I've been fascinated by business turnarounds since college... take an ailing company that's losing money and turn it into a profitable, sustainable company. I've been fortunate to help a few companies turn around and also love hearing other's stories. They all share these themes:
- Revenue is flat or declining
- Expenses exceed revenues
- Additional capital is either non-existent or extremely expensive
- Management and employees are scared or checking out
1. Cut everything that isn't producing revenue/real value for the customer - until expenses are below revenues, including: expensive executive management, excessive product development, unprofitable biz dev or sales teams, product lines, office space, discounting, unprofitable marketing and advertising, commissions, ceremonial account managers, employee perks, charitable contributions, etc.
2. Focus intensely on the real value/products that customers want to buy by eliminating distracting non-core products and services
3. Renegotiate debt/payables to pay-out over time. Show an ongoing commitment to lenders and vendors by paying something every month. But, don't pay more than what the company can reasonably afford.
4. Go Open Book with employees and management. Show everyone exactly where the company was, is, and will be. Let them be a part of the turnaround. Meet weekly to review progress.
5. Bootstrap exciting new products that customers really want (Ford Mustang revival, Apple Ipod)
6. Enjoy the profitable fruits of having a leaner organization that delivers more value to customers.
Turnarounds are really hard for most to envision/lead because it takes a fairly rare leader who can see through to where the waste is in the organization (i.e. not delivering value to the customer), has the courage to actually trim to the core, the ability to instill confidence and ownership in those remaining, and the awareness to listen and drive the leaner organization to what their market/customers really want next.
I find it thrilling to uncover value and add life to old things, unlike most of my entrepreneur friends who get more excited about starting things from scratch.
Two turnaround books/stories that I LOVE are: The Second Coming of Steve Jobs (turnaround of Apple) and American Icon (turnaround of Ford)