No one ever plans for a “turnaround.”

Who really owns your business? How did we get off track? Likely, these are questions most business owners contemplate but rarely set about to answer thoroughly. The thought of having a business turnaround expert knocking on your door is never appealing, yet much can be learned from how they assess the health of your business and what steps they often set about to remedy almost instantly. Dave Sands of Dorset Partners joined the Vermont Family Business Initiative forum last week to help members understand what it takes to keep from needing a turnaround.

Here is what was shared that will serve any business well, in prosperous times and also when it tightens up :

  • Watch the trends – look closely at rate of change. What appears to be a healthy debt:equity ratio in March can be trending quickly down by June.
  • Implement a Board with members from outside the business or family. This external perspective is critical to keeping the business decisions in step with reality.
  • What is the true liquid value of your business? Understand who really owns your assets; the business is only worth what the shareholders can readily take out of it.
  • Remain true to your core business. If there are parts of the business that are hemorrhaging funds or keeping you from excelling elsewhere, get rid of them.
  • Gauge the health of your business. Have several members of the business complete this “Business Health Test.” Be honest and compare your answers with the others.

While turnaround is never desired, the steps of the turnaround process may serve help you make decisions now to keep your business moving in the right direction. Here is how Dave approaches many of the turnarounds he is involved with:

  1. Stabilizing the business and creating cash. CASH IS KING!
  2. Diagnosing what are causing the problems.
  3. Restructuring your business around a profitable “core”.
  4. Preparing a realistic turnaround plan your creditors will believe.
  5. Negotiating the restructuring of your debts and obligations.
  6. Executing the turnaround with precision and consistency. Have a time frame.
  7. Growing (or selling) your business when the turnaround is complete.

Turnaround is never something you plan for. No business owner works it into their long term strategic plans. In this current economy, however, it is often the reality. Dave Sands founded and ran a $25 million business in Louisiana. He faced turnaround first hand and was eventually forced to liquidate the business in the wake of Hurricane Katrina. Whether suddenly catastrophic or a slow spiral into oblivion, as a business owner you need to be prepared to weather all the storms. Turn the business around now on your own terms, other wise, this is the guy who will show up at your door to “help” you.

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