If you have a company that is reporting losses or performance is falling sharply it is essential that you take a realistic assessment of your business and if necessary start your business turnaround now to avoid the %link%.
Causes Of Business Decline
There can be many causes for business failure but these are best described in the four pathways of business decline:
Pathway 1 - Your market is in short term or long term decline.
Pathway 2 - Your competitive rivals are using industry damaging strategies. The easiest example is a price war. One business reduces its prices by 3% and another rival retaliates by reducing prices by 5% and the cycle worsens in a series of tit for tat responses.
Pathway 3 - You have lost the competitive advantage you once had. You don’t give your customers a compelling reason to buy from you rather than your competitors. Alternatively you may have lost a cost advantage, you once had.
Pathway 4 - Your management approach, procedures, planning and control techniques are not as good as they need to be. While your management techniques were worked during favourable economic conditions, any weakness in one area or management discipline becomes an issue when recession is looming.
Your %link2% must address which ever area or areas is causing your performance problems.
Four Types of Business Turnaround
There are only four possible results from a business turnaround:
1 - The turnaround creates a viable business which generates high profits over the long term.
2 - The turnaround creates a business that returns to profit over the long term but only at a modest level.
3 - The turnaround creates a business that achieves short term survival but longer term prospects remain poor and eventual failure occurs.
4 - The turnaround fails. The business cannot be saved and bankruptcy is inevitable.
Factors Which Determine The Success Of The Business Turnaround
It is essential at the beginning of the turnaround that a fair assessment is made of the likelihood of success.
This will depend on:
1 - The number of problems causing the performance problems. The more weaknesses in the company, the harder it is to fix enough of them in the time available.
2 - The level of crisis within the company. The longer the problem continues without action, the less time and money is available to work within in the turnaround.
3 - The attitude of the business owners. The more open minded the [owners|management[/spin] and the more they are prepared to give up on the strategies and tactics have caused the problem, the easier the turnaround.
4 - The attitude of key stakeholders. If the decline has become clear to outside stakeholders like clients, vendors and the bank, their continued support is essential. Unfortunately actions they take to protect themselves are likely to make the situation much worse for the company. To beat the natural instinct to protect their own positions, it is critical that the turnaround leader retains the trust of these stakeholders.
5 - The level of cash available to work with. In any turnaround cash flow is all important and shortage of cash and opportunities to raise extra cash will restrict the turnaround process.
6 - The general economy. Any turnaround will be easier if the economy is booming rather than in recession.
Getting Help For Your Business Turnaround
You have three choices for your turnaround process depending on your company size and the size of the problem.
Business turnaround is a specialist discipline with hard nosed turnaround professionals or company doctors who are used to making the tough decisions to save companies in %link3%.
Less specialised are a wide range of business advisers, coaches and consultants who may be able to help your company if it is not in imminent danger of failure. If your business is struggling but not failing, this may be the right way to find help.
If you currently don’t believe you need outside advisers because your problems are small, there are self help programs ranging from books about business turnaround to more sophisticated programs.