10 Steps to a Successful Business Turnaround
About the Author:
Paul Wilton (editor)
CA with degrees in commerce, accounting and information technology. Paul worked overseas in the “Big 4” accounting firms and served as a director at Audit New Zealand before setting up his own consultancy. Author of A-Z of New Zealand Business Law, Paul has over 20 years of experience as a business owner and consultant. He joined FBA in 2004 and is totally committed to providing excellence in quality and value to our subscribers.
When it comes to the economy, it is generally thought that the worst is behind us. Yet, many businesses are still struggling. If you have not done so already, now is the time to take practical steps to turn things around. Here are the steps to follow:
1. Review and assess where you are now.
It is important to fully understand fully where you stand at the moment. Gather all relevant data so you can review the situation to determine the causes.
2. Develop a new business strategy.
Assess what needs to change. Get help if necessary. Then develop your strategy to achieve the success you want.
A business plan should include a reference against which results can be measured. It must be clear to other interested parties such as investors, staff, etc, that the proposed plan is viable and worthy of their support.
3. Talk to key staff.
For the turnaround to succeed it will be necessary to talk to managers and key staff. All business affairs will need to be explained and the consequences of not taking action made clear. An outline of the proposed actions will need to be conveyed and a request for comments sought.
This group will be critical to the success of the turnaround. They will be expected to take the planned actions and deliver results. It will be necessary for this group to act as a team and be committed to any plans.
4. Talk to other employees.
It will be necessary to meet all other employees at the earliest opportunity, particularly if job losses are part of the plan.
A prolonged period of inactivity, fuelled by rumour will not be beneficial. While bad news may not be easy to impart, it is is desirable to tell any affected staff in a timely and sensitive manner.
5. Meet the bank
Banks and anyone else with a financial interest in the business should be advised of the turnaround plans. If possible, meetings will need to be arranged to discuss the plans, and to seek assurances of continued, and maybe even more, support for the business.
6. Meet customers
Depending on the severity of the situation it may be necessary to reassure key customers of the plans, and the benefits for them. This action should be considered essential if the cause of the sharp decline has been poor customer service, poor quality product, or any other reason.
Asking for a second, third or even fourth chance to ‘get it right' may be embarrassing but remember: No customers, no business. Learn from mistakes, don't promise what you can't deliver. Ensure that systems, processes and communications are raised to allow business to be conducted in a timely and efficient manner.
7. Meet suppliers
If the business has failed to settle accounts on time, even the murmur of a turnaround may result in suppliers imposing severe penalties that could interfere with the recovery plan.
If support for the plan has been gained from banks and investors, it may be advisable to schedule meetings with vendors to outline plans and seek their continued support.
Re-establishing trust is critical. Negotiating new or even the continuation of existing payment terms from a weak position will be difficult. However, all promises made should be kept, or if failure is imminent, tell the vendor how any debt will be discharged.
8. Cash conservation
Review and improve the payment management if necessary. If possible negotiate extended payment terms to suppliers. Thoroughly examine all unused assets and liquidate if necessary.
Options may include selling unused buildings, renting out spare office space, selling unused plant and office equipment, disposing of excess or redundant stock, factor sales debt and if absolutely necessary, make excess employees redundant. Elimination of all unnecessary overhead cost should also be actioned.
9. Implement new/update systems and procedures
A thorough review of all systems and procedures will be required to meet the goals of the turnaround plan. If necessary, implement any changes. Remember: If you always do what you've always done, you'll always get what you've always got.
Positive change will be required. Employess should understand their roles in the new company.
10. Monitor, measure and take action
Throughout the turnaround process results must be regularly checked against the plan and corrective measures taken if necessary. Determine key indicators that will give a snapshot of performance and be available on a daily, weekly or monthly basis.
The indicators should include financial and non-financial plans and reflect the important aspects of the business that will determine success or failure.
Finally all interested parties a should be kept up-to-date with progress - employees, customers, suppliers as well as banks and investors.
If sound management principles are employed, results measured and positive trends re
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