WP-2 Achieving Business Stability
Our next objective is to use the few weeks created at WP-1 develop and implement a short term strategy designed to stabilise the business. This means taking bearings of the current situation, then taking a different course that only focuses on core business activities that generates a 'Positive Operating Profit
First step is to that three requirements for viability are in place;
- one or more viable core businesses,
- adequate short term financing,
- sufficient operational resources.
Inevitably it involves dealing with various external interest groups; typically angry creditors who are in the dark, employees that are more focused on their job security than business and customers who are concerned about continued supply.
Identify a Defendeable Competitive Position
Every business will have a competitive profitable core. They must be viable at least in the short term to give the business time to plan a future. Unprofitable product lines, division or business units will be identified, cleaned up for sale or liquidated.
Secure Short Term Finances
Short term funding and accommodation by lenders and creditors buys time. During which action will be taken to restructure outstanding debt obligations, sell assets, improve working capital management, reduce operating costs and implement a weekly cash budgeting process.
There can be no payments towards old debts at this stage. So these lenders may precondition support on weekly reporting from our consultants.
Get More Short Term Sales Revenue
Getting more sales from current customers, reactivating others and using existing business data to increase sales is a priority. All sales must yield a quality net sales profit. Putting up prices helps.
The business must correct product line and customer mix pricing, prune product lines, and exit loss making customers.
Focus Operations on Profitable Activities
Analysing the value chain identifies what's creating profitable value in the business. The primary activities of supply logistics, production, distribution and service get tested. If it's not generating a profit it goes or shutdown.
Ensure All Personnel are Contributing
Initially every will be pleased to see turnaround consultants working to save the business. However, they can only be retained if their activities contributes to this phase of the turnaround plan.
Others who won't or don't contribute positively must be laid off. Perhaps entire departments are eliminated or outsourced.
Stop Spending on Non-essential Engineering and R&D
Development projects and routine maintenance absorb cash. Change to a breakdown maintenance strategy and delaying or cancel development work in the short term.
Trim the Organisation
A smaller business can be managed by a slimmer organisation. Reducing departments, middle management layers will assist decision making and increase focus on core business.
Support functions can be outsourced to eliminate the overhead.too.
WP-2 Outcome = A Smaller Business with a Positive Operating Cashflow
Having made the cuts and changes, at WP-2 it will be a smaller
company with a positive operating cashflow. It'll probably take a couple
of months but it is only from this position does the business get the
opportunity to restructure and rebuild.
Owners feeling... Renewed Calm. Knows there's work ahead.