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Indispensable Secrets for Small Business Turnarounds

Date: May 13, 2015 @ 07:00 AM
Filed Under: Turnaround Management
Related: Turnaround

Not every problem is a crisis.  Those come from fundamental systemic failures.  Once the evaluation is complete the results should be categorized into fundamental infrastructure problems vs. performance improvement opportunities.

Fundamental Infrastructure Problems vs. Performance Improvement Opportunities

When smaller companies fall into distress, leadership will blame the economy or focus all of their efforts on landing the “next big sale”—as if that will solve all of their problems. When the owner blames his sales team, the economy, or even his lender as the reason behind his cash and profitability struggles, he loses focus on the legitimate reason the company is failing.

Sometimes management will embark on grander activities like performance improvement projects – new software, new equipment, new building. But committing to a performance improvement strategy—which adds activities to a core that is broken—puts the company at a high risk for failure.

The company isn’t deteriorating because it’s waiting for that next big purchase order. It’s failing because sales and marketing are bringing in new business that doesn’t align with operational expertise, machinery is being used for things it wasn’t meant to do, or there is employee dysfunction or burnout driven by poor leadership.

Identifying these and other fundamental infrastructure problems—problems that relate to the basic physical and organizational components of the business—is what will give the company the best chance for sustained success. It’s only then that the core issues can be addressed and the business can begin the turnaround process, starting with a strategic plan.

Identify Critical Operational Elements to Incorporate Into a Strategic Plan

After the fundamental infrastructure problems are identified, realistic and straightforward solutions must be incorporated into the company’s strategic plan. The strength of that plan is based on the leadership’s ability to recognize a company of this size must be nimble and focused. Less is more in distressed situations.

It’s critical at this juncture for owners and stakeholders to have an honest conversation about what they are really good at versus what they are capable of doing. Whether it’s the company’s ability to make something, sell something, communicate ideas, or offer a service, the key is to focus on where strengths lie and eliminate the things that are a struggle. This exercise will largely tighten up the focus on what the company really offers—and offers efficiently and profitably—and just how many people it really matters to.

Once the critical operational elements are incorporated into the strategic plan, the company is positioned for tactical execution.

Position the Business for Tactical Execution

Once the operational strategy is articulated, the tactical execution is naturally defined. Armed with a distinct and narrow focus, the company and its employees should feel motivated to start down the new path with incredible rigor.

To ensure the path leads to success, the company should establish metrics and implement tools to pull measurements weekly (at a minimum). Immediately, the company must prevent and eliminate any activities that contribute to the identified fundamental infrastructure problems. Old habits are hard to break, so stay focused. There will be people the company no longer markets or sells to, operations that are outsourced, and inventory and machines that will be omitted/excluded. Even small, resource-starved companies can have too many assets and too many markets they serve.

If owners and leadership commit to the tactical execution and behave with consistency, the company can expect it to take about three weeks to collect enough data to understand if the right things are being measured. Within about eight weeks, the company will experience the first “eureka” moment that ties together actions and results. And within three months, there will be tangible, measurable, and fundamental differences in who the company is and how the company is performing.

Ken Yager
Founder and President | Newpoint Advisors Corporation
Ken Yager is Founder and President of Newpoint Advisors Corporation, a turnaround consulting firm dedicated to improving troubled and financially underperforming businesses with revenues of $1 million to $50 million and/or credits of less than $10 million, for a fixed fee and on a fixed timeline. Since 2013, Newpoint has leveraged its proprietary TAMETM methodology to recover $102 million in debt and save 2,299 jobs.
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