Welcome...

In previous newsletters, we have often talked about the work that we do: how we determine areas of weakness in troubled businesses, how we work to improve cash flow, how we work with creditors, how we try to improve organizational structure and operations. Depending on the size of the business and the magnitude of its difficulties, putting everything back on track could take three months, six months, sometimes as long as a year.

Sooner or later, however, it's time for us to leave, and for the management team to resume taking care of business on its own. In this newsletter, associate Chris Beane discusses what happens after we leave and what management should do to ensure that its business continues to grow and prosper. We hope you find it informative.

Also in this newsletter, we offer you brief summaries of four successful engagements we recently completed.

For additional information on us, visit www.beaneassociates.com. We welcome your comments and encourage you to forward this newsletter to anyone you think would find it interesting.

Sincerely,
Tom Beane, President CMC CIRA

An advisory board can furnish an abundance of advice on major projects, open doors for new opportunities and help prevent major mistakes. Here are some tips to think of as you form your board.

Check your ego: At your first meeting, look around the table. If you think you are the smartest person in attendance, you missed the point of having an advisory board.

Compensate them: Creating an advisory board will cost money (you don't always get good advice for free!), but it's an efficient way to enlist a team of advisors with diverse specialties.

Embrace diversity: Draw as many advisors as possible from different industries and backgrounds. The idea is to beat your competition, not be just like them.

Use them or lose them: Keep meetings focused on the issues you need help to resolve. Encourage free-wheeling discussion. Engage your advisory board, empower them, listen to them and then watch the positive results.

Many of us have experienced physical problems - a sprained ankle, a broken bone, a muscle tear - that has sent us to a doctor for diagnosis and then to a physical therapist for treatment.

In our work, we function as both the doctor and the PT, figuring out what really ails the businesses we're asked to help and then working with the company's management team to put in place systems designed to ensure smooth operations and continued profitability.

And then we leave.

Physical therapy doesn't last forever either. When we've recovered, or reached the maximum number of visits our insurance plan allows, virtually every PT will deliver the same message at the close of the final session: "Keep on doing your exercises at home, and call if you have any problems."

And that is essentially the message we deliver to our clients at the end of each engagement: "You're on your own now, but you'll be OK if you do what we've showed you. And don't hesitate to call if you need help."

The businesses we work with come in many shapes and sizes. Many are distressed, some even on life support - in need of drastic change in both their financial and operating systems. Others might be doing well, perhaps too well, growing so fast that they haven't had time to establish systems that accurately track their cash flow or even out the pace on their production lines. Sometimes we work with family-owned businesses in the transition between generations, making sure that the members of the new leadership team possess the right mix of skills to carry the company forward successfully.

No matter what the situation when we arrive, when we leave the company is generating a positive cash flow, has a healthy outlook for its financial future and its managers have been trained on how to keep the business healthy.

A lot of that training was focused on accountability and how to use the reporting systems we put in place while managing the turnaround to ensure that accountability is a standard practice.

The 13-Week True Cash Flow is essential to keeping on top of where the cash is coming from and where it's going. Other metrics, such as guidelines/goals placed on Accounts Payable and Accounts Receivable, serve as reminders that there's more to managing the bottom line than collections and payments -- efficiency counts too. The system of weekly managers' reports which are contributed to and completed by employees throughout the firm from such departments as Accounting, Manufacturing, Sales and Purchasing, requires a summary of which objectives were met and which were not, along with explanations for why goals weren't reached.

Accountability is essential to any successful organization. These weekly reports ensure that all the employees are on board.

Here's where the discipline the physical therapist demands comes in. It's easy to say, "I'm doing OK. I don't need those exercises any more." And it's easy to say, "we're running in the black, we don't need all those reports."

However, the reason your body feels OK is because you're doing the exercises, and the reason the business is doing well is because management is paying attention to those reports.

Those weekly statistical updates - cash flow, accounts receivable and accounts payable - provide an instantaneous view of what's going on with the business, with no need to wait for the quarterly report. The written reports from each department provide the narrative, the explanation for why the numbers for the previous week were better (or worse) than expected.

The point of these reports is not to waste paper, not to take up management's time. The point is to show how the business is moving, and to hold every manager accountable for their areas of responsibility. The goals are set for all to see. Were they met, or not? If not, why not? Top management has to understand the metrics, ask the obvious questions and get meaningful answers.

For a business that has been struggling, achieving steady and sustained performance is a significant achievement. But a good business cannot be satisfied with operating on a steady plateau. That's why we also strongly recommend that businesses create an advisory board of skilled and trusted executives who can provide the guidance needed to take the business to the next level.

Choose advisors from other business sectors who can give the CEO a fresh and balanced perspective of the company's operations. By choosing advisors carefully, the CEO can build a team whose skill sets help compensate for any of his own weaknesses.

An advisory board differs from a board of directors in that its members don't have any power but they have the freedom to take a fresh look at the business and to guide management to resources, both human and financial, that can help improve the company's operations and profitability.

In our experience, the most successful advisory boards have five to seven members and meet quarterly. Look for experts with legal, financial and industry expertise, knowledge of sound human resources and management practices, and familiarity with any relevant specialties (engineering, marketing, international, etc.), where the company is inexperienced. Most owners and CEOs have the contacts to recruit advisors with the appropriate expertise; effective networking with other business associates should provide candidates for any remaining positions on the board.

By paying close attention to regular reports and creating an advisory board of professionals, a business can emerge from its troubles and operate within a new structure designed to help it thrive after we leave.

Remember the advice of that wise physical therapist. The CEO who keeps on doing the exercises won't just feel better about the business, he'll see his business do much better too.

To view additional articles, please go to:
www.beaneassociates.com/
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