The 4 Pillars of a “Corporate Turnaround”: How to Unlock Your Business Profit Machine.
Corporate Turnaround. You’ve heard the term. But what does it really mean?
Many businesses in need of a corporate turnaround are facing growing distress; reductions in sales, cash flow problems, and mounting debt. On the other hand, many are dealing with the challenges of rapid growth while navigating the stormy sea of finding appropriate means of capital formation.
Regardless of the challenges being faced, any business can be turned around immediately when best practices are instituted, fundamentals are committed to, and operations are divorced from well-intentioned but misguided human biases that do not benefit the business in the long run.
What a corporate turnaround is, and what it is not. If you do not know the difference, it could literally cost you your business.
What is a corporate turnaround? Well, let’s start with what it is not. Too often a ‘debt relief’ firm of one kind or another will describe their services as a ‘corporate turnaround’. Marketing so-called ‘debt relief’ services as ‘turnaround’ is misleading, albeit more pleasant sounding. Why?
Proceed with caution: debt relief is NOT turnaround.
First, “debt relief” in and of itself is absolutely not the same thing as the process of turning a company around. A corporate turnaround involves addressing the fundamental issues which brought distress and debt to the business in the first place. Dealing with unsupportable debt is only a first step in an overall turnaround program. This is not what a ‘debt relief’ service promises.
Alternately, even when there is not critical financial distress, a corporate turnaround must always involve identifying the core value-add, competitive advantage and pathways for re-invention for the business, while striping away factors which have locked away its true value, or obscured its growth trajectory.
The danger in confusing a company marketing itself as ‘debt relief’ with a true business consultancy that actively specializes in corporate turnaround, is this: You don’t fix what’s broken, things get worse not better, and you’ll probably find yourself taking on even more debt. This will often make actual turnaround much more of a challenge down the road, or even jeopardize its success, because you’ve further depleted your resources.
When necessary, dealing with debt is the first step in a successful turnaround. But addressing debt alone, without addressing the business, is a recipe for failure.
If debt does exist, thereby jeopardizing a successful turnaround, any business owner must understand the difference between services marketed as ‘debt relief’ and a true “debt-workout”; they are not the same, and again, not knowing the difference could cost you your business.
Debt relief is NOT the same as a “debt-workout”.
If you’re facing mounting debt, debt stacking, or even default, ‘debt relief’ dressed up as a ‘corporate turnaround’ might very well put your business and even personal assets at further risk. When ‘debt-relief’ is inaccurately marketed as turnaround, this should signal the business owner that even the debt relief service promoted is not what you might hope for. A business owner, facing a critical life or death juncture, must understand the difference between ‘debt relief’ and a true ‘debt workout’.
A true ‘debt workout’ is very different from ‘debt relief’.
A debt workout involves actual business re-organization and strategies within the business arena to divorce debt from the value of the business. This is very different than simply contacting creditors and asking for forgiveness or even a re-negotiation of terms. In a true debt workout, re-organizational fundamentals (such as those used by Fortune 100 companies when they encounter distress) create both leverage and a single path for creditors. The path created in a true debt workout is one that is in the best interest of the business and the owner; and one which preserves the business, maintains the continuity of operations and jobs, or alternately offers a successful exit.
Unfortunately, too many ‘debt relief’ services found all over the internet are simply phone banks that will call your creditors and beg for reductions in what you owe; these won’t get you the relief your business needs, and certainly has nothing to do with the first steps of an actual corporate turnaround.
What corporate turnaround IS.
If you’ve ever watched The Profit, with Marcus Lemonis on CNBC, then you’ve already had a fantastic introduction to what corporate turnaround is; and to how focusing on fundamental principles of business can unlock profit and growth for almost any business. Corporate turnaround begins with a deep analysis of the business that can identify and correct all of the inefficiencies and flaws which created either distress or insolvency in the first place.
Second Wind Consultants looks at the fundamentals of a corporate turnaround as centered around four distinct pillars. Other consultants may look at these slightly differently, but in the end, the principles and applications are similar.
Pillar one: The foundation. These are the inter-party agreements, understandings and company documents on which everything else rests. For a myriad of reasons, businesses often find themselves misfiring and creating unintended pitfalls, even minefields, by not correctly executing mission statements, by-laws and operating agreements, for example. Other times, owners have fallen prey to the dreaded 50/50 deal. Beyond these issues, employee contracts, benefits packages, understanding UCC’s on business assets, notes and guarantors are just a few areas where gears driving your business can be brought to a grinding halt- if you don’t understand and execute all of these as a coherent whole.
Pillar two: Management by the numbers.
At Second Wind we believe in what we call ‘your cash flow crystal ball’. The careful construction of a cash flow proforma for the year, allocating revenues over costs for the entire company, will be your roadmap to effective management and profitability.
We call it a crystal ball because a talented business consultant can see the entire company therein; including all of the issues and challenges standing in the way of success, which can then be adjusted to force profitability.
A business consultant working to turnaround a business will not only examine and interpret, but will knowledge-transfer to owners and management. Removing emotional biases from rational decision making requires fluency in your P&L statements (monthly and quarterly), A/R reports, KPI reports, among other ratios and metrics, giving you a crystal-clear view into productivity and profitability.
Pillar three: Re-Invention
A meaningful re-invention is all about defining and adding new creative applications of your goods or services, becoming the biggest or best, perhaps the most complete or maybe the most diverse merchant in your space. Offering the most complete or all-encompassing service to your clients may be part of a strategy not just to ‘sell’ products but to form loyal relationships, to delight, and to generate advocacy as you scale your client base or deal flow.
Pillar four: Sales and marketing
As a business owner, your expertise is in your product or service- and your customer. When you combine that expertise with next-level sales and marketing know-how, two things happen; you won’t be burned making bad advertising investments ever again, and you’ll discover new sales funnels and strategies you never knew existed.
We see far too many business owners limiting their potential because they are selling ‘from their gut’ rather than leveraging sales tools available to them, while approaching sales as an actual technology, requiring as much upkeep and updating as any piece of equipment.
When it comes to marketing, we often find that busy business owners avoid the digital marketing they need to be implementing in the modern world. It’s part of what’s called “new selling”, and it goes hand in hand with “inbound marketing”. It doesn’t need to be complicated and can exponentially increase your lead flow or traffic.
Real corporate turnaround consulting should NOT cost you.
Business consulting is a strategic tool of large corporations. You know many of the big names that service them; names like McKinsey, Deloitte, or Accenture. But the cost of engaging a big consulting firm is often prohibitive for all but the largest businesses. Not to mention the catch 22, in that by the time you decide you need business turnaround consulting, its even less likely to be affordable.
We believe turnaround consulting should be based on a win/win model; on results. That’s why, at Second Wind, for example, we do not charge hourly fees. Zero. Instead, we invest in the success we will create with you, by taking a fee as a percentage of the increase in profits we create.
Our advice? Whether its Second Wind or another expert business consulting firm, look for a consultancy that’s willing to invest in your success.
We’d love for you to learn a little more about the true heroes here at Second Wind Consultants, and the thousands of businesses they’ve turned around over the past 10 years.
Ask us how and receive a free consultation from one of our consultants!