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Corporate turnarounds can

generally be understood as
implementing a series of planned
actions for the purpose of avoiding
business failure and returning it to
financial solvency.
The implementation of such a plan
requires strong leadership and it
may include a restructuring of the corporate hierarchy, eliminating redundancies, a thorough
investigation of problem root causes, and the development of a long-term strategy to revitalize
and motivate the corporate culture of the organization.
It’s not unusual for a business to suffer an occasional economic downturn because sales are
slower than originally projected, or expenses are higher than expected. It’s important for
management to recognize these warning signs early and take action to counteract the downturn
and quickly put the business back on the road to profitability.
Speed is of the essence to ensure that the long-term prospects for the company aren’t irreparably
damaged. With the very life of the business at stake a carefully thought-out approach to resolving
the problem that is methodically implemented throughout all levels of the organization is
necessary.
To ensure that the early warning signs of a looming downturn are recognized as early as
possible, management should always be on the lookout for the following red flags:
 Multiple creditors escalating their efforts to collect receivables from you
 Repeated cash flow issues
 Increasing turnover of key personnel
 An ineffective marketing plan that fails to increase sales
 Large customers and contracts are lost to competitors
 Inability to obtain additional financing
 Difficulty working with suppliers and joint partners
 Continuous loss of market share
Frequently, the presence of these symptoms indicate that there’s an underlying operational or
strategic problem hindering the business. If these symptoms aren’t recognized and addressed
quickly with the corrected business strategy, the business can rapidly decline ending in
bankruptcy and liquidation.
Too often corporate managers are afflicted with “analysis paralysis.” Management can analyze
company data until the end of time, but if they can’t devise and implement an effective plan then
all of the analysis in the world is pointless. That’s why the most sensible plan of all is to hire an
external business strategist to examine the business and leverage their experience and expertise
to quickly improve a failing business—perhaps even pulling it out of the red and putting it back
into the black.
Management consulting firms that specialize in turning around problem companies are staffed
with professionals who share a results oriented culture that understands that the failure of the
client is not an option. They’ll work hand-in-hand with senior executives of the troubled
company to develop a restructuring plan that balances competing priorities for company
resources against managing liquidity, anticipating and reacting to unforeseen risks, leveraging
unexpected opportunities, and maintaining open lines of communication with key stakeholders.
It’s because that external strategists are first and foremost business executives, they understand
what it takes to build consensus, manage staff expectations, and control the progress of the
restructuring.
Obviously, the primary purpose of any turnaround effort is to eliminate the immediate danger of
insolvency and focus vital resources and talents on those tasks designed to restore corporate
value. To achieve this goal senior management must recognize that a corporate restructuring is
necessary for the survival of the company. This will frequently mean that a new Chief Executive
Officer (CEO) will be needed to make the difficult decisions that existing management is unable
or unwilling to do. The traits of an outstanding turnaround CEO include:
1. Extensive turnaround experience and can implement effective business techniques that
have been successfully used in the past with other businesses.
2. There’s no historical baggage influencing their decision-making.
3. They’re capable of challenging company management more freely since they aren’t part
of the organization’s hierarchy.
As soon as the new CEO is installed, immediate steps may also be necessary to remove any
members of senior management who may resist the restructuring effort including the CFO and
weaker board members.
There’s always the risk that turning around the business may require more than just cutting
expenses and laying off workers. Once the reorganization is complete, the company must still
ensure that its remaining business is profitable or an investment in newer growing markets may
be necessary.
Once the restructuring is under way the priorities of the organization must be crystal clear.
Generally, you want to focus on the following critical areas of the business to achieve a
successful turnaround effort:
 Priority number one is to stop the bleeding. In other words, positive cash flow must be
regained and continuous losses must be eliminated.
 Company moral must be restored by ending unproductive rumors about layoffs, product
line discontinuations, and facility closings.
 Stabilization must be quickly achieved. This must usually be done at a pace the troubled
company is not accustomed.
Nothing must stop the management consultant from achieving these initial objectives. Doing so
as quickly as possible will give the troubled company enough breathing room to restructure,
reposition, and reengineer itself. The breathing room that’s attained is only a short-term reprieve
that must be exploited to advance the momentum of changes that are still to come.
There’s no room to make expensive errors and there’s a zero tolerance for nonperforming
personnel. Financial solvency must begin by leveraging short-term payback opportunities, even
if that means temporarily putting off larger payback efforts that take longer. Short-term
payback’s are critical until the viability of the company is reestablished. The kinds short-term
paybacks we’re talking about are measured in days, weeks, and at most, a few months. This
emphasis will last far beyond the crisis management stage of the turnaround and almost until its
completion.
During the crucial stages of a restructuring there will be no time to conduct formal assessments
before taking certain drastic actions. The decisioning influencing those actions must be based on
a quick, penetrating analysis and implemented quickly by the turnaround business advisor.
In any turnaround, the owners of the company give advance authorization for the expert
strategist to implement drastic, unpopular, and most certainly unpleasant actions, including
laying off as many employees as necessary to bring down costs, closing facilities, and changing
policy. Without quick and decisive action the owners of the company will lose not only their
equity but any loans advanced to the company.
It’s imperative that senior management or the board of directors is capable of affirmatively
answering each of the following questions throughout the restructuring process:
 Is there proof that the business is still viable?
 Can key stakeholders be motivated and managed?
 Does existing management have the necessary credibility to be successful?
 Does the business have the ability to acquire sufficient credit from suppliers?
 Has the reputation of the business been irreparably damaged?
 Can the business secure additional funding either internally or externally?
It’s important that business owners don’t lose sight of the broader implications and impacts to
the community if the company fails. For example, the negative financial impact to employees
who lose their jobs, marriage breakdowns due to financial pressure, loss of government revenue,
and social impacts such as depression and suicide. The reality of corporate bankruptcy is that
many of them can be prevented with an alert and competent management team in place.
Kratos Innovative Strategic Solutions, Inc. are business turnaround specialists with extensive
expertise in returning troubled businesses to profitability. They work with creditors to reduce
payments and reestablish cash flow to the company. Then they assess your situation to determine
the viability of the business. Finally, they’ll partner with you to develop and implement a
restructuring plan to solve long-standing issues that interfere with the continued growth and
health of the company.
A restructuring plan may even attract new investment that can further stave off the possibility of
insolvency and give your business a good chance of long-term success. Their experience in this
increasingly specialized area of corporate governance may be just the infusion of intellectual
capital your company needs to survive.
For expert advice and assistance in turning around your business or creating a restructuring plan
capable of putting your company back on the road to profitability contact us for an initial
consultation.
For details visit www.kratossis.com
About Kate Wolfe -
Ms. Kate Wolfe is the Founder & President of Kratos Innovative Strategic Solutions Inc. Ms.
Wolfe has proven track record in corporate business, communications - marketing and
advertising, business development, software, office equipment, personnel, and has a legal
background. Ms. Wolfe eads a diverse team of professionals and manages portfolios of more
than $10M returning growth of more than 50% a year, within months.
Media Contact
Kratos Innovative Strategic Solutions Inc.
#760, 10150-100 Street
Edmonton
Alberta T5J 0P6
Canada
Tel: 1-587-880-4727
Email: info@kratossis.com
Website: www.kratossis.com