The entrepreneurial spirit is one of adaptability, ambition, and determination. We adapt to changing economic and business trends. Our ambitions lead us to create the best possible future for ourselves, our businesses, and our communities. Dogged determination means we will never taste permanent failure, only temporary setbacks. These traits are the very reason that I will bet on the entrepreneur every single time. Likewise, these traits provide the foundation for our path forward. For many business owners, turnaround management is exactly what their organization needs to emerge victorious when the pandemic comes to an end. Follow me as I explain four essential techniques to turnaround management.
With as many as 15,000 permanent retail closures predicted in 2020, planning for changes to your business is more important than ever. As we begin to reemerge from our shutdown, restarting the machine requires good turnaround management. But what is turnaround management and how does it differ from startup management?
Startup management involves launching your entire operation from scratch. However, as the name implies, turnaround management aims to turn an existing business around. Turnaround management is a process dedicated to the renewal of business. It utilizes analysis and planning to save businesses in distress and return them to solvency.
Typically, turnaround management is used to rebrand and renew a troubled business. For many business owners, the COVID-19 shutdown has placed them in unfamiliar territory. Although these businesses may have thrived before the shutdown, many of them are now in trouble. Turnaround management may just be the best way to go about restarting your business.
Repositioning your business for success requires time, planning, and the resolve to see those plans through even when they are difficult. Although there are five stages — evaluation and assessment, acute needs, restructuring, stabilization, and revitalization — to repositioning your organization, today’s article is going to focus on four essential techniques for completing those stages.
This strategy of turnaround management is based on wide-ranging, short-term actions to reduce financial losses, restabilize the company, and to work towards fixing the problems that exist within your business. Retrenchment is, therefore, all about an efficient orientation and a refocus on the core business. But what does that mean? In many cases, retrenchment is a kind of addition by subtraction.
Through a shrinking selective strategy of selling assets, abandoning difficult markets, ceasing unprofitable services, and downsizing and outsourcing, your company could generate resources and prevent financial losses. I like to think of it like my rose garden. I know, you’re probably like, “Wait a minute, Justin. You’ve lost me. Your rose garden?” Hear me out. I have this beautiful rose garden and every spring, I have to go out and prune the rose bushes. Even though I’m cutting away at this plant that I love so much, I know that it will yield the most beautiful long stem roses because of the cuts I am making.
Retrenchment and the shrinking selective strategy can be viewed through the same lens. In spite of the cuts you’ve made, you may just find yourself in a better market position and with greater productivity and efficiency.
You might have heard this technique referred to as the “entrepreneurial strategy.” Basically, repositioning uses new innovations and changes in your product profile to generate revenue and even change your market position. Repositioning requires creative thinking and a willingness to try things that you may have never done before. This is where the entrepreneur’s adaptability is crucial.
You see, the entrepreneurial strategy is really about modifying the image of your company. This may also include changing the vision and mission of your business as well. In order to be successful at repositioning your company, you must pay close attention to the evaluations and assessments that you made earlier. By looking at the results of your SWOT, you allow yourself to take advantage of new opportunities that, potentially, could help your business to thrive during these challenging times.
Repositioning is all about maximizing and taking advantage of the opportunities that are unique to you and your business.
Replacement is difficult. Nobody wants to have to make these types of choices but, just like my rose bushes, sometimes making the right cuts can allow your team to blossom. The replacement technique allows you to assess your team and really identify whether they have what it’s going to take to move your business toward its new vision. Now, this doesn’t necessarily mean that they are bad employees. It could be as simple as, they were the right team for where you were but not for where you’re going.
I’ve spoken to a lot of business owners over the last several weeks and one of the things that stood out to me was this unique opportunity to replace personnel under the umbrella of the coronavirus shutdown. There are protections in place for the employee, during this time, that could soften the blow of being cut. So now’s the time to really examine what your team needs to look like going forward. The personalities need to complement one another to change the culture of your organization.
The final technique that I want to talk about today is the renewal strategy. With a renewal, the company pursues long-term actions meant to conclude with a successful managerial performance. The first step in the renewal strategy is to examine the existing structures within your organization. This could end with the closure of some divisions, a development of new markets and projects, or even expanding other areas of the business.
When navigating through the renewal technique, you must be cautious. As you change things, you may remove efficient routines and resources. So just be aware that renewal may have consequences that you might not have intended or even prepared for.
Finally, the renewal technique utilizes innovative core competencies that are implemented to increase knowledge and to stabilize the company’s value. These four essential techniques, when performed properly, can go a long way in helping a struggling business to succeed. Let’s face it, folks, none of us have ever experienced anything like the coronavirus shutdown before and many businesses have struggled as a result. The reality is, many businesses won’t survive. However, with a little knowledge and a strong entrepreneurial spirit, a bright future is possible.
Let me be clear that I’m not offering any form of financial advice here. I am simply offering something to think about. You should always conduct your own due diligence and seek the advice of your support team to find out what is best for your unique situation. With that said, here is a quick reference of things to consider when looking at turnaround management.
One of the phrases we like to use at our sister company Heritage Business Advisors is, “Tighten the belt.” If you’re hemorrhaging cash, do all you can to stop it. Get rid of the “nice to haves” and only keep the things that are essential to your business. While doing this, avoid cutting any payments that would be damaging to the value of your business if possible.
This is so important to a successful turnaround. Make sure that you have a team that is complementary to one another and is working toward the new vision. If you need to make cuts, make the first one deep. Avoid doing it in stages because this causes the remaining staff to be fearful that they are next.
Whatever your business offers, needs to be suitable for the current market conditions. Research the broad economic and industry conditions to determine that you are providing what the market demands and how it that demand needs to be filled.
In short, reduce your overhead. If it can be cut, cut it! In terms of your people, lessons have been learned in this recent downturn. Businesses are better off reducing the time or salaries of employees than to lose their key skills and capabilities forever.
It doesn’t matter how well you’ve planned. If you don’t have the capital to fund the turnaround, it will fail every time. Take care to plan your cash flow for the short-term — roughly 12 weeks — and for the next 12 months. Identify the best finance partners to work with you and your business, returning it to its former glory.
Anyone that has an interest in your business should be notified of your plans. Take the initiative and contact them first. Be calm and confident so that they keep faith that you are in control of the situation. Communicate your plan with your clients, staff, vendors, landlords, and financial institutions. Being proactive will instill confidence and promote cooperation.
Folks, I know that things have been rough this year. But with a little knowledge and an entrepreneurial spirit, we can, at least, make life and business financially simple!
If you have specific questions about restarting your business, PPP loans, or any business growth questions, please contact us! Our team of professional Business Advisors is here to help!