Wednesday, March 10, 2010

Save Your Troubled Company Now

by Jeff Sands

I am absolutely, positively certain that our economy will rebound and
that the specialty retail channel will survive. We’ve been through
worse and we’ll get through this. Our choice now is to survive the
storm and stay healthy for the sunny days which lay ahead.
Over the years I have returned five Gift/Décor companies to
profitability and have learned a few tricks along the way. The
patterns are always the same but these days the economy is certainly
giving us stiffer headwinds.

You probably have all the necessary components for survival already in
your possession. Likely you have customers, decent products, prior
(hopefully recent) profitability, prior and hopefully recent positive
cashflow. That’s all we need.

So here are the simple steps;

1. You need to assume full management control of your company.  You
built it once, now do it again.  If you have not personally guaranteed
your debt, breathe a sigh of relief and skip to #2.  If you do have a
personal guarantee, go read your signed paperwork and realize just how
committed you really are.  Next go look up the bankruptcy schedules
online to explore your options.  You’ll realize that most states will
let you keep one livestock, one gun, wedding bands and maybe a couple
bucks worth of home equity – assuming you still have some.   That’s
it.  Okay, now that we agree on your level of commitment, let’s work
on the fix.

2. Make a short list of everything you really want to keep;
Marriage, mental health, physical health, relationships with your
family.   All these things and your business can be preserved.  Let
your family know your true situation and enlist their emotional
support.  Let pride be the first casualty of your turnaround plan.
You may have gotten into this mess by yourself but you are unlikely to
fix it alone.

3. Stop all payments and expansion plans immediately.  Not forever,
just for now.  During my first turnaround, I had a Marketing VP nearly
in tears when I put a halt to his new showroom.   “When you find
yourself in a hole – stop digging.” That’s all we’re doing here,
taking a break to clear your head and get a new direction.
You are probably behind on your bills.   Some you must pay, the others
you should.  There are ways to deal with all of your payables and keep
things moving.  I recently worked with a company who was six months
past due with their vendors and struggling to make payroll.  Together
we crafted a plan to reduce breakeven 60%.  I then coached them on how
to present this plan to their bank and to their vendors.

4. Start building your plan – quickly.  We all know the saying that,
“Hope is not a plan”.  You need a real plan.  No smoke and mirrors, no
hope, no If-Then statements.  You have to show your bankers, your
vendors, your employees and your spouse how you can survive another
20% drop in sales.  We’re going to build a plan now that will still
make sense when this economy finally does hit bottom.
Here is the magical secret of Turnarounds – most business owners don’t
have the stomach for the cuts that need to be taken.  And 100% of them
afterwards say they should have cut deeper-faster.   My experience
tells me that you can’t cut too deep or too fast.   On my second
turnaround, I cut overhead 80% in 2.5 days. Seriously.  On Day 3 I had
a profitable company and a future.   Three years later, this business
was still producing profits and positive cashflow.

5. Now that you have a plan, here’s the final part; you personally
have to give first and give most.  Sorry, this entrepreneur thing is
not all fancy dinners and fast cars.  The next couple years will
require heroic leadership.  You need to be out front and leading by
example.   This hurts but you will need to downsize the car, the
lifestyle and the paycheck.  Everyone is watching – especially your
banker.

The essence of your turnaround is pretty simple; Hoard your cash. It’s
your oxygen and the only thing which matters in the coming years.
Truth be told, it was the only thing that ever really mattered.

You need to be a bold leader.  Fake it if necessary, just don’t let
folks know how scared you really are.  You now have a good plan which
makes sense.  Stick to that plan and nothing else.  Evangelize your
plan to everyone who will listen.  “Yep, the economy may be going off
a cliff, but I have taken the steps to assure our survival”.
Keep your cool and celebrate your victories.  There are five steps to
a turnaround and each one is cause for celebration.   The first three;
Management Change, Objective Analysis and Emergency Action will not
feel like cause for celebration but they are.  They are critical and
valuable steps to your survival.  And they are proof of your courage,
leadership and determination.

Watch your health and hug your loved ones often.  Sunny days will
indeed return to our lives and our great nation needs you and your
business there when this happens.

Jeff Sands works with several of the nation’s leading Turnaround &
Restructuring firms. He also manages a fund which invests in
distressed businesses. He can be reached at 985-778-3343 or
jeffsandsemail@yahoo.com.

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