Before You Hire That Turnaround Expert


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A self-help guide for the business owner on doing their own turnaround.

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Before You Hire That Turnaround Expert

  1. 1. Walsh Enterprises Business & Financial Advisors Huntington Beach, California USA (714) 465-2749 Before You Hire That Turnaround Expert… Al Walsh Reprinted from a blog posted December 2008 at
  2. 2. So, your business is not going as hoped, you‟re feeling the noose tighten around your neck, and panic is setting in. You‟re thinking about hiring that “Turnaround Expert” who‟s been calling. Before you spend your last money on him, there are things you can do for yourself. At the risk of restating the obvious, the ultimate control of any business comes down to cash flow. If more is going out than coming in, matters turn ugly rapidly. As a first step, take charge of the cash flow:
  3. 3. • Talk to your banker. You have to make sure that they understand your business, and that the financing is structured to fit it. A few years ago, our valve & instrumentation business purchased a general contracting business that installed & serviced the equipment. It was a great marriage, but we quickly learned that their operations died like clockwork for three months every summer. We spoke to our bankers, educated them, and got them to change the loan conditions so that we had more “breathing room” during the down-time. • Talk to your vendors. They don‟t want you to fail, and most will work with you if you do them the courtesy of bringing them into the loop. Slow- paying them without explanation just builds animosity & distrust and results in untimely shut off of the supply pipeline.
  4. 4. • Cut costs! Can you consolidate facilities - move to cheaper quarters - outsource production at reduced cost? Are there marginally- productive employees on your payroll? Can you lease instead of buy? Are your employees aware of the situation, and cost- conscious - or have you kept it a secret (as if they don’t already have suspicions). Is you inventory slipping out the back door? Is you accountant dishonest (We always hate to think about this, but my father got burned in just this way because he and his partner were too trusting. The accountant literally flew off to Rio with their money. Talk about a cliché come to life!). • Renegotiate everything you can: rent, leases, purchases, wages & salaries – everything! Something is better than nothing. If you succeed, make it up to them later.
  5. 5. • Collect your receivables! Uncompensated sales are an expensive form of charity. If your business fails, it won‟t matter whether you have strained relations from demanding prompt payment. Business failure will guarantee ex-customers, whereas success will provide the chance to maintain relationships. Don‟t keep financing slow-payers & deadbeats. If someone‟s a straight-out deadbeat: Sue „em – Now! Don‟t be shy. You can get a lawyer to do it on contingency, so you don‟t have to lay out hard cash up front; or if it‟s a small claim you can do it yourself in small claims court for a minor court fee. In other words, do everything you can to stop the out- flow of cash, and maximize it‟s in-flow. Try to at least get to break-even quickly so you have some breathing room.
  6. 6. Next, try to assess the basic underlying reason(s) for your troubles. • Flawed business model? • Failed marketing strategy or sales effort? • Product/service problems? • Market changes that you haven‟t recognized or adjusted to? • Bloated infrastructure? • Unforeseen recession / depression-driven problems? The possibilities are endless.
  7. 7. You‟re in the best position to determine the cause if you will only take off your emotional blinders and reassess the situation with fresh perspective. That‟s hard to do with the baby you‟ve been nurturing; especially when the wolves are scratching at the door. You may be too emotionally-involved, in which case you SHOULD seek help. I‟ve been involved with two successful turnarounds. • In one case the financial problems were brought on by sloppy business practices and failure to adjust to market changes. They actually had six months receivables uncollected because they were billing incorrectly and the customers were just ignoring them. • In the other case, an “intuitive genius” who‟s claim to fame was in biochemistry built a business monstrosity that consumed all of its seed capital on over-fancy facilities, a bloated lab, inefficient production, the complete lack of a sales strategy, and over-priced over-staffing. The products were great, but they were overpriced and there was no mechanism to get them to market.
  8. 8. You need to be honest with yourself and address the root causes of the failure. That‟s the primary role that turnaround experts serve. • They take control, assess the situation, and make the hard decisions that the owner couldn’t face because they were too emotionally involved. • No turnaround expert worth their salt will become engaged without having total control; otherwise they know the owner’s emotional blindness will continue to get in the way. Is that really what you want? Of course not! If you can take off your emotional blinders, you stand as much chance as the turnaround expert of salvaging your business; without the added expense and loss of control. It‟s not as easy as it sounds. It takes a fundamental change in your psyche. The business probably got where it is because you failed to see the problem(s) in the first place.
  9. 9. There‟s another thought I‟ll share. Most business owners are sales- oriented, and their psyches are totally geared to customer satisfaction. But sometimes your customers ARE the problem. If you just can‟t bring yourself to make the hard calls, hire someone to do it for you; and then get out of the way and let them do their job. Just as many people aren‟t geared to do selling, sellers have difficulty asking for the check. You worked hard to start and nurture your business. Before you throw in the towel and give up control, or lock the doors, make that final effort to conduct your own turnaround. If others can do it, so can you. It‟s mostly a question of attitude. You need to change so that you can change the business. If your psyche isn‟t well-suited, or you try and it‟s not working: Then call in the expert. But don‟t wait until there‟s nothing left to save. Good Luck!