Discover 10 steps to a successful turn of business
In all business turnaround situations, there are certain steps that are commonly taken to turn around 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 on business changes?
All business situations are different and therefore call for 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 evaluate 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 understand the immediate effects of the problems that affect the business.
Management accounts, the 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 evaluating what needs to change for the turn of the business to be successful, it will be necessary to develop solid plans and strategies that will achieve success.
Without a doubt, it will be necessary to thoroughly document the actions to be taken, the timelines, the financial impact of those actions, and to obtain the “buy-in” of 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 companies’ future plans are.
3. Communicate with key employees
For the business turnaround to gain momentum, it will be necessary to meet with managers and key personnel. Current business issues must be explained and the consequences of not taking corrective action must be made known. 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 learn about the concerns of this group and address them in the most positive way 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-rumors, will not be beneficial to business, and while bad news may not be easy to deliver, it is desirable to communicate it in a timely and sensitive manner.
The meeting will also be the opportunity to give insight into 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 any plans to restructure the business. If possible, meetings should be arranged to discuss plans and seek assurances of continued and perhaps further support for the business.
6. Know the customers
Depending on the severity of the situation within the business, it may be necessary to reassure key customers of plans to restructure the business and the benefits they will realize.
This action should be considered mandatory if the cause of the demise of the business has been poor customer service, poor product quality, or any other issue that does not meet expected/agreed levels of customer satisfaction.
Begging for a second, third, or even fourth chance to ‘make it 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. Know the providers
If the company has not settled accounts payable on time, even the murmur of corporate restructuring activity taking place can result in suppliers imposing draconian payment terms that can 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 the 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 kept or, if default is imminent, inform the supplier in advance of how any debts will be paid off.
8. Keep Cash
Review and improve if necessary credit management procedures. If possible, negotiate extended payment terms with suppliers; Thoroughly examine all unused company assets and liquidate them if necessary.
Options that may be available include the sale of unused buildings, the rental of excess office space, the sale of unused office plant and equipment, the removal of excess or redundant inventory, debt from factor sales and, if It is inevitable, lay off employees excessively.
In addition, one must also act on the elimination of 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 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 they understand their roles in the new business environment.
10. Monitor, measure and act
Throughout the business restructuring process, the results should be regularly compared with the plan and corrective action should be taken if necessary. Key Performance Indicators (KPIs) that will give a snapshot of business performance must be determined and made 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 the progress of the recovery to all stakeholders: employees, customers, suppliers, and financial institutions.
As long as sound business management principles are employed, results are measured, and positive trends are reported, control of the business must be restored. However, business change work should not be considered in isolation. The experience gained during the restructuring process should be adopted to avoid repeating the mistakes made previously.