Avoiding a Turnaround

Aug 12, 2019 by Roger Scherping

During my career I’ve turned around a bunch of companies, some of which were only a few weeks away from shutting down. As I look back at those companies, and at other companies that I straightened out and put back on track, I see that they all made some of the same mistakes. Being in a turnaround situation is very stressful, involving pressure from all sides: banks, vendors, customers, employees, and owners. So keep these common mistakes in mind with your business and avoid getting yourself into that dreaded, stressful, and uncertain turnaround situation.

Denial
It always amazes me the extent to which owners can deny they have a problem. My first turnaround was just two weeks away from going out of business when I joined. I had the data to prove the dire situation, including an obviously empty bank account. But the owner insisted that there was absolutely nothing wrong and refused to take the situation seriously, so we took action ourselves to save his company. His attitude didn’t change nine months later when we had cash and profits flowing again. He still insisted there had never been an issue. So always be realistic. Don’t kid yourself. Be honest with where you’re at.

Assuming that things will get better
Once an owner admits to him or herself that they have an issue, their first tendency is to assume that they can just do nothing and everything will just get better all by itself. They think they don’t have to take any action because the big selling season is coming up, or a new customer will come on line, or expenses will magically drop. It’s a little better than denial, but it inevitably leads to the next mistake.

Being afraid to make the tough decisions
Even when the owner knows they need to do something, they just can’t bring themselves to make the tough decisions. Letting go loyal employees, cutting overhead, eliminating unprofitable products, or firing unprofitable customers are the kinds of tough decisions that a crisis calls for but which owners are afraid to do. They think they will be damaging their company in the long-term, but they don’t realize that they are living in a short-term world. They need to force themselves to make decisions that are tough in the short-term but that will benefit the company in the long-term – and perhaps save it from extinction.

Waiting too long to act
The first three mistakes inevitably lead to the most critical mistake of all: Waiting too long. A problem is much more easily dealt with if you attack it early! The longer you wait to take action, the tougher the decisions will be and the more impact they must have. It’s much better to just make a small course correction early when the problem is still small. And you’ll be able to do that if you’re not in denial, realize that you need to take action, and do so boldly.

The best way to avoid a turnaround situation is to anticipate it by using ProjectionSmart Growth! That’s exactly why we created Growth: So that you can see into the future and know where your business is going to be in the next 12 months. Don’t let a small crisis balloon into a full-scale turnaround. Use Growth to look into the future, and, if you don’t like what you see, take actions quickly to keep your business on track. You can learn more about ProjectionSmart Growth here, and click here to try it for free. Let me know what you think by emailing me at roger@projectionsmart.com.

 

Tags: turnaround