Turning a Business Around: How to Spot the Warning Signs and Ensure a Business Stays Healthy

222 Pages·2006·12.93 MB·English

by  Mark Blayney

TURNING
A BUSINESS
AROUND
Other books by Mark Blayney

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A step-by-step guide to purchasing a business and making it successful

Buying a business is not just a case of doing a deal. You buy a business
to become the owner of a successful business that achieves your personal
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Selling Your Business for All It's Worth
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This book gives first-hand advice on deciding what you want to sell,
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'An excellent guide to the complicated process of selling a business and
helping you get the best possible price. Describes the process in detail
and is full of useful tips.' The Letting Update Journal

Send for a free copy of the latest catalogue to:
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TURNING
A BUSINESS
AROUND
How to
e
and
ensure
stays healthy
M A RK B L A Y N EY
howtobooks
To Pat, for all her support

Published by How To Content,
A division of How To Books Ltd,
Spring Hill House, Spring Hill Road,
Begbroke, Oxford 0X5 1RX. United Kingdom.
Tel: [phone]. Fax: [phone].
email: [email protected]
http://www.howtobooks.co.uk

All rights reserved. No part of this work may be reproduced or stored in an
information retrieval system (other than for purposes of review) without the express
permission of the publisher in writing.

The right of Mark Blayney to be identified as the author of this work has been
asserted by him in accordance with the Copyright, Designs and Patents Act 1988.

© 2005 Mark Blayney

First published in paperback 2002
Second edition 2005
First published in electronic form 2007

ISBN: 978 1 84803 114 2

Cover design by Baseline Arts Ltd, Oxford, UK
Produced for How To Books by Deer Park Productions, Tavistock, Devon, UK
Typeset by PDQ Typesetting, Newcastle-under-Lyme, Staffs, UK

NOTE: The material contained in this book is set out in good faith for general
guidance and no liability can be accepted for loss or expense incurred as a result of
relying in particular circumstances on statements made in the book. The laws and
regulations are complex and liable to change, and readers should check the current
position with the relevant authorities before making personal arrangements.
Contents
List of illustrations ix
Preface xi
Acknowledgements xiv
1 Introduction 1
The importance of business skills 1
Managers are critical in a crisis 4
What to do in times of difficulty 5
Take the time to do a business health check 7
2 Turnaround 10
Obtaining support for a turnaround 10
Understanding your options 12
The conditions necessary for a successful turnaround 15
The phases of a turnaround 16
The turnaround process 16
How this book is structured 19
PART1: RECOGNISE THE NEED FOR ATURNAROUND 21
3 Spotting the Warning Signs of Business Failure 23
Why businesses fail 23
The types of business failure 24
Normal business failure 26
Avoiding failure 28
The symptoms of normal failure 28
Checking your business's health to spot the warning signs 31
Take an 'A' score test 37
4 Understanding Why Businesses Fail 39
The causes of normal failure 39
The five key areas 42
Key points 54
How serious are your problems? 54
V
vi /TURNING A BUSINESS AROUND
PART 2: STABILISE YOUR FINANCES 57
5 Understanding your Immediate Financial Position 59
What you need to know 59
Insolvency 60
Cashflow forecasting 63
Support from the bank 74
Key points 84
6 Managing a Real Cash Crisis 85
Wealth warning 85
Achieving balance 85
The key steps to survival 86
Controlling the cash you have 87
Obtaining more cash from normal trading 88
Obtaining more cash or credit from elsewhere 89
Reducing and/or controlling outgoing cash 94
Reducing the amount of cash needed to trade 96
Improving profits 99
Improving management 102
7 Understanding and Controlling your Financial Performance 104
What you need to know 104
Profitability 105
Financial stability 109
Using financial information 111
The management/financial information you need 121
Setting financial targets 122
Setting financial targets for your business 123
PART 3: DEVISE A PLAN 127
8 Setting the Strategy 129
It's your business: what do you want to do? 129
CONTENTS / vii
Setting your personal goals 130
Industrial trends: TEST' analysis 134
Industry structure: 'Porter's five forces' 135
What products to sell into which markets? 135
Product lifecycles and product portfolios 139
Meeting customer expectations (the critical success factors) 140
Competitive advantage 142
Unique selling propositions 144
The value chain 145
Family businesses 145
Setting business goals and deciding on an action plan 156
9 Managing Marketing 157
Successful marketing 157
The importance of marketing 157
Deciding whom to sell to 158
How to sell your product 160
Tailoring marketing strategy: the four Ps of marketing 162
Managing the sales process 163
Managing the salesforce 164
Key points 167
PART 4: MAKE IT HAPPEN 169
10 Managing Change 171
Managing and motivating yourself 171
Self-motivation and time management 171
Understanding your business's structure and culture 173
Assessing your team 176
Managing people and the process of change 179
Managing a project 186
Getting stakeholders on board and keeping them there 186
Assessing how well your project team operates 189
viii /TURNING A BUSINESS AROUND
11 Managing the Risks 191
Identifying the risks 191
Dealing with the strain 192
Insolvency-specific risks 193
12 Summary and Conclusion 195
Recognise the need for a turnaround 195
Stabilise your finances 195
Decide what to do 196
Make it happen 196
Conclusions 197
Further information 198
Index 203
List of Illustrations
1. Procedures under the Insolvency Act 1986 14
2. The phases of a turnaround 17
3. Priorities in each phase of a turnaround 17
4. Turnaround management 20
5. Normal business failure: the decline curve 27
6. The symptoms of normal failure 34
7. Company B: maximum and minimum account balances 36
8. Management structure problems 46
9. Strategy challenges 50
10. Company F's cashflow forecast (£) 66
11. Checking the arithmetic in the cashflow forecast 71
12. Realisable values 82
13. Prioritising actions 87
14. The working capital cycle 96
15. Company J: borrowing requirement 97
16. Types of cost 106
17. A personal goals summary 133
18. PEST analysis 134
19. Porter's five forces 136
20. A product/market ('Ansoff') matrix 137
21. The product lifecycle 139
22. The Boston Consulting Group matrix 140
23. Critical performance factors 141
24. Graphing critical performance factors 141
25. Assessing competitive advantage 143
26. Stakeholders 146
27. Stakeholders in a family business 147
28. The family/business continuum 147
29. The value chain 154
30. A project timetable 156
31. Customers'preferences for airline tickets 160
32. Customer buying behaviour 161
33. The product 'package' 161
ix