We recently met with the owners of a business that had been making losses for a number of years. They had been holding on for a couple of years hoping to ride out the storm, not wanting to admit the business was in trouble. I think many business owners can empathise with this situation at the moment. This is an important and time critical stage because if you leave it too long, your run the risk of insolvency, administration and maybe receivership. All of these give you much less room and time or options to manoeuvre.
In this case it became apparent that what was required and possible was a rapid turnaround in order to save the business before it’s financial situation became terminal. In the meeting, the owner asked a simple and legitimate question “how do you actually go about turning around a company?”.
As we have done this before, we sometimes forget that most people, thankfully, haven’t experienced it first hand. It’s a subject surrounded by mystery, has a strong emotional aspect and is often hidden behind ‘consulting speak’.
So I decided to share with you Dequity Partner’s business turnaround process.
The first step we undertake is a complete independent review of the business. We dissect every aspect of the business from end to end. I personally like to look at the business from the client’s perspective and work backwards. My colleagues each have their own approach and we combine our skills and experience to look at the whole picture. It’s important at this stage not to jump to conclusions.
We work with the owner and the Board to understand their perspective and understand their vision and end game. This gives us a starting point or a base line to work from.
- How the business operates, it’s processes, production facilities, premises, products;
- Who operates the business, the directors, management team, employees, founders, shareholders and other stakeholders;
- The company history, assets (including IP), organisational structure, strengths and weaknesses; and
- The objectives of the owner or the Board, what their end game is, such as to recommence business in its revised form, to sell the business, merge with another business, divest interests or raise additional capital to expand.
Meet with the External Stakeholders
This includes Advisors, Creditors, Customers and Suppliers. The objective is to clarify their view of the company and it’s future and to give them confidence that something is being done to turn the business around. This process establishes rapport and builds confidence.
Identify the Problems, Issues and Opportunities
These are sometimes obvious but frequently there are many sub-optimal practices and processes that are uncovered with a fresh set of eyes and experience.
We identify the problems and issues by benchmarking, standard financial analysis, comparative product and marketing analyses. We also identify the critical issues that need immediate action and the low hanging fruit where changes produce quick and visible improvements. We have found through experience that demonstrating small wins and often keeps the turnaround on track, we try to mix this with fundamental changes that make a bigger difference. The combination is key to maintain balance and energy through the whole program.
- Develop a draft set of action plans ensuring that we have the financial, physical and human resources required to implement them;
- Identify any risks involved in our plans and develop risk management and mitigation plans;
- Test out our proposals before finalising them; and
- Review the likely outcome and reconcile this with the Board’s original objectives.
We conduct research to support strategies and build confidence. Wherever possible we use evidence to support proposed solutions.
Once we have the buy-in and support of the Board we develop a detailed Turnaround Plan including a full financial model which includes what we are doing, when, who is doing what, what we expect the results to be. We stand behind this Turnaround Plan and execute with management.
While the Turnaround Plan is being developed, we keep all stakeholders informed of progress to the extent that we can and take into account any feedback they provide. This is required to gain their confidence, co-operation and to encourage participation.
Project Implementation & Oversight
Once finalised, it is important that the Turnaround Plan is driven forwards in order to ensure that it is completed. It is very easy for small improvements to remove any previous panic and for there to be a sort of “return to normal” approach. This can slow down results and lead to a false sense of security.
However, it is also important that the actual results of the Turnaround Plan are continuously compared with the original objectives and that, if required, further changes are made to cope with situations where the results are not what is desired or if the business environment has changed.
We provide oversight and help management to execute the Turnaround Plan. We tap into our network of advisors, consultants and senior executives when we need specific skill sets.
We require regular project management and review meetings with key directors and management to ensure that everyone is still supporting it and any necessary corrective actions can be agreed and implemented.
Once the Turnaround Plan has been fully implemented, we often stay on in an ongoing strategic advisory role, take a place on the Board to assist the company with it’s ongoing development and to provide it with access to our global business advisory resources.
Tags: Administration, Advisors, Benchmarking, Business Owners, Business Turnaround, creditors, Customers, Dequity Partners, External Stakeholders, Financial Analysis, Insolvency, Making Losses, Receivership, Risk Management, shareholders, Solutions, suppliers, Turnaround, Turnaround Plan
We love turnaround projects because they are exciting, rewarding and challenging. Would you like our help with any of the above? Please call on +61 2 9258 1972 or go to our Contact page.