Turnarounds are not for the fainthearted among us.  Turning around a troubled entity is complex. There are many stakeholders: a nervous board, a thin-skinned management team and worried employees are just the beginning. There are customers who might run for the exits, partners second guessing their alliances. Public companies need to deal with the stock market expectations while private companies have private equity investors on their heels. If things are really bad, then the business needs to deal with lenders, creditors and potentially courts. Nothing about a turnaround is simple. Everything is urgent. The expectations are high, resources are scarce and time is limited.

So, what do turnaround specialists like Salto Partners do? Well, a first good advice is to stop digging further if you are already in a hole. As an independent third party we can lend the business a new set of eyes, trained in managing and advising in troubled situations. The key to a turnaround is to rebuild an enterprise that has a future, to build an enterprise that people want to do business with, to build an enterprise that people like to work for.  Here are the five major stages of the turnaround process:

Phase 1: Situation Analysis

First, it is important to find out how severe the situation is. Is the business viable? Can its products and services compete in the market place? Is there sufficient cash to go through the turnaround? This analysis should result in a preliminary action plan that shows what is wrong, what potential solutions exist, key strategies to turn the entity in a positive direction, and a cash flow forecast to understand cash usage.

Phase 2: Establish The Go Forward Team
All options are on the table. The turnaround can be managed with the existing management team, perhaps augmented by advisers. It is possible and has been done. The biggest problem for the existing leadership that presided over the downturn is to challenge its own assumptions and decisions. For that reason, it is not uncommon in turnarounds that key players are being replaced. The most important characteristic of the go forward team is that it is willing and able to function with minimal friction while executing the new strategy.

Phase  3: The 30-60-90 day plan
Now, it is important to gain control of the situation. Based on the preliminary analysis create a detailed 30-60-90 day plan that outlines how to tackle the problems. Create ownership by distributing responsibility for parts of the plan to key people in your organization. What ever causes the problem, stop it right here. The 30-60-90 day plan lays out key initiatives and actions that happen in the near term. For example the plan might include the following topics
a) Portfolio: Which products and services will be carried forward? Which ones need to be cancelled? Which ones need to be fixed?
b) Sales: What are the must-win deals for the quarter requiring executive level attention?
c) Cash flow: Aggressively collect accounts receivable, and renegotiate payments against accounts payable.  Secure asset-based loans if needed.
d) Restructure debt and equities: Sell unprofitable or non-strategic business units, real estate, and under-utilized assets. Restructure debt to balance the amount of interest payments with to a level the company can afford.
e) Reorgs: Realign organizations, reduce overhead, conduct lay-offs if needed. Do this swiftly. Avoid the death of a thousand cuts.
f) Key processes: Fix’em. If you have problems with product quality, then  fix your Q&A process. If your delivery organization is creating non referenceable clients, then fix the way you manage your custo-mer engagements. If the company doesn’t get any leads, fix your marketing. If promising deals are consistenly lost, then fix your sales process.
e) Top Talent: Identify top talent early. Create opportunities for people to grow even in these trying times.

Whenever possible, have a way to measure the outcome of each element of the 30-60-90 day plan , e.g. closed sales in $, product quality, customer satisfaction, P&L of business unit/company etc. Make the plan known. Get buy-in. You need everybody pulling in the same direction.

Stage 4: Building Momentum
Look for positive signs of recovery. This could be anything:
– Winning a major deal
– Better product quality metrics
– A new partnership
– Reaching break-even in a business unit
Look for any and all indicators that show that the plan is working. Nothing is more important than people believing into the future of the organization. Enter into another 30-60-90 day plan if need be.

Stage 5: Stabilize
At some point, declare the turn-around to be completed. For example, the business has reached profitability. Declare publicly the crisis is over. Capture the lessons learned. Make the findings known. Enter into mid range planning to ensure the future of the business. Shift the focus back to innovation, customers and the market place.

Communication is key to a successful turnaround. Get your management team aligned. Make your employees believe in the future. Most importantly, let the market place know that you are here to stay. Assume that bad news about your business reaches clients, partners and your competition. Be proactive with your communication, so you can control the message.