Our Process is a Methodology That Gets You Home Safely
It’s a 5 phase process that's robust, easy to understand and measure success. Achieving each ‘WayPoint’ goal requires a different management style, leadership, decision making and team focus.
There are proven strategies for rescuing businesses that involve more than cutting costs, and increasing sales. Navigating a safe direction.
- WP-1 is to survive the current crisis, typically a cash problem.
- WP-2 is achieved when operating cashflow is positive.
- WP-3 is restructuring the business to generate a positive EBITDA.
- WP-4 focuses on optimising performance and profitability (NPBT)
- WP-5 provides the strategy and direction to enable a high value exit.
Initially, it's all hands on deck to control cash, get relief, buy time to develop a turnaround plan your stakeholders will accept, and you're committed to deliver.
A successful turnaround depends on producing a positive operating cashflow, while restructuring around a smaller, but profitable core business. Then moving to rebuilding and revitalising to a new strategic plan.
The Five Phases of a Successful Turnaround
Few business owners have the ability to hand over the keys and walk away. The emotional scar of abandoning ship and letting it sink with crew aboard will haunt forever. Engaging a team to turn it around is the best solution for all involved.
Any successful business turnaround follows a basic process, a journey. A journey in five stages.
Each is a process that's easy to understand and measure success. This is our 'Waypoint'. Each has a distinct goal that requires a different style of driving the boat and managing the team. Once the business is stable, then we have more time to talk tactics and plan a strategic course.
However, when we talking 'rescue' and dealing with an immediate crisis, it's all hands on deck to save the ship.
WP-1 Crisis Survival
You survive to the the first WayPoint when the business achieves a short term reprieve in the immediate crisis, and you are still in control.
WP-1 Involves...
Critical Risk Assessment; what might sink the business before there's a chance of a turnaround.
- Survival Strategy & Tactics: what must be dealt with immediately and how to put the threat on hold.
- Protect Key Assets; what's core and key assets (incl people) that's essential to the core business.
- Negotiate Agreements; making arrangements with lenders and creditors for some short term support.
Getting to WP-1 can only take a few weeks, any longer will see external parties taking control. It'll be a 3 - 6 week process to rescue the situation and avoid external administration.
The next WayPoint objective is stabilising the business so it can operate and reliably generate a positive operating cashflow. There are three requirements for viability; one or more viable core businesses, adequate short term financing, and sufficient operational resources.
The next course to WP-2 requires assessing and dealing swiftly with...
- Competitive Position; of the business in its (new?) market environment.
- Finances; finding enough short term funding to stabilise the business.
- Sales & Marketing; getting short term sales from existing customers and channels.
- Operations; ensure the primary value drivers in the business are performing.
- Personnel; ensuring everyone is focused on turnaround and is rewarded.
- Engineering / R&D; cut back to essential activites for core business.
- Organisational Structure; trim down to the leanest crew necessary.
Having made the cuts and changes, at WP-2 we will have a smaller company with a positive operating cashflow. It's probably taken a couple of months but only from this position do we get the opportunity to restructure and rebuild.
Learn More About WP-2 Business Stability
WP-3 Restructuring & Revitalising
With the business stable the focus widens, we gain the opportunity to take a new direction. To restructure and revitalise the business operations so that it's generating a positive EBITDA.
If the WP-2 business has a long term future, then it must be restructured so it operates smoothly from existing facilities to generate sustained profits. Over the next 6 months we work over each part of the business...
- Market Strategy; now looking to the future, what product / service mix generates a worthwhile return.
- Sales Revenue; ensuring the sales people and the sales systems are generating good quality revenue.
- Supply Logisitics; rebuilding damaged relationships and sourcing better inputs.
- Overhead Expenses; reducing support function costs at least in line with revenue and making them variable.
- Profitability; apply budget constraints to generate a 15%- 20% EBITDA retur.
- People; ensure that everyonewho stays on-board is committed to rebuilding the business.
At WP-3 we are measuring success by the EBITDA. The business, albeit smaller is slowly returning to profitability. Relationships with lenders, creditors and other stakeholders have normalised. Up to here it's been about correcting problems, the next leg is about growth and performance.
Learn More About WP-3 Restructuring & Revitalising
WP-4 Optimising Performance
The The WP-4 leg focuses on embedding a culture of continuous improvement, on profitability and return on equity, and enhancing economic value-added.
This leg psychological shift in personnel towards goal achievement and performance. Rebuilding momentum and morale also rebuilds our return on investment. It means a rebirth of the corporate culture and transforming negative attitudes into confidence and pride.
- Strategic Plan; one that ensures the business works in harmony with its new long term goals.
- Budgets; implementing budgets that reflect new structure and future business environment.
- KPI Goals; matching business goals to personal achievement goal via agreed KPIs.
- Rewarding Performance; align the compensation to delivering on-budget and over achievement.
- Operations; implement new processes, equipment that increase business efficiency.
- Innovation; upgrade marketing, product range, and competitiveness for chosen market segments.
Having
made the cuts rebuild.
Learn More About WP-4 Optimising Business Performance
WP-5 Managing Exits
While, not all turnarounds make it successfully past WP-3 & WP-4 most mid-sized business owners will exit at some stage. Planning and managing the exit will significantly increase value to all stakeholders.
Bottom line for owners... a performing business offers you better and more choices when delivering on your Ultimate Goal. We provide guidance for owners to maximise their value by implementing well thought out exit strategies.
- Exit Options; the better the business performs the more options are available to owners.
- Identifying Targets; finding more than one so to increase negotiating power and choice.
- Capital Restructuring; ensuring the capital structure allows and enhances the exit.
- Redefining the Business; reshaping the business to improve exit value.
- Negotiating the Deal; having strategy and tactics in place to generate the best value.
Getting to WP-5 is a journey that may have taken your business from sinking to a success. In the end you will measure WP-5 against your 'Ultimate Goal'.
Learn More About WP-5 Managing Business Exits
Tasks within the Process
- Getting the right cost structure.
- Improving cashflow.
- Finding and restructuring new funding
- Retaining key employees, Outplacement. Finding new people & skills.
- Keeping customers. Finding new markets
- Optimising business operations.
- Planning the exit strategy.
It's An Emotional Journey Too
The 'Business Turnaround' process is of 5 stages; each requires
different style of management and decision-making to support owner's
emotions.
Initially owners will be fearful and concerned.
As each stage progresses you decision will be rewarded
with renewed clarity, motivation and energy.
By the end, we expect all stakeholders will be relaxed and satisfied.
The success of each stage is measured by financial statements. It's also about rebuilding confidence and health of owners.
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