I’ve had some challenges in my time, but this one was definitely a doozy! This is a business turnaround story of how I managed to take a business that was losing £100K per month and got them to £60K profit in just 3 months. In this post, I want to give you a quick overview of how I turned this company around using my very own business turnaround strategy and process. Using the below methodology, I was able to take this company from -£100K EBITDA to -£1,700 EBITDA (month 1), to £40K EBITDA (month 2) to £60K EBITDA (month 3) Without further ado, here’s my business turnaround story…
The company in question was a professional services company with about 50 employees. At its height, the company was doing very well with a turnover of over £6 million per year. It was one of the fasted growing companies in its field.
Over time, like many companies, things started to go wrong. It was subtle at first, but those small cracks began to grow over time. Before they knew it, they were in a business turnaround situation. There were so many things going wrong simultaneously and they didn’t know where to start.
When I was called in, the company had just posted a minus £100K EBITDA the previous month. Think about that. This wasn’t a £100K loss in a year, this was a £100K loss in a month. Time and more importantly, cash, had run out. The Directors were exhausted, heartbroken, embarrassed and any other negative emotion you could think of. To top things of, the culture from the top, down had become toxic. People no longer wanted to come to work. Back-biting, ass-covering and throwing people under the bus was common place.
This was not going to be easy.
Clarity Is King
I have always said that business success comes down to two things – clarity is king and simplicity is queen. The CEO had assigned me to “turn it around”. Let me ask you, is this clear? Of course not. How could you tell if the business was turned around? I could get the company to make a £1 profit. Would that be turned around?
I needed clarity, so I asked the CEO for clarity. Simple. Remember, clarity is king. Here are some of the questions I asked:
- On the Profit and Loss, what EBITDA do we want to see?
- On the Cash Flow, what surplus do we want to see?
- On the Balance Sheet, what do you want the Current Liabilities to be in 6 months?
- Do I have full autonomy?
- Is anyone off-limits if I want to fire them?
Now, doesn’t that build a clear picture? The CEO answered all my questions and I left this conversation with a clear idea of what ‘good’ looked like. Now notice, this is very top level. There was no discussion about ‘how’ I was going to do achieve this. All I was after at this stage was clarity on what a turnaround looked like. i.e. what does ‘good’ look like. The reason I say ‘clarity is king’ is because you need to know when you’ve arrived. You can’t hit a goal you can’t see. The clearer you are, the more chance you have of succeeding.
Men Lie, Women Lie, Numbers Don’t
Guess who was the very first person I grabbed. The Managing Director? The Operations Director? Sales Director? Wrong!
I grabbed a Finance person who had access to all the management accounts and knew how they were put together. I didn’t want to talk to anyone until I had a firm grasp of the numbers. The numbers don’t lie. They are fact. Each financial statement tells a story – if you know how to read them. My job was to read the financials. of the business and understand the story that they were telling me.
Why start with the numbers? Numbers don’t lie. People do. People tell you things with their own slant, emotion and agenda. Numbers don’t have emotions or agendas.
Know The Numbers
I spent a few days locked away with the Finance person. I adopted a line from Denzel Washington in Philadelphia, “Explain it to me like I’m a two-year-old.” I didn’t assume I knew anything. I asked questions and listened. We have two ears and one mouth for a reason. Time was running out and I had to learn a hell of a lot in very little time.
I asked the Finance person to explain me every single aspect of all the financials. I asked things like:
- How do we recognise turnover?
- What goes into the cost of sale?
- Has the GP gone up or down in the last 6 months? Why?
- What are our biggest monthly expenses?
- Is the surplus going up or down? Why?
- Who are our biggest debts with? Why?
- Who owes us money? Why?
This actually comes from Lean Thinking. This fact-finding exercise is called a Gemba. (For more on what a Gemba is and how to do one please read this post). In its simplest form, you attempt to find a root cause by doing 3 things:
- Go to where the work happens
- Ask questions
- Always show respect
Notice, that nowhere in that list does it say you talk and everyone listen. Ask questions, shut your damn mouth and really listen.
Now I had a deep understanding of the numbers. Now it was time to talk to some other people.
Simplicity Is Queen
Remember my mantra? Clarity is king, simplicity is queen. Now I had clarity. I had clarity on the successful outcomes and the numbers to date. The next thing was to get simplicity.
I spoke with all of the Directors individually and did Gembas again. I went to where they were, asked questions and showed respect. I got an understanding of what was happening in their respective areas. Remember, I had the numbers in the back of my mind, so I was able to separate fact from opinion.
Once all the Gembas were complete I had an idea of the challenges that the team were facing. Now it was time to get everyone together.
