If you’re reading this then you’re most likely looking for a business turnaround process that is easy to understand and implement. Well, you’re in luck! Here at Business Fixer, we pride ourselves on giving out lots of in-depth, free content on business turnaround. In today’s post, I will show you a business turnaround process that is suitable for 2020.
What is Business Turnaround Process
In a previous post, I went through the Business Turnaround Plan. As you can see this is the step-by-step guide on how to get to the business turnaround plan. What I’m going to go through with you now is the process of how I get to the plan.
For me, the business turnaround process is the thinking process of how to get to a plan. The plans I create are not random; there’s a clear starting point and train of thought that leads me to the plan. What you will learn in this post is what that starting point needs to be and the thinking process of how I get to the plan
The Business Triangle
In a previous post, I talk about something called the Business Triangle. This is the starting point for all my thinking. It’s like a filter of how I view every business. In simple terms, the foundation of every single business (whether you’re one-man-band selling bikes or a large corporation), comes down to these 3 core departments:
- Sales & Marketing
Every business needs these 3 to function. Without them, the business cannot operate. Not every business needs a procurement department, or a research and development department. But every business needs a Finance department, or Operations or Sales & Marketing.
So when I think of business turnaround process, I first think about the Business Triangle. I automatically assume that is a business is struggling then there must be problems within the foundation (i.e. Finance, Operations, Sales & Marketing). After years of business turnaround experience, I have confirmed my theory. Usually, the problems lie in all 3 areas. My theory is that if I can get these 3 areas right, then the rest falls into place. It’s that simple.
The Starting Point – Finance
In my opinion, Finance is the most important department in the whole business. I’ve always said that if you don’t know your numbers then you can’t run a business – nevermind turning one around! When you’re doing a business turnaround process, then Finance must be your starting point.
As you can see from the business turnaround plan, the starting point is to understand the economic health of the business. The reason I say this is because you need to know the current state of your profitability, cash flow, assets and liabilities. You need to understand what type of problems you have. You can’t begin fixing things until you understand what’s going on, and that requires you to look at the profit and loss, cash flow and balance sheet.
Paint the Financial Picture
The next part of the business turnaround process is to paint your financial picture. What do you want the profit to look like? What surplus do you want to see on the cash flow? What shareholder equity do you want to present? You’ve got your starting point, now it’s time to start setting the course for where you want to go.
The Need For a Strong Relationship Between Finance and Operations
When you’ve decided where you want to go, the picture needs to happen. That means that your Finance and Operations departments need to work together to make the picture a reality. Quite often, the Finance department simply read off a lot of numbers and there’s not much commerciality behind it. Real commerciality is about creating value i.e. making the financial picture come alive and putting the right numbers on the financial statements. You can’t do this is your Finance and Operations don’t have a good relationship.
How To Strengthen the Link Between Finance and Operations
Therefore the next part of my business turnaround process is to start strengthening the link between the 2 departments. This usually starts by me inviting some of the key Operations people into the Finance Meeting. The Operations staff are the ones who will be driving the numbers, so it makes sense for them to attend the Finance meeting.
Don’t be surprised if your Ops guys don’t understand finance and accounting. It’s your job to translate the numbers and get them to understand what’s going on; what financial goals you have and how they will be able to influence those numbers.
By doing this, over time a natural bond starts to form between the 2 areas. Finance are painting the picture, Operations are making it happen. It’s also good to have representatives from Sales & Marketing in these platforms too as they too drive the numbers. The reason I place a big emphasis on Operations is that typically they have more costs that they can influence.
The Culture of Ownership
The next apart of my business turnaround process is to create a culture of ownership. I was really blown away by the fantastic book, ‘Extreme Ownership’ by Jocko Willink and Leif Babin (2 ex-Navy SEALs telling you their leadership lessons that they learned on the battlefield). Their interpretation of what real ownership is was humbling, to say the least. It’s precisely that kind of culture that I try to instil into the teams.
If you have a team of people who play the ignorance card when it comes to ownership, then you’re business is doomed. The plan must be owned. If you have people in your core team (perhaps your management team or senior leadership team) then they must understand what true ownership means.
True ownership does not:
- Feign ignorance
- Blame others
- Make excuses
- Execute poorly
- Forget/miss deadlines
- Stir dissension amongst the troops
Instead, true ownership does the following:
- Take responsibility for anything with their name attached to it
- Has a sense of team
- Leads by example
- Leads up and down the chain of command effectively
- Executes with excellence
- Hits targets and deadlines
- Doesn’t make excuses
- Wins at all cost
Now let me ask you a question – which category would you like your team to be in?…
Hopefully, this has given you an insight into my business turnaround process. The beauty of this is that it’s simple. It encompasses hard numbers and the soft skills required for a successful business turnaround. If you follow this business turnaround formula, you’ll be well on your way to creating and executing a business turnaround of your own. Good luck!