Finance Monthly - September 2022

What is the most important step to turnaround success? Obtain leadership guidance early. Turnarounds and the Zone of Insolvency are fraught with risk. Businesses fail because of mismanagement – sometimes it is denial, sometimes negligence, but it always results in loss. There is a different set of skills required. I recommend hiring outside independent directors and advisers to help shape the process. You need these guys to increase cash flow, provide valuable guidance, contacts, and credibility. Install a board with transition and turnaround experience in valuebuilding situations. Companies committed to going through significant business change (turnaround, transition, generational ownership transfer, entering new markets), anticipating a major liquidity event, need guidance. Outside directors often increase cash flow and business growth. According to a Forbes/Lodestone Global survey, 97% of companies reporting increased revenues and EBITDA, since adding a board with outside directors. They bring a new set of skills and ideas to produce benefits, while you maintain control. They provide an external source of accountability and add credibility. When it comes time for a liquidity-seeking event, outside directors send the message that you are an organisation with leadership, guidance, and stability. Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s 41

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