The majority of business turnaround books are written by executives who have fixed Fortune 500 companies. These individuals implement business turnarounds by cutting large numbers of employees, tapping pension funds, getting banks to infuse capital and selling off assets to raise cash and decrease debt.
However, few small- and mid-size companies can make such dramatic business turnarounds changes. These businesses can have a difficult time getting a line of credit from a bank, typically don’t have meaningful assets to sell to increase the company’s cash position and can’t afford to lay off large numbers of people. To implement the keys to a successful business turnaround, you have to perform the following ten steps.
BUSINESS TURNAROUND – 10 STEPS TO SUCCESS
Step 1: Write business, sales, marketing and operation plans
Companies who write and maintain plans on an annual basis rarely get into trouble. Plans chronicle the good and bad of the past and set a vision for the future. Investors, management and employees all need to know what the company’s future plans are, so they can avoid the need for a business turnaround. They need to see where they fit in, how they can help and when to share suggestions based on their expertise to help the company succeed.
Step 2: Meet with key personnel and a board of directors or advisors
You must involve the key people in the business together to have a no-holds-barred discussion on how to move the company through a business turnaround. Don’t go into the meeting without a plan of your own. People lose confidence in leaders who lack a plan and vision for their business turnaround. The key in this type of meeting is to be self-assured, open-minded and flexible.
Step 3: Revise plans
After listening to key executives in the business, revise and ask them to review the plans a second time before presenting the business turnaround plan to the board of directors and employees.
Step 4: Meet with employees
Have a company meeting, admit that there are things wrong with the business and discuss how management plans to fix it. Provide employees with a copy of the company business plan and ask for their input. For an established business, this step demonstrates that careful consideration has been given to the development of the business.
Step 5: Meet with customers
Rumors of your imminent demise are probably swirling around the business community. Key customers are becoming nervous and some may even be looking for new vendors. Don’t stick your head in the sand. Inform your customers about your situation and tell them how you plan to implement a business turnaround. Be reassuring but not deceitful.
Step 6: Meet with vendors
Company vendors get very nervous when they hear “on the street” that one of their customers is having trouble. Sometimes word travels before you can alert the appropriate people about your problem. With that said, you need to develop a statement outlining the problems and your plan for a business turnaround. You will receive plenty of concerned telephone calls. Respond quickly and thoughtfully to all of them. Make sure they know that you have a plan to execute your business turnaround.
Step 7: Contact tax authorities
If you can’t pay your local, county, state and federal taxes, notify the authorities. Tax authorities will work with you. You’ll be on much better terms with them than if you fail to pay and have it appear as if you are trying to avoid your obligation.
Step 8: Contact your bank
If you have loans or a line of credit, call—don’t write—your loan officers and tell them you need to meet in person. Give them the bad news followed by your plan for a business turnaround. Appear confident and reassuring. This is an area where a third-party business turnaround specialist can be especially helpful. When a bank knows that they are getting information and plans from an experienced, independent third party, you will often find that they are flexible in allowing you time to work through the problems.
Step 9: Keep only employees who are essential to the business
Figure out which employees you can let go without damaging your business. Nobody likes to let people go, but for the business to survive, retain the people who are bringing in, making or servicing sales.
Step 10: Cut unnecessary costs
Make a list of all your expenses and eliminate what you don’t need. You need to buy time in order to fix your problems, and cutting expenses is a good way to buy “financial” time.
A business turnaround is not only possible, but it’s relatively simple if you take the right steps. As business turnaround experts, we can help your business return to financial success. If you believe that you cannot execute these business turnaround steps in a timely manner, do not hesitate to seek out assistance. There are business turnaround and restructuring firms such as Revitalization Partners that are focused on working with and helping small- and mid-sized companies.