Buying A Business To Turnaround 4: Making A Turnaround Work

As a practicing turnaround business consultant, the core of my work is business rescue and central to any successful acquisition of a business to turnaround will be the need to make the turnaround work once the deal is done.

At its simplest, turnaround is about reversing the decline curve and by doing so restoring stability to the business and regrowing its value and there are generally four tasks to be undertaken in any turnaround:

1 spotting the problems that need to be fixed;

2 surviving the crisis, as depending on how far down the decline curve the business has gone, there is usually the need to resolve some form of financial crisis so as to give time to carry out the turnaround;

3 putting together a plan, as having stabilised the business a turnaround strategy is required that sets out how the business is to be restored to health;

4 and making it happen, as to really make a difference, the plan and all the changes that this means in how the business is run have to be turned into reality.

The turnaround curve then divides into a number of distinct phases.

The early days of any turnaround are generally an exercise in crisis management and are focused on stabilising the financial position of the business. This involves taking firm control of the cash by taking charge of the chequebooks and installing strong cash controls and cashflow forecasting. The emphasis is then on getting as much cash in as possible by improving control of the debtor book and collections, reducing unnecessary stock levels and disposing of surplus equipment; whilst also strictly controlling the cash going out by reaching agreements with suppliers as to payment terms and shutting or radically restructuring areas of the business which are losing cash.

Once the bleeding has been stopped, sound foundations need to be laid for the subsequent successful regrowth of the company. This often involves a period of ‘stabilisation’ during which time the areas that are to be developed are identified and the necessary investment in people, operating efficiencies, new products, marketing and so on are arranged as well as putting in place the necessary finance.

The final phase where all the pain becomes really worthwhile is in the regrowth of the business and its value in accordance with the plan.

The difficulties of undertaking a turnaround should not be underestimated and they demand a particular mix of skills, experience and operating style. People who are good at managing the radical change needed during a turnaround often make extremely poor long-term managers whilst very good managers for ongoing or growing businesses will struggle significantly with the chaos and difficulty of the early stages of a turnaround.

If you are looking to find a business to turnaround you should therefore think very seriously whether you have the skills to achieve the turnaround required. Have you:

- the experience of dealing with overcoming a cash crisis?

- the experience of dealing with the insolvency issues around a business in difficulty?

- had to manage extensive redundancy programmes in order to cut costs?

- the confidence to lead staff during such difficult transition?

- had to deal with the business support arms of the banks and their approach to managing their risk position?

If not, you may need to obtain help from a turnaround practitioner (or ‘company doctor’) who is familiar with this type of crisis situation and who possess the specific experience and skills needed to deal with it. Company doctors are generally highly experienced in the specific situational skills and circumstances involved in turning a distressed business around and ideally should be accredited through the Institute for Turnaround.

They can therefore provide help with:

- analysis of the position where they can provide an experienced eye to look over how deep is the crisis, assess the options and make an informed judgement as to whether the business is saveable;

- being willing and able to act as a crisis manager who can deal with issues with the urgency and sometimes ruthlessness that they require coping with challenges and difficulties in a professional way;

- providing a body of specialist knowledge of commercial and insolvency issues such as wrongful trading and redundancy law to be able to both manage the risks; and

- managing the interests of key stakeholders such as banks so that they will support the business through its difficulties.

The help provided by a company doctor is generally therefore extremely ‘hands on’ in nature. These are not professional advisers like the insolvency practitioner or the lawyer who, however close the relationship, will always remain outside advisers. Company doctors are the doers who become part of your business as directors to take charge and drive through change for the time needed to make the plan happen. They often work alone but can usually also supply associates who are specialist interim managers able to deal with particular functional aspects of the business (such as a temporary finance director or an production director) as may be required to turn the business’s performance around.

The Advent of Social Business – How Your Business Can Benefit Through Digital Life Transformation

Social business has its roots in the ever increasing number of converged technologies and devices that are readily available to today’s Digital Life consumer. Their widespread adoption of these has spawned exciting new possibilities for businesses willing to engage with their customers, partners, and other stakeholders.

