As resilient business owners who have triumphed over past financial crises, including recent challenges like Brexit and COVID-19, the PCW Consulting Group’s Executive Team possesses the expertise to share highly valuable insights.With a wealth of firsthand experience in overcoming various setbacks, we have noticed recurring problems and root causes in businesses of all sizes.
In this knowledge sharing paper, we offer practical guidance to fellow business owners, management teams, and stakeholders. We highlight essential steps to address major business distress and caution against common pitfalls. While macro-economic issues can present challenges, it is crucial for shareholders not to accept them as excuses from their boards and management teams. Instead, use such crises as opportunities to evaluate team performance and make tough decisions if necessary.
Even if your business isn’t currently facing distress, preparing for challenges is essential. We encourage undertaking a thorough strategic review, benchmarking key areas, and asking difficult questions to ensure your business remains strong and well-prepared for any future obstacles.
By gaining insights from our experiences, you can emerge informed and ready to take the necessary actions to improve and fortify your business effectively. Remember, being proactive and strategic is a win-win for business owners, ensuring resilience and success in the face of uncertainty.
Assess the situation intimately but be brutally honest!
Before implementing a successful business protection plan or turnaround, it is essential to understand the current state of the company. In many cases, business troubles can be attributed to ineffective management. Management plays a significant role in the company’s performance, and sometimes their inefficiencies are hidden during prosperous times or under the guidance of a strong leader who is no longer present.
Issues can arise from various factors such as losing a key customer, complacency in protecting market share, or misjudging the capabilities of the management team. True leadership emerges during challenging times, but often, managers are focused on processes rather than winning new contracts or may lack the necessary skills for critical moments.
Owners must be aware that relying solely on the insights and recommendations of their current management team may not yield honest and objective solutions. Genuine people who are passionate about the business and willing to speak truthfully are crucial for turning things around for the greater good.
Using additional funding to solve problems caused by ineffective management is usually futile. It only delays the inevitable and wastes resources. Toxic internal politics and fear can adversely affect employee morale, leading to the departure of talented individuals and ultimately affecting the business’s performance.
To facilitate a turnaround, stakeholders need independent expertise to identify and address the root problems. Engaging with the management team, employees, clients, and suppliers is essential to ascertain the truth and understand the business dynamics. PCW Consulting Group has the experience and knowledge to undertake business reviews at any stage of a company’s journey, whether facing internal or external challenges.
Prioritising Profit and Cash Flow: The Reality of Success
Many management teams prioritsze chasing high turnover and big clients, often overlooking the fact that some of these clients may have low-profit margins and extended payment terms, resulting in cash flow issues. At PCW Consulting Group, our first step is to understand the liquidity of the business.
We listen to the management team but also form our own opinion by meticulously examining the cash inflows and outflows. Through a detailed financial model, we map out the current cash position and forecast the short-term cash flow. This level of precision is essential to quickly address any financial challenges and gain control of the situation.
By focusing on the immediate weeks, months, and quarters, we bring the business back into stability. This micro-level approach ensures there is sufficient cash to sustain operations, providing the turnaround team and stakeholders with the time to plan ahead and strategize effectively.
Streamline the business
Management teams often overlook their business’s core strengths amidst disruptions caused by high growth or ongoing losses. Diversifying and taking on additional product lines may seem tempting but can detract from the original core strengths and operational excellence.
As the downward spiral continues, retaining staff becomes challenging, and the quality of work suffers. Cash flow problems worsen, and morale deteriorates, leading to a cycle of further decline.
During times of trouble, focusing on core business operations and capabilities is crucial for success. Downsizing or retreating may be necessary steps to ensure survival. PCW Consulting Group can help secure various finance solutions or negotiate with suppliers and HMRC to navigate financial challenges.
Improving cash flow and conducting a strategic review are essential priorities. However, introducing new capital is not a sustainable fix; a more comprehensive restructuring may be required.
Selling non-essential assets or refinancing them can free up finance and help rebalance cash flow. It’s crucial to act promptly to avoid formal insolvency procedures and maximise asset value.
When facing severe difficulties, consider ending relationships with non-essential suppliers and employees to save the business. Rigorous and decisive action is vital for survival without causing irreparable harm.
Throughout the process, effective communication is key to protect remaining assets and maintain positive relationships with creditors. By taking prompt and resolute action, businesses can navigate through challenges and secure a stronger future.
Never let a good crisis go to waste!
After successfully turning the business around, PCW is committed to long-term value creation. With an intimate understanding of your business, we work with stakeholders and the management team to develop a new, relevant business plan.
Identifying key team members, we capitalize on the lessons learned to create a stronger and more valuable business. Transitioning from micro-management to a strategic outlook, we focus on tightening processes and pushing for growth.
As we progress forward, let’s explore some post-turnaround subjects to keep in mind.
Re-defining a winning culture
Companies in need of a turnaround usually have a confused or ill-defined culture or have lost their way for whatever reason. We can test this by asking staff to describe the company culture as they perceive it. In failing businesses, or failing management, employees will not be forthcoming, and answers will vary from person to person. You’ll find that no two people share the same description. Especially when a company is charting through stormy waters, it is imperative that the whole team embrace a clear vision, a mission, and a unified culture which will define success.
