, including information release. A Business Advisor will handle the full project management service to the point of having a sale agreement. This lets you carry on managing the business, which is what you do best, while your Business Advisor undertakes the planned sale, which is what they do best. To receive the best results take on board professional people who have been there before and been successful in business.
Colin Thompson and Robert James have between them 60 years of experience and skills as Managing Director`s. Our careers to date have given us a complete exposure to business management and management of people. We have wide experience in PLC and private companies in top level management of increasing sales/profit. Also, turnaround and re-engineering experience linked to new corporate identities and successful mergers/acquisitions. Plus, developed many business models to increase profitability. All our experiences and skills fit all sizes of businesses.
Our training and knowledge has enabled us to take an overall view of an organisation, its operations and strategy. Also, to understand with a degree of competence in a wide variety of business skills and functions. We have dealt with challenges at a high level of complexity, especially those that cut across the common functional divisions of business. Developed several business models to raise the `bottom-line`.
With vision and wisdom over several years has allowed us to be successful Managing Director`s, managing companies to increase turnover, profit and effective/efficient business communications. With our winning attitude leads to success and making businesses really fly and taking action to stay in business is our professional challenge, it is our focus, sharing management concern for a commitment to excellence, profit and positive cash flow.
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Colin is a former successful Managing Director of Transactional/Print Manufacturing Plants, Print Management/Workflow Solutions companies and other organisations, former Group Chairman of the Academy for Chief Executives and Non-Executive Director, helping companies raise their `bottom-line` and `increase cash flow`. Plus, helping individuals to be successful in business and life in general. Author of several publications, research reports, guides, business and educational models on CD-ROM's/Software and over 400 articles published on business and educational subjects worldwide. International Speaker and Visiting University Professor.
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