Times couldn’t be tougher for companies. Due to the pandemic, thousands received shutdown orders this spring. And just when the economy seemed to turn the corner with encouraging job numbers, more bad news hit. Governors in multiple states again ordered closings, devastating weakened organizations. If they are not careful, many companies are likely to go under, forever closing their doors.
Getting it Wrong
COVID-19 offers an example of how organizations can run into economic trouble for reasons beyond their control. But there are also plenty of mistakes companies make which they can and should address to stave off collapse.
The core of the problem comes down to one word: strategy. Too many businesses do not establish a plan. Instead, they bounce around from one day to the next, hoping for the best but doing little to prepare for the worst. Worse, few have a sense of future trends and are not doing enough to reinvent their model as innovations transform their industry and how they operate.
If and when short-sighted companies run into trouble, they tend to freeze like a deer in the headlights. Unable — or unwilling — to take action, they return to wishful thinking, hoping sales will return and all will go back to normal. Unfortunately, this doesn’t always happen. In fact, it’s getting rarer and rarer.
To use another animal analogy, the opposite of passivity is needed when the wolf is at the door. Threatened companies must take quick, decisive action before burning through their available cash. If they don’t, they will exhaust all of their options, leaving them vulnerable to insolvency.
Of course, these companies may have their own reasons for doing too little, too late. They may even be well-intentioned. Many don’t want to downsize their head count because they are loyal to their people. Others might have lost their way years ago and lack the vision to once again be successful.
No matter what specific challenge your company is facing, if it’s in the danger zone, it may be best past time to call in a Certified Turnaround Professional (CTP). To highlight what we do, I’ll share a brief story.
Going From Red to Black
A few years ago, an aerospace firm in Pasadena was suffering from typical entrepreneurship problems. Over-investing in new ventures unrelated to their core mission, they were burning through their capital. Fast. They sought to launch five new products simultaneously, but all were losing money.
As soon as the organization brought me in, I made quick, decisive moves. First, I advised them to halt development on four of the projects, freeing up about $200k/month. Next, I created a plan to accelerate the launch of the fifth product critical to the company’s future. Though at the time, this project was costing $100k monthly, I knew we could stabilize within 90 days with the strategy.
At the same time we renewed focus on the product launch, I reviewed customer activity for problems. Based on my advice, the company stopped taking orders from businesses which were generating low profitability but costing time and energy. Coupled with a reduced staff and redesigned processes to improve labor utilization and efficiency, I am happy to report my client went from a $4 million annual predicted loss to break-even in 90 days.
The Winning Approach — When All Hope Appears Lost
When working with distressed clients like the aerospace organization, I use a technique called “Starting Over.” What this means is I bring management into a conference room to ask these key questions:
-If you only had so much money to spend, how would you deploy it?
-What does your dream team look like?
-What’s your plan to become profitable in the next 1,3,5 years?
-What’s stopping you from reaching your goals?
-What can we do NOW to turn things around?
After receiving these answers, I set to work establishing a blueprint for success with measurable goals with my client. I also make it a point to schedule follow-up meetings to ensure the team stays on track to hit their targets. After all, a plan is only as good as its execution.
Maybe You Should Consider a CTP?
To be sure, many CPA’s and other financial advisors say they can turn-around a company. However, just like any other profession, if you are bringing on someone, you want them to be certified at what they do. To become a CTP, applicants must have five companies write letters in support of your expertise, stating you actually helped them turn around their business.
Ultimately, the reason why CTPs are so valuable, especially in this climate, comes down to strategy. When it comes to leading and managing a business, too many companies get stuck in the grind. They lose their way. Beginning with offering a fresh perspective, the right CTP can turn things around. Before it’s too late.
This begs the question: Is your company in danger of collapse? At Blueprint CFO, my certified team consists of individuals possessing years of turnaround experience. Major institutions, including Wells Fargo, US Bank, HSBC, and Comerica Bank have brought us on to successfully fix difficult situations. If you would like to learn more about our fractional CFO services, please read about me in Forbes or contact me @ [email protected]