To turnaround a business effectively, you need:
- an understanding of what needs to run better and what should cease
- a turnaround project plan
- buy-in from key staff members
- some fresh thinking
A QR3 turnaround finance director can quickly assess what needs to be done and then put in place and execute a plan to make it happen. Turnarounds are normally cash poor, so your turnaround manager needs to have the experience to know what works so that the cash drain can be stopped swiftly.
Shallow men believe in luck. Strong men believe in cause and effect.
~ Ralph Waldo Emerson
Cause and effect
Every business goes through distress at one time or another. Trying to grow the business too quickly. External influences like oil prices, currency fluctuations, political events like Brexit. It can be senior management taking their eyes off the goal.
The effects are felt throughout the business and beyond. Most likely the business will be short of cash. It will be late in paying its suppliers meaning it doesn’t have the means to deliver to its customers. Worse still, it might cut corners, leading to reduced quality. Both leads to loss of customers, reduced turnover and losses.
Discover the cause and deal with it – quickly!
There can be a spiral of consequences, depending on how serious the problem. One or more of the consequences below can be used as a solution.
First, the problem can be reversed. Fixed as quickly as possible. This can take a couple of months. Other times, it can take a couple of years. As long as the resources to fix the problem are there, a turnaround is achievable.
Second, if there is no prospect of recovery, (either through lack of resources or withdrawal of support by shareholders), the business (or loss making part) should be closed down so as not to incur additional losses or debt.
Third, there is a middle ground – a sale of all or part of the business. If the business is fundamentally good, but isn’t sustainable on its own, it can be sold as a whole. If there is a loss making division, it can be sold, thus generating much needed cash to feed the remaining parts of the business.
Every time you make a choice, it has unintended consequences.
~ Stone Gossard
In suggesting gifts: Money is appropriate, and one size fits all.
~ William Randolph Hearst
Diagnose and Solve
Get your stakeholders on board. Shareholders are likely to be asked for cash to support the business through turnaround. Employees (at least some of them) might have to take a temporary pay cut. Warn them this could happen if this is the right thing to do.
Batten down the hatches. Stop the losses. This involves a systematic review of the business to identify where the losses are being incurred. It helps to prioritise where action needs to be taken.
The turnaround plan needs to be devised and presented to appropriate stakeholders. The plan should include what actions are to be taken and when. The numbers should demonstrate when the business will recover to profitability and at what point it is expected to generate new cash. This in turn will define how much cash is needed, and when, to execute the plan.
Turnaround FD & the team
The above process isn’t rocket science, but it requires an experienced individual to execute it. Someone independent of the business who can give an unbiased opinion of the likelihood of turnaround. Someone who can identify the star players, form them into a team and work with them to devise and execute the plan.
A turnaround manager should do the job because they have done it time and time again. They will instil confidence from shareholders and motivate employees to remain. Depending on the severity of the situation they will either lead from the front or support the business in the background. Either way, they will turn the business around, return it to profitability and save jobs.
An experienced QR3 turnaround finance director will bring calm to the storm.
Turnaround or growth, it’s getting your people focused on the goal that is still the job of leadership.
~ Anne M. Mulcahy