Nearly all small and mid-size business owners and CEOs face the daunting task of managing the recovery of a highly distressed or dying business.
This is a period characterized by hard business conditions, low sales, low morale, low cash, low market share, and low innovation.
There are many factors responsible for this near death experience, including those that are self-inflicted like a major project failure, lack of information to manage the business or incompetent management, poor sales management, or poor financial controls. These are generally termed internal forces. While those that are not self-inflicted like government regulations, economic recessions, low-priced competitors or natural disasters are termed external forces.
How To Go About Reviving Your Dying Business
1. Identify the problems
You must first identify the real problem(s) and realize there are issues that need addressing with a high sense of urgency. You need to get committed to making the needed changes and seeking the help you need from a seasoned advisor that will help you with the many extremely tough decisions that you will face.
a. Strategy – Look closely at your business strategy to ensure your business is relevant, focused and managed tightly.
b. People – Are the right people running the company? Are the right people in the right places? Are employees committed to organizational success? Are employees properly incentivized to share in the ongoing success of the firm?
c. Customers – Are customers satisfied? Do they know, like and trust your brand? Is the business focused on profitable customers versus unprofitable and difficult customers? Are you targeting the right customers?
d. Product – Are you offering high quality, innovative products and services? Can the business better utilize technology to create better products, reduce costs and improve competitive advantages?
e. Process – Is the company performance-driven and goal-oriented? Are there processes and procedures in writing to enable the business to improve?
f. Finance – Are cash flows sufficient to sustain ongoing commitments and operations? Does this business have excessive debt and why does it have excessive debt? Are gross margins and pricing proper to optimize profits? Do you know your break-even point? Is your sales team efficient with strong sales management?
Realizing your situation is a critical turnaround strategy; without it all other things are just frantic moves that will yield little results. Before you begin to act, know why, what and how distressed your business is, and get the help you need to “right the ship.”
2. Rewrite your business plan
Investors, management, the bank, and employees all need to know what the company’s future plans are. They need to see where they fit in, how they can help, and how they can share suggestions based on their expertise that will help the company succeed.
Plans chronicle the good and the bad of the past and set a future vision. Companies that write and follow well-thought-out plans are much less likely to get into trouble, but when you’re already in trouble is when you need a plan most of all! Turning around a business takes trainloads of both time and energy. But it also takes a plan! I have yet to hear of a business succeeding without a solid business plan.
3. Right size your costs
This is the time to reduce your overheads, to cut out the waste and to stop completely the nice to have, but not absolutely essential to the survival of the business. In terms of your people, lessons have been learnt in this recent downturn that businesses are better to reduce the time or salaries of employees than to lose key skills and capabilities forever!
4. Managing People
People are the most important component of any organization. Powerful investment groups don’t invest in companies; they invest in people. When companies fail, it is almost always due to ineffective management. In a business turnaround, it is important to identify who stays in his or her current position and who must find a position elsewhere. However, most failing ventures have poor methods of measuring individual results, so care must be taken in this selection process. Making this determination is critical; powerful managers surround themselves with high performers.
It is crucial to the success of a turnaround plan that you have the right team in place. It may be that you need to bring in outside support from a turnaround specialist with experience of turning around their own businesses.
5. Innovate
Lack of innovation is one of the warning signs of a dying business. It is impossible for a business to remain relevant in the market if it fails to introduce new products and services or update existing ones. People change, markets change, technology changes and so must your business. If you refuse to change and do not innovate your products and services, you are doomed. To bring your dying business back to life, focus on innovation and devise a written plan to generate a high ROI.
Innovation plans should also include going online. Having a website/blog, social media presence and carrying out digital/email marketing have been shown to increase business revenue by up to 50%.
Related post: Get Access To Active Nigerian Email Lists To Market Your Business And Services
6. Meet with your customers/suppliers/bank
Dependent upon the severity of the situation within the business it may be necessary to reassure key customers of the business turnaround plans and the benefits that will accrue for them.
If the business has failed to settle payable accounts on time, it may result in suppliers imposing hard payment terms that may jeopardize the business turnaround recovery plan.
If support for the turnaround plan has been gained from the financial institutions and investors, it will be advisable to actively seek meetings with vendors to outline the plans and to seek their continued support. Re-establishing trust will be critical. Negotiating new or even the continuation of existing, payment terms from a weak position will be difficult, however, all promises made should be honoured or if failure is imminent inform the vendor in advance of how any debt will be discharged.
The bank and other parties with a financial investment in the business should be advised of the business turnaround plans. Meetings should be arranged to discuss the plans and to seek assurances of continued, and more support for the business.
7. Implement New/Update Systems and Procedures
A thorough review of existing systems and procedures will be required to meet the goals of the business turnaround plan. Implement change if necessary; it will be noteworthy to recall that a continuation of old practices will almost certainly result in the same old results.
Positive and profitable change may be required and this should be communicated to employees, so that they understand their roles in the new business environment.
8. Monitor, Measure and Take Action
Throughout the business turnaround process, results should be regularly measured against plan and corrective actions taken if required. Key performance indicators should be determined that will give a snapshot of the business performance and be available on a daily, weekly or monthly basis.
The KPIs should include financial and non-financial measures and reflect the important aspects of the business that will determine success or failure.
Finally it will be desirable to pro-actively communicate the turnaround progress to all interested parties – employees, customers, suppliers as well as the financial institutions.
credit: Tochukwu Mgbeahurike
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