If your company has run into difficulties, the road back to profit can be a hard one. These tried-and-tested tips will get you back in business
When your company is in trouble, it can be tough to know what to do. No two turnarounds are ever the same, but these six steps provide the basic formula for bringing your business back from the brink.
Cutting costs is a nasty business, especially if restructuring the business involves redundancies. Work out the areas of the company where you can trim the fat, starting with the most bloated overheads but later looking at the nitty gritty. If something does not add value to the business, then it’s time to ditch it. Living without a biscuit tin and cutting spend on consultants in the short term could help save your business. You can always bring back some of the “nice to haves” once the firm is in better shape.
Stay in control
“Most businesses find themselves in trouble because the business grew and somewhere along the way management lost control over I,” says Bobby Lane, growth consultant at accountants Shelley Stock Hutter. “The first step on the road to recovery is to produce up to date information both financial and non-financial that clearly demonstrates where the issues are. Then put a plan together that will identify the critical and immediate changes that need to be made.”
Stick to your knitting
During turnarounds, work out the most profitable areas of the business and dedicate your attention to building up those high-value activities. Mike Clare, who sold bed retailer Dreams for an estimated £160m in 2008, warns that losing their focus on your core business can be fatal. “When you find something that works, stick to it,” he says. “It may feel boring but the best way to grow a successful business is to keep doing the thing that is making money, not experimenting with lots of new ideas.”
If you are going to turn around your business, you need your staff and your customers to buy into your strategy. These can be hard people to convince. Staff have witnessed the downturn in the company fortunes first hand, while customers may have experienced a deterioration in service. To get buy in from the people that matter, you need a clear and achievable strategy. Saying, “We’re going to double sales in three months,” will not cut it. Saying, “We’re going to upsell to 25pc of our customers by at least 10pc over the next six months” is something that people can understand and visualise.
It’s easy to dwell on failure but successes are rarely celebrated with equal gusto. During your business turnaround, make sure that you take the time to talk about the things that the company doing well and the areas in which it is exceeding expectations. Used properly, positive reinforcement will help keep your staff and the company on the road to recovery.
Don’t be afraid of change
“When companies get into trouble, many don’t strategy change quickly enough,” says Guy Rigby, head of entrepreneurial services at accountancy firm Smith & Williamson. “You must banish inertia and change the dynamic.
“This can be difficult when you’re in the middle of a situation. This is why people will often continue to push water up hill.”
Stuart Watson, Entrepreneur Of The Year programme leader at financial services fiant EY, adds: “In moments of crisis it is the quality of the leader, more than anything else, that can make or break the business. Leadership skills come to the fore at times of tension like this and play a key role in keeping morale high and the team’s efforts focussed on the great task ahead.”