Look around before you must turnaround!By Andrew J. Birol, President, Birol Growth Consulting, Inc.
An ounce of heavy lifting can prevent a ton of bricks on your business
Although all businesses are coping with these challenging times, it is worse for some than others. As the year unfolds, I am working with two kinds of companies, those already taking needed steps to thrive and those who must start doing so now just to survive. Why are some firms and owners more proactive than reactive? Why do others avoid so many previous warning signs and must suffer so much more pain?
Examples of progress some proactive companies are enjoying:
- A professional services firm facing high operating costs, eroding margins and unprofitable business is successfully reorganizing to focus on high margin services and clients.
- A manufacturing business has restructured around its best products and staff who are returning a much smaller firm to profitability.
- An Internet services company who has survived the shakeout and is enjoying surging sales as a result of rolling out new services and focusing its efforts around finding, keeping and growing customers.
Sadly, I am also watching:
- A CEO of a distribution firm finally commit to an overdue business initiative only to be overruled by his CFO telling him no further expenditures can be made for the next sixty days.
- An owner telling his son that decaying business conditions so threaten their company's viability that they must hire a seasoned outsider with business experience rather than keep control in the family.
- A retired business owner recognizing the firm's end is near, stops pulling his retirement cash out of his company and leaves what little remains for his children to try to settle with their bank.
What lessons can we learn from these examples? What are:
- The characteristics of these companies making proactive changes
- The changes owners are making to thrive
- The consequences for companies making these changes
- The consequences for companies not making these changes
- What you can do for your business now.
1. The characteristics of these companies making proactive changes:
While nobody likes change (except a baby with a full diaper), some owners overcome their FUD (Fear, Uncertainty and Doubt) and make needed moves before it is too late. They: ]
- Are watching, listening and analyzing their world around them. As my friend and client, John Milgram says about business events, once is a coincidence, twice is a trend and three times is an absolute. John monitors a daily dashboard of company statistics to keep tabs on his business.
- Are not “too smart to help”. Smart owners recognize that twenty years of industry experience is not enough to succeed in a changing environment. They accept and value lessons learned in other industries.
- Are hands-on. Owners who personally call on customers, fiddle with their machines, know their employees and monitor their daily revenues and expenditures do better. One of my mentors, Wayne Willis, says, “Until a company grows to $100 million the CEO can still make time to review all expenditures over $1000”.
2. The changes owners are making to thrive:
Proactive owners quickly and actually:
- Invest in critical initiatives when they need to instead of when they feel they can afford to
- Respond to the messages and demands of their marketplaces and other stakeholders, particularly their investors. They accept that they must modify and improve on their best and highest uses to remain in business.
- Create new and efficient ways of delivering value to customers. They do not lie low and wait for things to improve.
3. The consequences of making these changes
The owners who have proactively made changes are
- Actually working harder in the short term as an investment for long term payoff and business success, while their inactive counterparts ignore the inevitable while it gets worse.
- Taking more control over what they formerly thought was not controllable.
- Feeling more confident and sobered in “knowing what they don’t know”
4. The consequences of not making these changes
Owners who neglect building a strong foundation for the long term end up taking painful, and usually destructive, last ditch efforts. One such option is to engage a turnaround firm. These financial and business consultants are often seen as the silver bullet or the cavalry coming over the hill. Whether they are called in by the business owner or by the bank, the following steps are often inevitable:
- The turnaround expert analyzes the business impressing the owner with his analytical prowess and ability to synthesize the problem.
- The owner believes the turnaround expert offers hope and a future for business until the bank makes demands inconsistent with any long-term plan.
- The bank directs the turnaround expert to deliver and execute the bad news. Namely, the business and the owner must be divorced with a final settlement usually a fraction of anyones expectations.
- The owner goes away broke -- financially, professionally and emotionally and banks and other investors are left with cents on their investment dollar.
5. What you can do for your business now:
Address the key problems that are uncovered by professionals and experts you hire. Nothing is more dismaying than pointing out a problem and being ignored. Only Wile E. Coyote ever lived to star in another episode after pulling the shade down to ignore an oncoming train. So:
- If the problem is sales, replace people, pricing, customers or products before it's too late.
- If the problem is cost, cut quickly but not to the bone because the longer you wait the worse it gets.
- If you are the problem, get the outside help to make you and your business succeed.
In the final analysis, business problems are just like the ones in the old Fram oil filter commercial. You can pay a small amount for the oil filter now or you can pay a lot for a whole new engine later. So look around before you must turnaround! An ounce of heavy lifting can prevent a ton of bricks on your business.
Articles by Birol Growth Consulting are © copyrighted and all rights are reserved. However, articles may be reprinted with prior written consent if attribution is included as follows:
© Copyrighted by Andrew J. Birol, President of Birol Growth Consulting, who helps owners grow their businesses by growing their Best and Highest Use ®. Andy can be reached at (412) 973-2080, by email at email@example.com, or on the web at www.andybirol.com.