You’ve spotted the warning signs, now it’s time to roll up your sleeves, face some hard truths and get your business back on track.
But where to start? Well, that can depend on how far you have let things slide. If you don’t have expert guidance, now is the time to bring a professional on board. The first step in any turnaround is assessing financial health.
How much longer can you continue operating at current performance; how urgently do you need to turn things around?
Once you have a time frame sorted, you can begin going back over basics:
- Was your original business proposition sound?
- Is your product or service solid?
- How’s your location?
- Are your costs too high?
- Is your market share too low?
Once you have some answers and insights, you can begin looking at your options to turn performance around and devise a strategy and timeframe.
Useful turnaround tools
13-week cash flow forecast
This prognostic tool helps determine the future viability of a distressed company. It maps out a three-month turnaround trajectory if cash flow is optimised to focus on core profit drivers.
At the same time, the process identifies any non-essential expenses that can be deferred and under-utilised assets that can be sold off to provide greater liquidity in the short term.
The process also looks for inventory issues – identifying slow-moving stock that can perhaps be sold off at a discount.
Preparing a 13-week forecast allows company leaders to see what needs to be done to move the company towards profitability and maintain liquidity. Once complete, the forecast can then be tracked week on week.
SWOT analysis
A SWOT analysis can be done at any stage of your business’s life but is particularly useful to work out a path forward when you hit troubled waters. It examines a company’s Strengths, Weaknesses, Opportunities and Threats to help leaders identify area that should be the focus of the most effort.
Value chain analysis
This is another strategy tool to help identify or develop a competitive advantage for your product or service. If you are not achieving the market share you anticipated, a value chain analysis will help identify the internal activities which add the most value to your product and which, therefore, should be the focus of your attentions.
The analysis varies according to whether you want to compete on cost or product differentiation – that is, are you aiming to be the cheapest or the most desirable? It is important to remember, in the modern world, cost is often not the deciding factor for consumers.
Convenience, ease of use, customer support, design and desirability all play important roles. So, for example, a value chain analysis that prioritises product differentiation may rank marketing department activities as more valuable than manufacturing.
Conversely, if cost is the focus, a value chain analysis identifies the major cost drivers for each activity, allowing you to look at how savings could be made. For example, a bed manufacturer may decide to reduce its product range and focus on high-selling items only.
Your staff
Never forget – in the haze of analysis and modelling – that one of your most important tools in turning a failing business around are the staff. If you do not bring your employees with you, any turnaround plan will be hobbled from the start.
Change can be confronting and turnaround plans need to be framed and explained carefully to avoid employees feeling they are being `blamed’. Brief your staff honestly about the company’s position and what the plan is going forward.
Ask for their feedback as it is important they understand the rationale of the plan. Remember they have a strong vested interest in the business succeeding and will work harder when they understand the goals.
Don’t forget that rumours are not contained to an office, others in the industry may have heard your business is struggling. Be honest and upfront with customers and suppliers.
