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For a successful turnaround of financially troubled businesses, entrepreneurs often overlook two obstacles — the ego of the business owner or CEO, and poor advice by the lawyers.
It’s difficult for a business owner or CEO to accept the need for a turnaround specialist.
Most often, they’re in denial about the company’s prospects or they don’t believe an outside participant can come to their rescue with restructuring services. An ethical turnaround specialist will do the right thing.
As for many attorneys, in my experience, have tunnel vision. Not to be gauche, but they only see what’s at the end of their noses.
They’re more apt to insist on filing bankruptcy to protect assets because they don’t have the capacity to see the big picture.
While bankruptcy might appear to be a logical recourse to hold off creditors, that’s not always the appropriate course of action.
A turnaround can succeed if it’s handled quickly and by giving the turnaround specialist complete autonomy.
But that’s the hard part for turnaround consultants – dealing with the egos.
The easy part is knowing what to do.
A turnaround can succeed if it’s handled quickly and by giving the turnaround specialist complete autonomy.
The advisor will need to improve the company’s cash position with a myriad of steps:
- Evaluate the company’s prospects and reasons for the demise – starting with the company’s culture and human capital, processes and products
- Develop the turnaround plan
- Launch implementation
- Change what’s needed in human resources – replace the key employees lacking character
- Teach new skills, core values and vision to staff
- Fix processes
- Improve the inventory and products
- Require the company’s customers to pay in cash when making a purchase
- Control the checkbook
- Prioritize on cash outlays
- Negotiate with unsecured creditors and lenders
- Sell certain capital assets, including facilities and leasing them back
- Measure sales and operational performance
When given complete autonomy combined with quick action, such turnaround specialists are successful and the need for bankruptcy is averted.
From the Coach’s Corner, here is more information on financial strategies:
Step-by-Step Solutions for a Company Turnaround — Difficult economic conditions have exacerbated the woes facing many businesses. But business success is possible for companies suffering through red ink. Here are financial solutions that will help facilitate a company turnaround.
11 Management Strategies for a Successful Turnaround –– When it comes to management strategies for a successful turnaround, a quote by financial-world wizard Warren Buffett is apropos. “Risk comes from not knowing what you’re doing,” Mr. Buffett said. My response: “Touché.” It’s all about capital mobility created by effective management.
8 Simple Strategies to Give You Pricing Power — If you’re struggling with pricing strategies, you’re not alone. Many big companies struggle, too.
“In the business world, everyone is paid in two coins: cash and experience. Take the experience first; the cash will come later.”
-Harold Geneen
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