At the heart of culture are the core values a company embraces. Core values are like the Ten Commandments. They are simple action statements that define the principles the company believes in, not fuzzy declarations that can be reinterpreted at the whim of management.
They should be published and posted throughout the company. If they were developed years ago, then you should revisit them as the management may have lost their way, not lived and breathed them, or perceived them to be no longer relevant. You will need to engage with the staff to write new ones or review and refresh old ones and communicate, communicate, communicate. Employees and clients should understand the company’s commitment to them.
Many companies say they do the right thing, but do they? And do they do it all the time? Core values define corporate culture, and companies without them tend to drift and underperform, so don’t let this sort of omission happen again. Keep communicating the message about what you are and what you hold dear, whether it is through your vision and mission statement or your Ten Commandments, recruit people who mirror them, put them at the core of your existence and keep reinforcing the message.
People, People, People
In any organisation, people are the most crucial component. Investors invest in individuals, not just companies. Having the best people on board not only helps navigate crises but also builds a successful and valuable company in the long run.
When a business deteriorates, it’s often due to ineffective management. Identifying the right team members and making necessary changes are critical during a turnaround. However, evaluating individual performance can be challenging, especially when senior management plays non-productive roles.
Management should be cautious of self-preservation motivations among high earners, which might lead to biased reporting of their performance. It’s essential to consider the entire team and watch out for signs of favoritism or negativity towards others.
PCW Consulting Group offers independent expertise to help with team assessments and shaping a high-performing workforce. The key is to focus on hiring high performers with a track record of success. These employees bring energy, expertise, and a desire for growth to the company.
Retaining valuable employees requires a management team that inspires trust and leads by example. Demonstrating commitment to the staff, clients, and the company’s success is crucial. High performers seek to be part of winning teams and often associate with other successful individuals.
During challenging times, seize the opportunity to offload poor staff and bring in the best talent available. Empower them, reward their achievements, and continuously fuel their drive for success. By building a strong and motivated team, your business can thrive and create a positive upward spiral of success.
Creating a new vision of the future and a new strategic plan
As noted earlier, once a turnaround team has re-discovered and defined the core values, culture, and vision for the future of the business, then the effective strategic planning can begin. It makes no real sense to begin strategic planning before these first steps in saving the business and repointing it in an upward trajectory have been accomplished, other than to have one eye on it, knowing that it will have its moment when it is the next subject matter to be of priority importance. The strategic planning process should include the best management team members, if they exist, or perhaps new ones who will be charged with implementing the plan.
The planning sessions should not be held in secrecy, as the workforce will always find out that management is conducting an important meeting and will become suspicious as to why the meeting is being held. No one likes secret meetings that may define his or her future, and everyone can be sensitive to this after trauma. After the plan is finished, the employees should be promptly informed as to the outcome and how the plan affects their future. Good leadership and communication is essential in relaying that the company has a solid strategic plan now going forward and, quickly and effectively, must let employees buy-in to them and hold open forums for honest Q&A sessions with the owners and new management team.
It’s important to continually instil that need for pace across the business because, without that sense of urgency, desire loses its value.
Whatever you do, do it quickly with unshakeable focus and then keep up the pace!
Speed is more important than perfection in business. Indecision and overthinking betray lack of confidence and hinder progress. Making quick decisions allows companies to execute and achieve results efficiently.
To maximise customer value, respond promptly to their needs with well-thought-out plans and propositions. Quick response time increases the likelihood of positive customer feedback and prevents missed opportunities.
Efficiency and productivity are enhanced when making quick decisions, especially with looming deadlines. Being comfortable with “controlled chaos” and swiftly sieving through clutter to find the essentials is a valuable skill in today’s business world.
Starbucks exemplifies the power of quick decision-making during times of crisis. By closing stores for retraining, they re-focused on their core business and experienced a turnaround.
Maintaining momentum and staying focused on priorities are essential for productivity and successful recovery. Avoid losing pace and continue confronting challenges head-on to ensure ongoing success.
A few final words….
Pulling off a business turnaround takes an intimate, impartial, independent, and forensic understanding of the operations of a business, its customers, its products, sales processes, the capability of its management and staff, and its back-office functions. As the turnaround process should be completed in an intense and rapid time period, stalling or delaying doing something about it can lead to even more losses. Stakeholders should deploy all the armoury available rigorously and at pace, hiring independent support from those who know exactly where to look, know precisely what to do and who are very familiar with rolling up their sleeves and getting their hands dirty. We have all the resources you will need at PCW Consulting Group, and we can provide a one stop shop or work alongside your current advisors. However, you feel comfortable, we will deliver for your best interests.
With the proper support and an understanding of the key steps, you’ll not just be on the road to a successful and permanent business turnaround, but also an exciting transformation and ultimately growth that could perhaps make your company very valuable one day. PCW Consulting Group can then help you again when you want to sell it!
For a no obligation confidential consultation or a general discussion on business strategy, ask to speak to Paul Waldeck on 0800 037 5029 or email private@pcwconsultinggroup.com
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