In all business turnaround situations, there are certain steps that are commonly taken to turn the fortunes of a failing business.
The owner of a less than successful business may require the help of a professional expert to stop the demise of the business and create value for the organization. The task of managing the required change may be beyond the owner’s skill set or there may be too much emotional feeling that may prevent the owner from making the difficult ‘business saving decisions’.
Is there a standard process that should be adopted in business changes?
All business situations are different and therefore merit different approaches and emphasis on different aspects of the job. However, there are a few steps that are generally considered in many successful business change situations and ten of the most relevant are outlined below:
1. Review and assess the current situation
In a business change, it is important to fully understand the starting position. It will be important to collect objective and anecdotal data to review the situation and determine the causes, as well as to understand the immediate effects of the problems that affect the business.
Management accounts, sales order book, financial arrangements, internal controls, customer service levels, quality, and leadership skills are typical areas that will require assessment and insight.
2. Develop Business Plans and Strategy
After assessing what needs to change for the business turnaround to be successful, it will be necessary to develop solid plans and strategies to achieve success.
It will certainly be necessary to thoroughly document the actions to be taken, the timeframes, the financial impact of those actions, and obtain “buy-in” from the business owner.
The benefits of writing the business plan include that of a benchmark against which actual results can be measured and an indication to third parties that the proposed business restructuring plan has been carefully evaluated and is a viable proposal that should be supported. This will be an important and relevant form of communication for investors, staff and others who may need to know what the future plans of the companies are.
3. Communicate with key employees
For the business turnaround to gain momentum, it will be necessary to meet with key managers and staff. Current business issues should be explained and the consequences of not taking corrective action should be disclosed. A summary of the proposed actions to be taken should also be communicated and a request for comment should be sought.
While it may not be possible to answer detailed questions, it will be important to understand the concerns of this group and address them as positively as possible.
Members of this group will be critical to the success of the business recovery. They will be in charge of carrying out the planned actions and delivering the results; consequently, it will be imperative that the group act as a team and commit to future plans.
4. Communicate with other employees
It will be necessary to meet as soon as possible with all employees or their union representatives, especially if job losses are planned.
A prolonged period of uncertainty, fueled by rumors and counter-rumours, will not be beneficial to the business, and while bad news may not be easy to convey, it is desirable to communicate it in a timely and sensitive manner.
The meeting will also be the opportunity to give an idea of future business plans and the role that the remaining employees will play.
5. Know the Bank
The bank and other parties with a financial investment in the business must be informed of the plans to restructure the business. If possible, meetings should be arranged to discuss plans and seek assurances of continued and perhaps increased support for the business.
6. Meet the customers
Depending on the severity of the situation within the business, key clients may need to be reassured of business restructuring plans and the benefits to be gained.
This action should be considered mandatory if the cause of business demise has been poor customer service, poor product quality or any other issue that does not meet expected/agreed customer satisfaction levels.
Begging for a second, third, or even fourth chance to ‘get things right’ can be embarrassing, but remember: no customers, no business. Learn from past mistakes, don’t promise what can’t be delivered, and ensure internal systems, processes, and communication channels are raised to a standard that will allow business to run smoothly in a timely and efficient manner.
7. Meet the providers
If the company has not settled accounts payable on time, even the whisper of corporate restructuring activity may lead to suppliers imposing draconian payment terms that may jeopardize the restructuring recovery plan. business.
If support for the restructuring plan has been obtained from financial institutions and investors, it will be advisable to actively seek meetings with providers to outline plans and seek their continued support.
Restoring trust will be critical. Negotiating new payment terms or even the continuation of existing ones from a weak position will be difficult; however, all promises made must be honored or, if default is imminent, inform the supplier in advance of how any debt will be cancelled.
8. Keep cash
Review and improve if necessary credit management procedures. If possible, negotiate extended payment terms with suppliers; Thoroughly examine all unused assets of the company and liquidate them if necessary.
Options that may be available include the sale of unused buildings, the rental of surplus office space, the sale of unused office plants and equipment, the disposal of surplus or redundant inventory, factor sales debt, and, if it is inevitable, firing excess employees.
In addition, action must also be taken on eliminating all unnecessary overhead.
9. Implement new/updated systems and procedures
A thorough review of existing systems and procedures will be required to meet the objectives of the corporate restructuring plan. Implement changes if necessary; It will be noteworthy to remember that the continuation of the old practices will almost certainly result in the same old results.
Positive and profitable change may be required and this needs to be communicated to employees, so that they understand their roles in the new business environment.
10. Monitor, measure and act
Throughout the business restructuring process, the results should be periodically compared to the plan and corrective action taken if necessary. Key performance indicators (KPIs) should be determined that will give a snapshot of business performance and will be available on a daily, weekly or monthly basis.
KPIs should include financial and non-financial measures and reflect the important aspects of the business that will determine success or failure.
Finally, it will be desirable to proactively communicate recovery progress to all stakeholders: employees, customers, vendors, and financial institutions.
As long as sound business management principles are employed, results are measured and positive trends are reported, control of the business should be restored. However, business change work should not be viewed in isolation. Experience gained during the restructuring process should be adopted to avoid repeating mistakes made earlier.