Finance Monthly - September 2022

your competitive position. Deliver only what customers are willing to pay for. Establish a Sound Capital Structure Create reasons for investors to invest and for buyers to buy. A sound strategy with a viable marketplace, efficient delivery and production vehicles, high probability of future cash flows — coupled with a cohesive marketing-oriented management team — will entice the investment community. Securing new capital becomes much easier when investors see high probability of return and a viable exit strategy. As important to infusing cash for working capital needs, is to make certain cash won’t be diverted into past sins. Establish relationships with creditors so they will work with the new management team — give them upside when the turn is complete. Consider a “creditor’s committee” approach to keep them plugged in and participating. Pre-packaged bankruptcies are also available to ensure cooperation. You can always purchase assets out of bankruptcy to ensure a clean structure, a strategy being utilised more often as buyout funds get more comfortable with the process. Implement Processes Use systems and processes to drive the business and control the dayto-day environment, which allows management to run the critical elements of the company. Many managers waste time on tasks where results would be essentially the same, managed or not. Focus on the important things — controlling cash and costs, increasing sales and enhancing value creation. Manage these. Processes define guidelines and expectations — watch for the benefits derived from communicating what is expected. This will reestablish delegation of authority and expectation to those who can turn the events of the company. When results are recurring, this stimulates value. Nurture Resources Leverage all resources —people/ facilities/advisers — to complete the turnaround. Set up an incentive structure that pays only when they accomplish the goals set forth in your long-term strategy. A robust incentive structure shares the risk; if successful all will gain. If not, you’re not subsidising poor performance. Incentives should be based on performance that will take a company beyond its sale. After all, they are a key asset your buyer is looking for. What’s your final word of advice? Do not expect miracles overnight. A turnaround can take years of hard work to achieve. Outside advisers are a catalyst to speed and direct the process and increase probability of success and returns. Owners must make hard decisions and commitment to enabling the process to take place. Ultimately, the success of a turnaround rests upon the shoulders of a business’s most valuable assets; owners, advisers, leaders, creditors, lenders, its management and employees, all dedicated to turning around the company – get buy-in. Good luck. John M. Collard Strategic Management Partners, Inc. 522 Horn Point Drive, Annapolis, Maryland 21403 Tel: 410-263-9100 Fax: 410-263-6094 Web: Email: or Bank i ng & F i nanc i a l Se r v i ce s 44 Finance Monthly.

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