Knowhow: Growth Prep | How to make sure your business is ready for a turnaround
They say the Great Recession is over. However, many surviving CEOs find themselves in a precarious position.
They've gone through a series of adjustments to survive their own corporate downturns. After cash reserves dwindled while conducting business in the normal course, companies eventually maximized bank lines of credit, stretched payables, reduced inventory levels and, reluctantly, reduced workforces, all while watching some of their own customers and suppliers go out of business.
Now, like a ship lost at sea that finally spots land and screams “Land ho!”, companies are spotting what they’ve been searching for while lost in the economic hurricane of the last several years: growth opportunities on the horizon.
The great economic savior of companies — the rising tide that floats all boats — is finally showing up on the radar of many companies for the first time in years. Finally, they can return to their earlier days of profits and glory.
But not so fast!
Think Twice
CEOs now find their companies in the weakened position of having very little cash, no bank credit, little or no supplier credit, very little inventory and a fraction of the workforce they had at their peak. So if you are steering the ship, how do you get to that land of growth? Like a ship with tattered sails, you can see the land but can’t get there.
Some CEOs will make the devastating mistake of committing to the growth without a plan, thinking that it will save their organizations. Like drinking sea water when dying of thirst, it may actually hasten their demise.
So, what can a company do to return to that promised land of long-term, sustainable, profitable growth? Three words: plan, communicate and execute.
Plan. Your business has changed. Develop and document a new business plan. The exercise alone will force you to clarify many issues that would otherwise turn into problems down the road. Incorporate measurable and accountable action steps within the plan, and don’t chase just any growth for the sake of growth. Find your new core business. Reevaluate your products, your target customers and target markets. What parts of your business are most profitable and least labor- and inventory-intensive? Use this opportunity to grow your new business around core competencies without the drag of all the old business clutter.
Communicate. The best plan will go nowhere if it’s kept secret. Share your new plan with employees, with suppliers, customers, your banker, and even other bankers. You may be amazed by the valuable input and cooperation you receive by allowing these various stakeholders to participate in your growth plans. Suppliers may reopen credit, more profitable customers may be willing to make deposits with new orders, even your bank, or another bank, may show new interest in your progress and be willing to consider a new line of credit once you begin to execute. As for employees, you’ll see a renewed energy and commitment that has likely been missing for some time.
Execute. Now that you’ve communicated your plan, you must execute with unrelenting discipline. Do so, and you’ll build great credibility with all the stakeholders with whom you collaborated. Fail to execute and, well, you know what happens.
Adopt the mantra of plan, communicate and execute, and you’ll soon be sailing in strong, favorable winds. Be careful, though. The sea remains very choppy out there, and new storms may be just past the horizon.
He can be reached at ksanginario@northstarmp.com.
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