4. IS YOUR COMPANY A CANDIDATE FOR REAL TURNAROUND?
If you own a company or sit on the board of a company, which used to
be profitable and operated fairly smoothly, but in the recent past has
exhibited the problems listed below, your company may be a candidate for a
turnaround. I say "may be", because a turnaround as described
here is not always the best option. Before you put your heart into it,
you must also make sure that a turnaround is feasible (see Section
5 ).
Financial information is usually the most telling concerning the
desirability of a turnaround. However, just having an ear to the ground
can also alert you to the need for a turnaround. So ask yourself : Does
your company show the following indications of trouble and decline?
Critical financial problems that indicate the need for turnaround
:
(1) The company has been reporting large losses for some time and the
hemorrhaging continues; (2) Paying suppliers is a problem; (3) Paying
taxes and other "non-immediate" bills is a problem; (4)
Important jobs generate a loss; (5) Lenders and suppliers are not giving
the company the breathing room they used to, and they indicate that
their confidence is shaken.
Usually one of these problems is a sufficient indication that drastic turnaround action is desirable.
Critical non-financial symptoms that indicate the need for turnaround
:
(6) Good clients are leaving the company; (7) Clients complain their
calls aren't being returned; (8) A number of employees are telling each
other or management or clients or suppliers, that they do not feel they
are being led; (9) A number of good employees are leaving; (10)
Management is no longer working as a team.
Usually two or more of such symptoms plus some confirmation through financial data are a sufficient
indication that drastic turnaround action is desirable.
Other valid reasons for drastic changes (similar to turnaround):
Without any of above problems or symptoms being present, there may be
other valid reasons why, as an owner or company director, you may
realize that the company is in danger of failure unless the course is
drastically reversed. An example would be when your company is
profitable but is very dependent on a few large clients and there are
good reasons to expect they will drastically reduce the business they
give you.
But, as mentioned above, it is not enough that a turnaround is
desirable. It must also be feasible.
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