Blake Glenn’s Looney thoughts, perspectives, and insights on the world of business!
— By Blake Glenn
I’m not an expert in the “art of the turnaround”. Not by any means. But as an outside advisor, I’ve had more than my share of brushes with troubled small businesses. I’ve had about 8 brushes as a consultant. I’ve had one inside experience as a part-time employee. And on one occasion I even parachuted into a hot mess to lead a tech “project turnaround” that was instrumental in my then-employer retaining a valuable contract with the U.S. government.
All of those situations were different of course. But almost all of them shared a handful of common traits:
- Revenue declining
- Profits evaporating
- Customers fleeing
- Low employee morale
- Frantic owners/executives nearly paralyzed with fear and shock
- No crisis or turnaround strategy as far as the eye can see
And the reasons that small businesses find themselves in the midst of a quagmire aboard a rapidly sinking ship are also diverse. Some common reasons include:
- Loss of key customer(s) or contract
- Entry of aggressive new competitor(s)
- Industry-wide decline
- Catastrophic outlier event (9-11 attacks, 2008 recession, Hurricane Katrina … etc.)
- Management ineptitude or malfeasance
- Loss of key employee(s)
- Selling commodity products
That last one, commodity products, is a particular killer. It’s way too common in the world of small ventures. You provide a product or service that’s totally indistinguishable from many others available to customers. So rather than try to understand any obscure minute differences between the products (if any exist at all), customers simply shop for the lowest price.
And voila. There go your profit margins!
Captain … Iceberg straight ahead!
Small ventures have it tough I tell you. They have much less room for error than the troubled mega-businesses that often make the cover of Forbes magazine and the Wall Street Journal. Mega-companies such as IBM, Sears, and GM on the other hand, can go through several management teams over a period of years and still remain standing, though perhaps in a more deteriorated state. And unlike some mega-firms, small and mid-sized businesses aren’t too big or too important to fail. So government bailouts are nowhere to be seen in times of crisis.
But while each turnaround or crisis situation is unique, there are some general tactics you can implement to get a handle on the things.
Do An Assessment
Assess your cash flow. Do projections to get a clear picture of what’s going out and what’s coming in … and the timing for outflow and inflow. If you’re in an immediate crisis do this weekly. Also start regularly monitoring your income statement and balance sheet. Understand your key ratios and monitor them diligently. Assess your debt. What is owed to whom and for how much?
Also assess your management team. Are they equipped to deal with the crisis? What changes can be made to strengthen the team? Assess your employees. Maybe one or two of them can step into key roles on the turnaround team.
Stop/Minimize the Bleeding
This means try to minimize your losses by such methods as cutting costs, reworking debt payments if possible, and incentivizing quicker customer payments. You might also delay making payments to some vendors in order to temporarily help cash flow.
… with employees, key customers, lenders, and investors if you have them. Aprise them of the situation. And let them know how you plan to deal with the crisis. Get them on board early, especially employees. Let them know that their help is critical to your survival. Employees need their jobs, though some will almost certainly have to be let go. Customers need their products, though but maybe not from you if you sell commodities. And lenders want their money back.
Create a Turnaround Team
Launch a crisis team that includes one or two employees, not just managers or executives. Keep the team small. You must move quick and with urgency. And unwieldy committees notoriously move slowly. Appoint a turnaround manager that has the final say. This may be the owner, CEO, a founder, or other executive. Sometimes an outside turnaround manager is necessary, if you can afford it, because their judgment isn’t clouded by an emotional attachment.
Develop a Turnaround Plan
Create a strategy to survive and turn the ship around. Create goals and deadlines. Assign tasks. It’s just like a project plan, because, well, it is! Execute swiftly. Be flexible as things change and may call for different tactics than you thought.
These are just a few general tips on how to approach a basic turnaround. Of course each situation is unique. But these will at least get you going in the right direction.
And if you want to read an interesting and funny story about one of my turnaround experiences take a look at my post Jimmy’s Descent Into Hell.
Take care and watch out for those icebergs!
Blake Glenn shares his looney perspectives, stories, and mis-adventures in The Looney Executive blog. He has interviewed hundreds (or at least tens) of people via The Looney Executive Podcasts and former TV show. He’s the founder of a tech group called IgniteTech, and claims to be a direct descendant of the original Looney Executive – Because there must be SOME explanation … right?
If you dare, I can be reached the old school way … blake@LooneyExecutive.com
P.S. I’m actively recruiting test contestants for my business game show experiment. Interested? Please contact me so I can add you to the player pool!