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How To Turnaround A Declining Business
Learn how to change the fate of a business that you once thought will not survive.
Turnarounds are painful, they are the most emotionally draining things any strategist undertakes. The environment of negativity from employees, and hatred from customers and creditors make it more toxic. Add another looming risk, running out of cash. Is there a way around it? After having done 3 successful turnarounds in the service business I will share with you how to do it well, so you lessen the emotional toll and give your business a second life.
The Primary Reason Most Turnarounds Fail Is Because There Is Not Strategic Intent
This is what I mean by strategic intent:
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You have a weak purpose behind the turnaround
You are not looking closely at identifying existing assets
You lack the discipline that will regulate culture and operations
Finally, you are not making hard bets
Here's how to step by step:
Step 1: Objective Diagnostics
You need an objective lens to identify what went wrong.
Usually, there are 4 major reasons why you are in such a situation. 1) The customer preferences changed 2) Your talented people left 3) Your products have completed their lifecycle 4) Your industry has major strategic shifts
See what has led to most prominently contributing towards your lowered ability to generate cash.
Step 2: Identify The Biggest Assets You Can Still Leverage
Business is made of assets that deliver value, figure them out.
Some sources where you can discover these assets are customer segments, customer trust, technology & infrastructure, employee loyalty, etc. A combination of such strategic assets can be used to deliver new value in the form of a new business line or product or a change of business model.
Step 3: Design A Cash Flow Program To Accumulate It
Cash is king, it is what pash bills, not profits.
In a turnaround, there is a deadline for when the cash will exhaust. So build a program to preserve cash: 1) work with customers that pay cash 2) focus on products that have generated upfront cash 3) work with suppliers that work on credit 4) introduce pay for performance for employees.
In short, identify levers, discover new sources that can generate value, and preserve cash.
Step 4: Implement The Plan With Discipline
Once you have identified the assets and designed a cash flow program, it's time to execute the plan with discipline.
This means implementing a culture of operational excellence, creating a sense of urgency, and making hard decisions that align with the strategic intent.
It's important to stick to the plan and avoid distractions that take away from the primary objective.
Step 5: Measure And Adjust
Finally, measure the progress and adjust the plan accordingly.
Keep track of the metrics that matter and make data-driven decisions based on the results.
If something isn't working, don't be afraid to pivot and adjust the plan.
Remember, a successful turnaround takes time and discipline. But with the right strategic intent and framework, it can be done.
Turning around a declining business is a daunting task, but it's not impossible. By following the framework outlined above, you can increase your chances of success. It's important to have a strong strategic intent, identify and leverage existing assets, design a cash flow program, implement the plan with discipline, and measure and adjust as needed. Remember, it takes time and discipline to execute a successful turnaround, but with the right mindset and approach, you can give your business a second life.
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