Plan to Turn Your Company Around in 90 Days: How to Restore Positive Cash Flow and Profitability

200 Pages·2013·3.93 MB·English

by  Jonathan H. Lack

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Contents
About the Author                                          ix
Acknowledgments                                          xi
Introduction                                              xiii
Part I: Managing and Preserving Cash Flow        1
Chapter 1: How to Manage Cash Flow Better                 3
Chapter 2: How to Manage Accounts Payables Better          21
Chapter 3: How to Manage Accounts Receivables Better       31
Part II: Improving Operations Management       41
Chapter 4: How to Manage Employee Productivity Better      43
Chapter 5: How to Manage Technology, Facilities,
and Manufacturing Better                       63
Chapter 6: How to Manage Process Flows Better             77
Part III: Increasing Marketing and Sales Efficiency  95
Chapter 7: How to Understand Your Customers,
Competitors, and Key Trends Better              97
Chapter 8: How to Develop a More Effective
Marketing Strategy                            115
Chapter 9: How to Develop a More Effective Sales Strategy   133
Part IV: Managing from the Top Down            149
Chapter 10: How to Manage Investors and the Board
of Directors Better                            151
Chapter 11: How to Hire and Manage Your
Turnaround Consultant                        163
Chapter 12: How to Manage Yourself and Your Staff Better     175
Appendix: Sample Consulting Proposal                    189
Index                                                   197
Introduction
Reversing Business Insanity
Your company is in trouble—or soon will be. sales may be decreasing, it’s
getting harder and harder to eke out a profit, and you may suspect you’ve
already started the death spiral that causes so many companies to crash
and burn.
Based on my experience as an entrepreneur, as a consultant advising
companies about strategic planning, and as an interim chief executive
officer (CEo) when a rapid turnaround is required, i suspect that you and
your fellow executives are committed to achieving the firm’s vision and
mission but are extremely frustrated, unsure of what to do, and may be
burned out. Employee morale is probably dipping along with the company’s
sales. in addition, the firms’ debt and payables are most likely increasing.
no matter how unique your product or service, this trend is choking your
firm’s chance of success and is simply unsustainable.
if you are old enough to be reading this book, you probably have read
and/or heard that one definition of insanity is doing the same thing over
and over again and expecting different results. many of us have not only
heard this definition, but have been susceptible to it in our personal lives
as well as in business. i suspect that the reason you are reading this book
is because your company is suffering from business insanity. this book is
intended to help your firm by doing what a good friend once advised me:
If you want to climb out of a hole, stop digging.
as counterintuitive as it may seem—and as difficult as it may be for you
to hear—the company culture must change very quickly for your firm
to survive. What worked in the past is simply not working today and
certainly will not be effective tomorrow. Chances are that your firm’s
culture has been product or service oriented, personality driven, and
impulsive—characteristics viewed by all, proudly, as creative—which may
xiv Introduction
have worked during the startup and growth phases, but must now change.
the faster the firm becomes customer centric, process oriented, and
metric centric, the faster it will start to reverse the negative trends it is
experiencing.
Chances are that you and your managers do not need to work any harder,
you need to work smarter. the first step in doing this is to conduct an
objective assessment of what is working and what is not. the firm did not
get into its current predicament overnight, and it is not going to get out of
it overnight, either. However, within 90 days or less, you can develop a plan
to turn your company around by evaluating every aspect of your business
using the tools and principles discussed in following chapters.
Here’s what not to do: panic or conduct wholesale firings, like so many
private equity firms and venture capitalists do when faced with turning
around a struggling company. Firing the CEo and senior managers may
feel good, but often it is not the most effective approach to solving your
problems. Even if it is, new managers still need to conduct an extensive
audit so they do not become vulnerable to reinventing the wheel and/
or making the same mistakes as previous management. Besides, if you
are a CEo or part of senior management or owner of a family business,
cleaning house of executive management is not a viable option. are you
going to fire yourself?
this book is intended to help owners, managers, accountants, bankers,
consultants, entrepreneurs, investors, and lawyers help get a company
back on track as quickly and cost-effectively as possible. and this can and
does happen. since earning my mBa from the Wharton school more than
20 years ago, i have been involved directly with a number of startups and
dozens of companies that were facing the very problems i review in this
book. most of the issues i cover were not learned at Wharton; rather,
i learned them from the school of Hard Knocks. i have found myself in
many of the situations discussed in this book. at the time, i was not aware
of outside resources that could have helped me find solutions faster.
this book provides a no-nonsense, straightforward approach to solving
everyday business problems for a company that, for whatever reason, has
lost its momentum and finds itself digging out of a deep hole.
road map of the Book
Plan to Turn Your Company Around in 90 Days is divided into four parts.
there is a logical sequence to the parts and their chapters. However, each
part and each chapter can stand on its own merit and thus does not need
to be read in sequence for you to gain valuable insights.
Introduction xv
Part i focuses on managing and preserving cash flow. this is the most
important section for any CEo and/or senior-level manager to understand.
if you don’t understand everything in this section, read it a second time. if
you need to, discuss the issues with a more financially oriented advisor or
friend. Having a better grasp of cash flow management is critical to turning
your company around. it will also help you understand the context of the
subsequent parts and chapters.
Part i is comprised of three chapters. Chapter 1, How to manage Cash
Flow Better, focuses on why managing cash flow should be the number
one priority of the firm. Chapter 2, How to manage accounts Payables