By implementing a social business strategy, a business can provide easy access to company resources for eager and accepting consumers and customers in ways that many incumbents do not, and often cannot. Social businesses treat staff not only as valued members of their own company, but as recognized and valued members of society at large.

Many businesses are experimenting with social media forums, such as Facebook, Twitter, YouTube and LinkedIn in order to increase sales by reaching their customers using channels that are familiar to them. However, use of social media is merely the tip of the social business iceberg of opportunities.

Social businesses capitalize on the emerging opportunities that reach deep into the hearts and minds of their employees, customers, suppliers, and partners by focusing on 3 core elements of social interaction:

1. Building of trust and lasting relationships
2. Listening and learning from employees, customers, consumers, partners and suppliers alike
3. Collaborating to provide innovative and timely products and services that resonate with the needs and wants of all constituents and stakeholders

Some of the key business opportunities presented through social business include:

• New and greater insights into market trends
• Deeper brand loyalty and customer stickiness
• Timely innovative products and services that are geared to meeting emerging needs of today and tomorrow
• Increased market share and business growth
• Better business performance and sustainability

Social businesses learn that the more they successfully engage (interact, listen, learn, and co-create) with Digital Life communities, the more their insights into the needs and wants of their customers are enhanced. They are much quicker to market in providing innovative goods and services that meet changing needs and wants. They find that their growth in sales rapidly turns to record profitability and soon realize that their brand has strengthened significantly due to the viral spread of reactions amongst their customers, potential customers, partners and other stakeholders.

When analyzing the opportunities and threats afforded by social business, your business cannot use traditional tools and methodologies. Instead, a holistic, integrated, and interconnected view of Digital Life must be at the root of your business development and strategy, culminating in new business and economic models that are founded in thinking differently about the world.

Going Green in Business: If Your Business Is Not Already Going Green, It’s High Time to Get Prepared

Every business is affected by the going green movement, regardless of whether you are a small Mum and Dad business or a huge corporation with hundreds of staff scattered around the globe. Governments around the world have implemented, or are at varying stages of implementation of a carbon tax or emissions trading scheme to reduce greenhouse gas emissions.

If your business is not already going green, it’s time to get prepared. Here are some useful tips on going green in business:

Environmentally Friendly Operations

Try to use digital options where available in your day to day business operations. Easy changes to make include opting to send emails rather than printing out and posting hard copy letters. As a general rule, you should reduce the volume of email correspondence that you print.

If you choose to print documents and manuals, flyers and leaflets, and business cards for your business, select a printing company that supports environmentally friendly practices, and produces paper made from recycled materials.

The manufacturing process used by your printing company will have a bearing on how eco friendly its print products are. The type of pulp production and bleaching process applied will impact the environment.

If your business has an online presence, consider using green hosting. There are good choices amongst green hosting companies. Your business requirements can easily be matched against the offerings of a suitable hosting company.

Environmental Management Practices

Just as with any good corporate policy, it needs to be effectively managed in a systematic fashion. Treat the environmental management arm of your business just like you would any other arm of your business. Manage the risks and limit your exposure before unforeseen events occur that might cost you more in the long run.

Conduct an environmental audit upfront so that you are aware of your business situation and exposure to any environmental risks. Assess the compliance of your business with the environmental laws in your country. An initial outlay will be required in order to have an audit completed, but it could save your business a lot of money down the track. Non compliance with environmental laws or a “leave it and see what happens” approach in today’s current environment is not sound business practice.

Gain A Competitive Advantage

Gain a competitive advantage over other businesses in your market by promoting environmentally friendly products and services. There is a growing demand for products and services that have been produced with care for the environment. The consumer is becoming smarter and savvier about making sound eco friendly decisions. Non green businesses might find themselves out in the cold, as smart consumers choose not to support their products.

It’s time to rethink your going green in business philosophy by taking action.