The Big 3
I was inspired by a great book by Michael Hyatt called, ‘Free To Focus‘. (Read my ‘Free To focus’ book review). In that book, it says we have to come to terms with some things like there’s always going to be more for us to do than we can do in a day. once you understand these liberating thoughts you start to take it easy on yourself. Now that might sound counter-intuitive in a business turnaround story but that’s what we had to do.
When you try to do too many things at once, you end up not achieving anything. You become stressed, burned out and frustrated. That doesn’t help anyone. The key is to focus on what’s important.
Everyting is urgent, but not everything is important.
We had to make things simple (simplicity is queen). Urgent things will always be there. They’ll never go away. These so-called ‘urgent’ things can take us off doing what is important. The important things are what will get you out of a ditch.
I asked the Directors to list all the things they could think of that we could do to turnaround the company. They gave me a list of about 20 things.
They couldn’t do all 20. So I asked them, “What are the 3 things that will have the biggest impact?” The Directors then narrowed the list down from 20 to 3.
Then I asked, “If you could only get ONE thing right, what would have the biggest impact?”
This proved. tobe a very powerful question. It forced the team to abandon opinions and back up their answers with facts and financial scenarios. After a while, we had nailed it. We had found the one thing.
The 3 most important things can be referred to as the ‘Big 3’ as per ‘Free to Focus.’
Create The Business Turnaround Plan
If you have read the Business Fixer blog for any length of time, you will know that I base my business turnaround process on something called, ‘The Business Triangle.‘
Every single business can be boiled down to 3 core areas – Finance, Operations, Sales & Marketing. The underlying element that holds it all together is Culture. In order to create a solid business turnaround plan, I recommend creating goals around each of these areas.
Remember that clarity is king. The best way to get charity on a business turnaround plan is to define crystal clear goals. Therefore I recommend you use a goal-setting formula that comes from a book called ‘4 Disciplines of Execution’ by Franklin Covey. (Read my ‘4 Disciplines of Execution’ book review here.)
Move [X] to [Y] by [WHEN]
This is by far the best goal-setting formula I have ever used in my career. See this post for more detail on how to set goals using this formula.
Here are some examples of some goals for each part of the Business Triangle:
- Increase monthly EBITDA from £100K to £20K by 30th November 2021
- Decrease monthly cost of sale from £55K to 30K by 1st June 2021
- Increase monthyl gross profit from £40K to £55K by 31st October 2022
- Decrease average customer service response time from 4 hours to 10 minutes by 30th Septemeber 2021
- Decrease monthly customer complaints from 30 to 10 by 15th February 2022
- Increase number of widgets manufactured per hour from 3 to 9 by 16th August 2022
Sales & Marketing
- Increase monthly sales from £3,000 to £5,250 by 17th March 2022
- Increase Google Review rating from 2.5 to 4.5 by 29th January 2022
- Increae number of daily outbound calls per salesperson from 20 to 30 by 8th December 2022
Do you get the idea?
By creating clear goals around each of the Business Triangle areas, you will ensure a more successful outcome. Also, with the aim of keeping things simple and abiding by the Big 3, ensure that you don’t set too many goals for each area.
I created this Goal-Clarifier tool which will help you create crystal clear goals. It’s a free download so you’ve got nothing to lose!
Adopt the Big 3 for each area – which 3 things would have the biggest impact on the business?
Identify the one thing for each area? If you could only get one thing right, what would have the biggest impact?
Collate all the goals per area and put them in a document. Boom! There you have it, a solid business turnaround plan. The best part about this business turnaround plan is that it’s clear and simple. Clarity is king, simplicity is queen.
We had created our business turnaround plan. Now it was time to execute.
I’ve always operated on the basis of fewer meetings and more ‘doing the work’. My structure was to have 1 meeting with the Leadership Team on a Monday morning. In that meeting, we would identify everyone’s Big 3 for the week according to the business turnaround plan and what ‘good’ looked like by Friday. The meeting lasted no more than 20 minutes. Then everyone was off to work. On Friday, we reviewed everyone’s results from their Big 3’s.
I gave people space to work. This is where the trust has to come in. Because I had involved the team in the creation. of the plan, they were bought in. It was their plan. Now I had to give them space to execute. My door was always open should they need to ask something or run something by me.
Laser focus on the most important things got the business out of the ditch. The team was doing fewer things but they were happy because they knew these were the most important things. These things would have the biggest impact on the business.
Here’s the results:
- Starting Point: -£100K EBITDA
- Month 1: -£1.7K EBITDA
- Month 2: £40K EBITDA
- Month 3: £60K EBITDA
There you have it. My business turnaround story of how I took a company from a £100K loss to £60K profit in just 3 months. If there’s one thing that I want you to take away from this post it’s this – clarity is king, simplicity is queen.