Company Turnarounds: part 2 - Immediate actions

This article is the continuation of last week′s edition on Turnarounds.

In this one we will dig deeper on the problem and move one step further on what to do.

Now if you followed the last edition, the first question to answer is:

For how long we can survive? Is it less than 4 months?

And we′ve setup an indicative threshold of 4 months.

In a second what to do next with this information.

The next one to answer is:

Is this a cash-flow problem?

In both cases you need your finance team to guide you on this.

And some might be wondering: shouldn′t this be already noticed long ago by the finance team?

Shouldn′t this be the normal part of operating a company?

And the answer is yes, but in many Small Businesses/Enterprises, this function is externalized or if an internal function, the systems are not so well prepared.

That doesn′t necessarily mean that is a problem of finance, but a problem of the whole organization on tracking costs, expenses, sales prices, etc...

From here, we move on.

SURVIVE FIRST, IMPROVING COMES WITH IT

If you have less than 4 months of "survival cash", you need an immediate action.

And you need to act as quickly as possible.

If you also answered, "yes, we have a cash-flow problem", then even more important.

You are in survival mode, so think in that way.

I need those sales to happen, so I can get some more income. How do I support that in the most lean way possible?

Don′t try to think on "improving", because what you need is to survive.

If it is good enough to survive, is good enough.

And I highlight this, because it is easy to derail to "improvements" that lead to more costs than anything.

By focusing on your survival, you will intrinsically improve things.

On the main points to touch:

1- PLAN YOUR 13 WEEK CASH-FLOW FORECAST

Most provably you are in this situation because there was no cash-flow forecast in the first place.

Do it now. Stop everything else and do it now.

You want to list all your booked sales, committed sales and forecasted ones.

Then you want to focus on that. That is your blood stream.

So anything that is not supporting that, is as by now, unnecessary.

That leads to point 2.

2- CUT COSTS

Tidy up your business.

Like in a cabinet where you store things, in companies we accumulate costs.

There are "nice to have", that we end up paying.

The thing is: if those costs are not supporting that immediate 13 week plan, most provably are not needed. So put them on hold until you can have some breathing room.

Usually this is not a popular action, so be prepared for push-back.

And then there is the topic of payrolls... Usually being one of the biggest expenses on a business, is the main target of cost cutting.

But I would encourage you to look at that last.

In this kind of situations is the people, your team, who will help you get out of the hole. So cutting on people, might not be the best idea.

Now, if you had some pending "team adjustments", this is the time not to hesitate...

Of course, you being the owner, need to make the first step and cut costs on your side... don′t need to further extend on this...

3-SEEK FOR FINANCIAL INSTRUMENTS

There are absolute experts on this topic, and you want their help.

They will help you on structuring financial instruments that might help to inject some cash, while you are fixing the problems.

This extra cash should be used really carefully to support the company on getting out of the problem.

Sometimes what works is selling part of the business to another one, that can alleviate the financial burden and help with the recovery. Not nice for many business owners, but something I′ve seen working several times.

COMMUNICATE CLEARLY

One thing worth mention is communication.

It is always important, but in bad situations is even more important.

From all the things you will be touching, humans are the most complex ones.

And yet, are the source of most of the creativity needed to help you out.

So, be mindful and communicate super clearly.

Make sure everybody understands that this is not because you as an owner want to make more.

Is because the company is in trouble, and as such, everybody′s job.

It is quite amazing what people can do when working united to solve this kind of situations. Embrace it and make it a goal for everyone.

Use the situation as "the enemy" to come together and fight together.

LAST WORDS

The whole point making here is: you need to buy time to fix things.

And you buy time with cash.

So you need to find a way to generate that cash.

Be creative, and be focused. CASH is what you want.

Next week, we continue peeling the problem.