If there’s a small silver lining to the COVID-19 pandemic—beyond the influx of fresh-baked sourdough bread, that is—it’s the opportunity that many companies have had to make their operations remote. Many of the clients I’ve met on the business turnaround speaker circuit tell me that after the initial shock and stay-at-home adjustment period passed, the majority of their employees were just as happy and productive, if not more so, working from home.
Of course, not all businesses are able to function remotely. In addition to essential/front-line industries like healthcare and retail, companies with their foundations in manufacturing, oil and gas and my family business, automotive repair, all use equipment and processes that require in-person work. Due to the unprecedented pandemic-related drop in revenue, many of these sectors are also having to limit staffing and reduce hours, putting further strain on cash flow—and ultimately having a trickle-down effect on their suppliers and vendors.
Ironically, I came to my current business turnaround speaker role quite honestly—years ago, as the newly minted CEO of our family business, I was essentially handed the reins of a runaway horse. As many have said about 2020, I won’t cite that year as one of my most enjoyable. But it definitely ranks among the most informative and formative of my life, and the things I learned during the business turnaround process have informed my whole career. Here are the five most important actions we took, and how they helped save the company.
1) Understand Your Current Reality + How You Got There
Here’s another silver lining of the COVID crash: in most cases, significant business losses during a global pandemic are relatively blameless. Not so for the failure of my own family business—we’d spent nearly 100 years building our company and unfortunately, laying the groundwork for its untimely demise. When I was suddenly thrust into the CEO role at the tender age of 28, we employed 360 people across six different locations. And we were broke.
Though I was inexperienced, I was fortunately savvy enough to understand that things would need to change drastically and quickly, or all would be lost. And I knew I couldn’t do it alone—so I hired my mentor, Frank. His objectivity, experience and focus helped me to prioritize where we should spend our time and resources in order to save the company. His perspective was critical in helping us identify the shortcomings that plagued us, including:
- Poor customer satisfaction
- An outdated sales process
- A weak management team
- Increasingly catastrophic losses
- Lack of urgency to initiate change
As they say in the self help industry, understanding the problem is the first step to finding the solution. In the case of our family business, the first four problems were apparent all along—but the fifth was the straw that threatened to break the camel’s back. Only Frank’s fresh perspective and decisive hand helped us move past our collective ego to instigate the changes that would ultimately shape our successful business turnaround.
2) Develop a Clear Strategy + Act Quickly
One of the most common issues I hear from my business turnaround speaker clients is that they lost valuable time—and money—trying to develop the “perfect” business turnaround strategy. And believe me: without Frank’s no-nonsense personality and take-no-prisoners approach, it’s possible I would have “perfected” our family business into oblivion.
But as Frank said to me in the early days of our relationship, the best business turnaround strategy is usually the simplest, and the one you can execute quickly. Urgency is paramount. Once you have identified key areas for improvement, it’s important to prioritize the actions that will make the biggest impact in the shortest amount of time. Speed is critical during a business turnaround; it breeds decisiveness and often creates its own momentum.
As Frank once said to me, “Make the best decision you can on the day, with the information you have available, then move on. There is no time for second-guessing or what ifs.”
3) Don’t Overlook the Most Critical Resource: People
I often get asked if my business would have survived if I had not hired Frank to be my mentor. The reality is I think I would have struggled with our business turnaround—primarily because I was stuck in paralysis by analysis. Frank helped to focus me on our biggest priorities, not the least of which was evaluating our staff to create a turnaround dream team.
But there’s an important parallel to consider here. Much as the “perfect business turnaround plan” is most often the one you can execute quickly, the so-called “dream team” may not be the one who brings you to profitability—but the one who can ensure your basic survival. It’s possible that you will have experienced and beloved employees who will not be able to weather this particular storm. This is unfortunate, but it’s a reality you will have to accept if you want to survive. Other things to consider when assembling your transition team:
- Is there talent that has already left, which a short-term contractor can replace?
- Do you have team members in place who have credibility with external stakeholders?
- Are your team members open to new directions—or entrenched in past/failed approaches?
4) Understand Your Finances + Make a Bridge Plan
Critical to any business turnaround plan is having absolute clarity about your finances.
In our family business, we simplified things by identifying our break-even point—then developing a simple tactical plan to get there as quickly as possible. Here are the questions we used in order to create that strategy:
- How much does the company have in cash reserves?
- What is the burn rate of our cash, when we are losing money?
- What is our line of credit, and can this be extended if necessary?
- What are our gross margins? Can these be improved, even if it costs us a few sales?
- What loans are coming due, and can they be refinanced for a longer term or lower rate?
Here’s another critical business turnaround fact that often comes as a surprise to my clients. In a crisis, especially a GLOBAL crisis like the one we’re facing at the moment, cash is more important than profits. Your company can continue to lose money, sometimes even for a prolonged period of time—but if you exhaust your cash reserves, your bank will be unlikely to continue to support you.
During my own family business turnaround, I remember directing our used car manager to send 100 cars from our inventory to the local auction—with no reserve. He was shocked, as this strategy was virtually guaranteed to force us to take a loss on every one of those cars. But at that point in our turnaround, cash-in-hand was absolutely critical to our survival.
And, though we did lose about $50K on that particular inventory, we ultimately netted $650K from that auction—which helped us to stay within our overdraft limit with the bank. If we had broken our financial covenant, the bank would have likely forced a fire sale of ALL our assets to recover their investment. Instead, our deft action to quickly boost our balance—and our trust—demonstrated that we were serious about getting the business back on track.
5) Get Clear on Your Goals + Act Without Hesitation
Once you’ve navigated through numbers 1–4, it’s time to act. Period. You’ve already laid the groundwork for your business turnaround, and only action remains. During the reversal of my own family business, Frank helped us structure a plan by which we worked with several short-term tactical goals, in service of the long-term goal—which in our case was returning to basic profitability within 12 months. Here are the steps we took to get there:
- Invest in IT to get faster and more accurate financial data to help management with the decision-making process.
- Pay down bank overdraft by selling off assets, as necessary.
- Keep the bank informed with regular updates so they are supportive of the plan.
- Streamline our sales process and reduce the size of our team.
- Focus on maximizing margins and profitability rather than sales volume.
While the basic tenets of this five-point business turnaround plan might seem very general, I can’t stress enough how easy it is to customize it for your unique situation. And having a rough sketch to build upon is the first step in your journey back to profitability. Good luck!
Here’s to Your Business Success,
Richard J. Bryan
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