Better, focuses on tips to manage your accounts payable. Chapter 3, How
to manage accounts receivables Better, focuses on tips for managing
accounts receivables.
Part ii examines improving operations management. it is critical that you
determine where, in the firm, you are getting value for your expenditures
and where you are wasting money. Your management team is going to
have to develop a discipline of understanding which expenditures are
necessary to run your business, as opposed to the nice-to-haves, during
the initial phases of turning the company around. the latter point is
especially important given your limited working capital.
Part ii, improving operations management, is comprised of three chapters.
Chapter 4, How to manage Employee Productivity Better, focuses on
managing employee productivity by, among other things, improving
internal communications. Chapter 5, How to manage technology, Facilities,
and manufacturing Better, examines leveraging the assets you need and
reducing the liabilities associated with them, as well as getting rid of what
your firm does not need. Chapter 6, How to manage Process Flows Better,
looks at how to manage your core business operations more effectively
to maximize your overall productivity and margins.
Part iii is called increasing marketing and sales Efficiency, which is the one
area of the business in which it is very easy to become susceptible to
third-party marketers and advertisers who get paid to sell you programs
and who often have no clue and, sometimes, no interest in whether you
really need their services. marketing and sales is especially difficult for
consumer-oriented businesses that are dependent on customers who have
lots of other choices for purchasing the same products and services, as
well as other unrelated companies vying for the same precious, disposable
wallet share given the current lingering recession.
xvi Introduction
Part iii is comprised of comprised of three chapters. Chapter 7, How to
understand Your Customers, Competitors, and Key trends Better, looks
at how understanding your clients, competitors, and industry trends will
enable your firm to position itself more effectively in the marketplace.
Chapter 8, How to develop a more Effective marketing strategy, examines
why developing a solid marketing plan should occur before developing a
sales plan. Chapter 9, How to develop a more Effective sales strategy,
focuses on developing a sales strategy along with a motivated, trained, and
accountable sales team.
Part iV, managing from the top down, explores how to manage your
investors and the board of directors, yourself and your staff, and an
outside consultant. this is an area in which CEos in trouble tend to
put the least amount of effort. the main emphasis in this part is on the
importance of transparency and maintaining ongoing communication with
those stakeholders who ultimately may be your greatest asset in turning
around your firm.
Part iV is comprised of three chapters. Chapter 10, How to manage
investors and the Board of directors Better, looks at how to reach out
to your investors and board members, and the importance of leveraging
their relevant expertise and contacts to help your company. Chapter 11,
How to Hire and manage Your turnaround Consultant, examines the
processes of finding, engaging, and managing a consultant to help you turn
your company around. Chapter 12, How to manage Yourself and Your staff
Better, focuses on helping you do some things for yourself and your staff
that might make all of you more effective.
turnarounds: simple, But not Easy
Every company’s financial and operational situation, culture, and dynamics
are different. However, the fundamentals of operating any business and
the problems to which many companies are vulnerable are not that
unique. this entire book is based on firsthand experience of helping
different types of companies work through very similar problems.
First, you need to get your finances in order. this does not mean you have
to solve all your financial problems; it means you have to understand how
big your problem is and where and why you are losing money. second, you
need to get your operations in order. third, you need to improve your
marketing and sales. understanding which products and/or services sell
the best to whom, and which ones make the best margins is critical before
planning marketing and sales efforts. Fourth, and last, you need to manage
yourself, your fellow executives and staff, your board, your investors, and
Introduction xvii
your consultants better. this old cliché is trite but true: the most valuable
resource your firm has is people. spending the appropriate time building
your team and leveraging its strengths is critical to getting your company
back on track. together, these steps will allow you to make your way out
of your hole.
Plan to Turn Your Company Around in 90 Days is intended to be a lifeline
for you and your colleagues. i hope that many of the recommendations
made throughout the following chapters help get your company back
on track as soon as possible. Feel free to e-mail me with any questions
([email protected]). Good luck!
P A R T
I
Managing
and Preserving
Cash Flow
C H A P T E R
1
How to Manage
Cash Flow Better
Your Number One Priority
It’s important to point out at the onset of this book that you shouldn’t worry
about your firm’s original vision or how big your company is going to get
someday. Your business is in survival mode. Preserving cash must be your top
priority, along with fixing the systemic problems that your company faces.
In addition, you should focus on how to make your business profitable.
As a result, your company may have to downsize its staff, locations, opera-
tions, and marketing campaigns to obtain gross profitability. Simply selling
more products or services that are not profitable only leads to the faster
demise of your firm. If you can’t obtain gross profitability, you have a flawed
business model that needs dissecting as quickly as possible. If you do have
a profitable business model but are unable to reach the company’s full
potential, there are various options available to you to get the firm back
on track. We discuss these choices throughout this book.
If people try to convince you that all you need to do is just grow your
way out of the hole the firm is in, chances are they are either not aware
of the systemic problems your business is facing or they have never been
involved with a company that has the same types of problems you have. It
takes working capital to grow a business, whether you are hiring new sales
representatives, purchasing advertising, or purchasing inventory. If you are
out of cash, you simply cannot do these things. You must play a different
hand as quickly as possible; you don’t have any more time to waste.