Key Steps To Move Your Company From Surviving to Thriving
Kenneth H. Marks
How does the board
of directors or management team of a small or mid-sized business
think about reversing a declining or distressed business? It is a
common question given the turmoil in our financial and business
markets. There are many good companies that find themselves with
weak balance sheets, attempting to recover and reposition for the
new reality in the markets and to take advantage of emerging
opportunities. Where to start and how to change the momentum in
your favor? It can be done!
In their book
“Corporate Recovery: Managing Companies in Distress” Stuart Slatter
& David Lovett articulated the foundational areas and steps that
have proven valuable in turning companies in the right direction.
Couple these with solid cash management practices and you will have
a road map for real progress. The core areas to address begin with
gaining control of the cash and end with “fixing” the balance sheet.
Management that tries to start at the end will likely find it very
difficult without a credible, well vetted plan that is believable.
So let’s walk through and discuss each of the areas (which can be
viewed as steps)
- this is about addressing a deteriorating situation and taking
control of cash flow and short term financing. This begins with
fully understanding all cash sources and minimizing cash outflows
until there is a recovery plan. If possible, short-term bridge
funding sources are identified and pursued to fill the gaps.
- this step involves making sure you have the right talent in the
right seats on the bus …particularly at the top. If existing
leadership expects to stay in place, they may need to re-prove
themselves to their stakeholders to assure continued support.
- is all about communication with those involved in the business –
internally and externally. Sometimes it is not easy, but you must
communicate the progress and trials as they happen to keep
stakeholders from being caught off-guard or being surprised.
- this step deals with asset reduction and a focus on the core
business. Part of rejuvenating a business is making the tough
decision of where to focus and what resources to harness. It also
means that you may have to sell off some non-core assets to generate
- involves establishing new terms and conditions for employment and
making structural changes to run with a smaller team. Once the
strategic direction of the business is set, the team needs to be
shaped to implement the plan. Laying-off teammates is never easy
…but a positive way to view this step is that it can re-energize the
remaining team with confidence in a clearer and focused plan.
- focuses on cost reductions, quality improvements and increasing
revenues. The business got in trouble for a reason. This step
involves taking a critical eye to the core business processes and
indentifying opportunities to operate more efficiently while
accelerating revenues. In a production environment this would be an
ideal time to consider implementing lean manufacturing concepts; and
for administrative and service operations, similar lean enterprise
concepts may be of value.
- this step is what many of us think about when we hear
restructuring. It involves the work-out of liabilities and making
financial commitments to a level that the renewed organization can
meet. It may mean raising capital or finding longer-term bridge
sources of funding until the business can return to predicable
profitability and positive cash flow. This step may also open the
door for conversion of some liabilities to equity and renegotiating
the terms of existing debt.
Let’s circle back to
cash management, given its importance in the turnaround process.
Here are the guiding concepts that have been battle tested and
proven to work. Some of these are tough- medicine and not easy to
implement, but all have the same critical objective in mind
…generate and preserve cash to assure the business has adequate
resources to make it through the recovery process. In reality there
are always exceptions, but they should be few –
cash unless it directly relates to more cash generation (i.e.
weekly cash flow management routine so the team has visibility
to cash in-flows and committed cash out-flows.
payments to those that help move the company forward and that
are part of the solution; others will have to wait.
critical sources of supply that enable revenue generation.
Develop payment and financing plans to assure these suppliers
truth with creditors and be positive. At first, share that you
are creating a work-out plan so you can have a realistic
repayment schedule; and then periodically provide status - good
and bad news.
Only sell to
customers that pay quickly and dependably.
collections of accounts receivables.
New money (i.e.
bridge loans, stock sales, etc…) goes to resources that generate
revenue and to pay for go-forward activities, not to pay old
plan to all stakeholders and periodically provide status on
progress and issues.
Most suppliers and
creditors realize that a company in bankruptcy will have less to pay
them, not more; but they won’t support your recovery if you cannot
convince them of a realistic go-forward plan. Part of this means
sharing the truth and setting expectations and commitments that you
can meet. In today’s economy many companies are confronted with
cash issues and strategic problems. Being proactive will likely
increase your chances of recovery and positioning so that you can
move from surviving to thriving.
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about Kenneth H. Marks.
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