In the UK, only four percent of businesses manage to celebrate and survive past their 10th birthday, and given the recent high street turmoil, this number is likely set to drop further. As a result, we are witnessing an increasing number of businesses looking for turnaround and restructuring solutions and specialists to breathe new life into their faltering companies, often using their expertise alongside existing management teams, providing expertise, mentoring or investment. But how do you turn a business around that’s been in decline and losing money for a number of years? Below Andy Scott, serial entrepreneur and Founder of Rel Capital, provides expert insight.
Having worked closely with hundreds of business that have been on the brink of bankruptcy, as well as having had my own financial loss during the credit crunch, I wanted to share the steps I take to help turn around a faltering business:
Don’t stop asking questions
Before you can do anything, you need to figure out the reasons why a business is struggling. When I go into a business, I watch closely, listen and learn before changing too much. I find it helpful to meet everyone one on one, no matter how junior they are, and listen to their concerns. I always ask, ‘what would you do if this was your business?’, as you get some amazing feedback which paints a picture of what has gone wrong, what it does well, its USP and where the business should be heading. Often people lose sight of this. Give everyone your personal mobile and tell them they can reach you anytime if they have concerns, ideas or just want a chat. Lose the us and them mentality. In order to succeed you need to be a team.
Have a clear short, medium term and end goal
When business owners try and turn their own businesses around, they often only focus on short term fixes, making cuts and redundancies to help stem the losses, rather than assessing the bigger reasons why a business is failing. As a general rule, businesses don’t tend fail on their own, Business people do, with some exceptions such as when a sector is in massive decline with no demand.
Once you have established the root causes, it is important to put in place medium and end goals, as well as short term fixes to ensure success. Common short-term goals include reducing overhead or debt by cutting excess or wasted contracts, whereas your mid-term goals are increasing sales and generating profit. End goals vary business to business but can include becoming a leader in your sector or even being acquired in 3-5 years time.
Get to know the staff (and get them back on side)
Meeting and motivating the management team is essential to keep the business going. When a business is struggling, it can be a very disruptive and traumatic time for staff, so it is important that you reassure them that you are in it for the long term. It is often the second-tier management who are run down and lacking in motivation and need to buy into your vision and back you as much as you are backing them. Something that has worked for me has been offering a select number of key people shares of the business to help keep them long term, and more importantly making them feel its their own baby. Whilst you may not like it, try and remember to think pound signs not percentages!
Be prepared to wait for results
Turnarounds usually break even in year one at best, and make money in year two, so be patient, stick to your plan, and your hard work should reap results. To help you come out leaner on the other side, go through all your contracts, negotiate where you can – from the amount of paper you go through in the office to the number of company cars you have registered, every little helps. With an insolvent purchase, you have the option on what facets of the business survive, and might be faced with the difficult choice of which divisions you want to retain but remember that when you are back on your feet, you can scale up growth quickly and bolt on other businesses.