Why is a business turnaround so difficult to accomplish?
First it is necessary that the Business Owner / CEO acknowledge that a successful turnaround is critical to long term survival of the company. Without this step a successful turnaround cannot be accomplished because it usually takes tough actions to achieve a successful turnaround. A turnaround can only be achieved by being top down driven; it cannot be driven from bottom up.
Secondly it takes different actions to accomplish the turnaround than were being taken prior to the turnaround. Many companies in turnaround try to accomplish it by using the same old techniques and actions, ignoring Einstein’s definition of insanity – “doing the same thing over and over again and expecting different results”. This part is very difficult because “we have always done it this way and it has worked in the past”. Thus a different mindset is necessary!
Businesses of all sizes experience turnarounds. Some large recent failures include Circuit City and Borders. There are approximately 27 million businesses in the United States of which small business comprises 99.9%. According to U.S. Census, there were 18,469 businesses with employees of 500 or more in 2008. Most of the turnaround situations reported in the news media is about large businesses. However, most business turnarounds pertain to small business. Unlike large businesses, small businesses are not in the position to bring in a turnaround team to help facilitate the turnaround.
I have been involved in several successful turnarounds and I can tell you that they are not easy to achieve but can be accomplished by taking the proper steps and actions. I will discuss these actions in future blogs.
Dave Mayo, CPA, CGMA
CFO 4 Small Biz Partner