It can be a very chaotic time when a company is need of a turnaround. Management is (or should be) fretting over revenue, placating investors, managing suppliers, and reducing costs all while keeping employees motivated. There is an inordinate amount of things that need to get done. How do you know what to prioritize?
A disciplined process can help bring order out of chaos and lead to a successful transition. Of course, solid management, great employees, and accommodating suppliers and creditors also helps.
Step 1: Project Your Cash Flow
Companies that are in a turnaround situation are generally cash-constrained. You're stretching payables, calling customers to collect, testing the limits with your bank. You may have already asked investors for additional capital.
The first step to a successful transition is to develop a detailed cash flow projection. What are your receipts and when will they be coming in the door? What are your outflows, and when are they due?
The goal of this exercise is to understand if and when there is going to be a cash shortfall as well as the magnitude of the potential deficit.
Obviously, it is best to anticipate cash flow issues well in advance so you can properly plan for them.
Step 2: Free Up CashChances are that you are already working payables and receivables pretty aggressively. Where else can you free up cash?
Is your inventory moving quickly enough? Is there obsolete product that can be liquidated? Do you have any non-operating assets that can be sold or space that can be sub-leased? Can payment terms be re-negotiated? Look at every line on your cash projection to see if there are opportunities to free up cash.
The goal is to minimize and delay the cash trough. The better the cash flow, the more time you have to fix the business and the more accommodating your investors/creditors will be.
Step 3: Identify the Problem
Take a holistic look at your operations to identify where your business model is falling short. A quick benchmark study can be a good tool to point you in the right direction.
Are your products and services in-sync with the market? Do you have adequate sales and distribution infrastructure? Are your costs appropriate for your revenue? Is management able to effectively execute? Are your operations efficient and effective?
The goal of this exercise is to understand the underlying reason(s) why the company is struggling. Superficial cost reductions will help alleviate immediate cash flow constraints. But, a sustainable turnaround will only come from a perfected business model.
Step 4: Revise the Business Model
Now that you understand the underlying cause of your company's difficulties, develop a strategy to capitalize on your strengths and get rid of the dead weight.
Do you need to overhaul your core offerings? Create an incentive plan for your sales team? Revamp your supply chain or reduce headcount? Jettison an unprofitable product line?
Re-forecast your P&L projections based on your perfected business plan to make sure the revised business model will pay-off.
What are projected sales from new revenue streams? What is the sales lift and costs for your new incentive plan? Has changes to your supply chain improved gross margins? What are your new SG&A expenses?
Will these changes result in a sustainable and profitable business? If yes, keep moving forward. If not, continue to reevaluate your options.
Step 5: ImplementNow it is time to make and follow through on some tough decisions. Crystalize the vision, set goals, develop a plan and execute. It takes hard work, a motivated team and some late nights.
The goal of this step is to translate your plans and projections into reality and begin to realize the positive results of your revised business model.
The 5 steps I have outlined are a general roadmap for companies in transition. Having a clear plan can help keep you and your team focused - even while being pulled in many different directions.
If you would like assistance focusing your business, give me a call. I would be happy to help. 
