When we are contacted by the owner of a distressed business she invariably asks, “Can you help me?” While we have great confidence in our abilities as turnaround consultants and change agents the question that must communicated very clearly, precisely and in understandable terms is, “What are you trying to achieve.” This seemingly simple and obvious question not only defines success of the process but also helps to inform the entire process. Once we know this we can determine how we can help.

Our role as turnaround consultant is to immediately stabilize the business, improve cash flow, communicate clearly with all stakeholders that a stabilization is occurring and to help the owner keep the business moving forward. This is a very critical phase and must be attacked with great vigor and speed.

Gap Analysis is the starting point for revitalization planning after the stabilization is underway. Figuring out where the company is at present is relatively easy compared to the difficult task of determining where the ownership wants the company to be. However, if the owner can clearly articulate this in measurable terms, the turnaround consultant can help to create the plan to “bridge this gap” and help the stabilized company achieve the owner’s goals for the company and its turnaround. It is so true that you can’t hit the target unless you know the mark.

This articulation of objectives informs the entire revitalization process and helps to determine if the target is being neared and achieved. What are some of typical objectives articulated by business owners?

• Make payroll this week – During the stabilization process cash is very tight. Often vendors’ payments will be delayed in order to make certain there is sufficient cash for payroll. Lenders can play a role in alleviating this strain. They can agree to delay principal payments and might even make the payments interest-only for a period of time. Sometimes the lender will help create additional availability based if the borrower can allow the lender to secure additional collateral offered by the borrower and/or make an over advance based on the efforts being put forward by ownership to turn the business around.

• Improve cash flow – Most of our clients need improved cash flow. This can often be accomplished by doing a better job of collecting receivables thus reducing accounts receivable days outstanding. We also would focus on accelerating sale of inventory and attempting to extend vendor payments by increasing terms with vendors.

• Sell the Business – Increase the value of the business to prepare the business for recapitalization of its debt or sale.

• Pass the Business on To a Next Generation – Many of our client businesses are multi-generational. Often an objective is to actively engage the next generation in the day-to-day operations while improving the profitability of the business.

• Find a New Lender – Often the bank is one impetus to getting outside help. An objective may be to refinance the current bank debt to reduce principal payments due each month.

• Improve profitability of the business – Many businesses have eroding profit margins. If an objective is to increase gross margin we will recommend an analysis of profit by customer. We then rank the resultant profit by customer from highest to lowest. We then draw a line at the level of acceptable profit. Those customer above the line we try to learn from and replicate the company’s success in these higher profit situations. We also seek to do more business with these higher relative profit customers. The customers below the line need further review. Often we then 1) increasing price to those that the resultant customer relationship profit would be above the gross profit target, 2) decrease cost of products and services being provided to increase profit in each sale to these customers, and 3) introduce new products and services that have higher profit margins targeted at these customer.

So when you need our help, let us first help you determine where you actually want to go. Once objectives are articulated by ownership, a revitalization plan can be constructed to guide the implement of the tasks necessary to meet these objectives and measure success along the way. First things first; figure out where you want to be in the end.