Do you need a business turnaround expert? Millions of new businesses are created each year — and then several hundred thousand fails. What happened and could it have been stopped?
I talked to turnaround expert, Walt Jones to get to the bottom of some of these questions.
Maybe you think that hiring a turnaround expert is just for multi-million dollar businesses, but that is a myth. Listen to our interview to get more insights and tips. Here is a short summary of our conversation.
What are some common signals that business is in trouble?
Too many small business owners are living on the brink of failure but they ignore the signs. Here are just a few red flags to pay attention to:
- Can’t pay vendors
- Lost customers
- Low margins
These can happen from time to time, but if you find that these triggers are trending (i.e. it’s happened more than twice in the last two months), it’s time to take action before it’s too late.
What are some metrics that business owners should be looking at regularly to avoid a crisis situation?
- Cash Flow is the first and most important. Cash Flow measures your ability to meet your financial obligations. QuickBooks and other small business accounting software have pre-defined template reports for all of these so you can pull them up on demand.
- Earnings Before Interest and Taxes is the next most important measure. EBITDA is a measurement of what it actually costs to run your business. This is a great early indicator of what your business is costing. To put it as simply as possible, don’t spend more than you make. This is easier said than done. A great way to make this easy is to read Mike Michalowicz’s book Profit First.
“Ignorance is not an excuse.” says Walt Jones. “It’s your responsibility as a business owner to know where you are financial – even if you don’t know the details, you should.”
Use this as a self-check — Every time you go to another venture or purchase something, one thing to ask is – “What is the return on investment that I want to get out of this? What is the amount of money – will I make money at this?”
What is the quickest way to find the root problem?
Losing money is not your problem. It’s a symptom of your problem. The job of a turnaround expert is to help you get to the core of the problem. Here are a few tips from Walt Jones:
- Talk to employees at every level. Your employees are the boots on the ground of your business. If you’ve built a trusting relationship with your employees (meaning that you don’t default to blame), tell them what’s going on and ask them what they think is causing the cash flow issue. If you approach this properly, you’ll get an astounding amount of great ideas. If you’ve ever watcched Undercover Boss, the results would be similar to this. And again, you can do this yourself, but a turnaround expert isn’t you and this may take the pressure off of employees for sharing information.
- Talk to your customers. You can collect customer feedback from your sales and customer service teams, you can hire a marketing expert or turnaround expert to interview your customers and get their feedback.
- Deep dive into how you spend your time. If you’re a single business owner, dig deep into how you are spending your time. Remember that you can actually save money (cut costs) by outsourcing all of those things that are difficult for you to do such as bookkeeping or technology. Make a list of the things that only you can do. Outsource the rest.
What are some characteristics that a small business owner should look for when hiring a turnaround consultant?
Now, let’s say you’re ready to hire a turnaround expert. What should you look for?
- Listening skills. When you’re talking to the consultant or turnaround expert, check that your ration of talking to listening is about 2 to 1 — you should be talking twice as much as they are. They should be listening, asking questions, listening and getting clarification from you.
- Sharing thoughts. A really good turnaround consultant will give you some golden nuggets and suggestions that show that they know what they are doing and that shows you that they can think out of the box. They should bring something to the meeting where they have initial advice that they can share with you. Sometimes the fix is really easy – reviewing process and identifying that by simply changing the date they send invoices out can change the result. You’re looking for someone who can provide creative, simple solution. The biggest thing the consultant has to do is justify their value.
- Ask for referrals. Don’t be shy and ask to speak to previous clients. Ask for case studies where they can explain what they’ve done.
How do you know that the turnaround is working – what are some signs that it’s improving?
Once you’ve taken the plunge and hired a consultant or turnaround expert, you want to make sure that you are moving in the right direction. Consider the following:
- Look at the data — Quite frankly, it’s not looking at the data or not understanding the data that gets you in hot water. Once you’ve started the turnaround process, reviewing data regularly is essential. Monitor your financials and your sales and marketing performance data. If you’re measuring employee productivity, then monitor staff management, employee engagement.
- Meet regularly — The best way to make sure that you’re making progress, is to keep your finger on the pulse of your team’s performance. Meet about once a week or at least twice per month.
- Be actively involved. The last thing you want to do is bring someone in and hand it off. The consultant should want you to be involved and you want to make sure that they are staying on task and that you’re getting the value – it’s a partnership.
- Be sure to get the process — In addition to being involved, you need to know exactly what the process is that the consultant used. The consultant should also want you to know how they did it.
Every Successful Business Needs a Turnaround
There is nothing wrong or shameful about reaching out for help to pull your business out of a financial hole. In fact, a successful turnaround cannot only rescue your business, they can also send your business in a whole new, more successful direction.