Blog

During the lifetime of a small to medium size business, it will inevitably falter in the execution of its strategy which will have an impact on employees, customers, and other stakeholders.When identifying the factors that will assist the CEO and management team in a restructuring event and or turnaround it is important to ask the following questions<h3>Business Restructuring and Turnaround Questions to Ask</h3>Where Are We Now?<ul><li>Situational Analysis</li><li>Diagnostic Organizational Fitness Health Evaluation</li></ul>Where Do We Want to Be?<ul><li>Strategic Direction</li><li>Objectives</li></ul>How Will We Get There?<ul><li>Strategies</li><li>Programs</li></ul>Who Must Do What?<ul><li>Delegated Objectives</li><li>Action Plans</li><li>Key People in the Right Positions</li></ul>How Are We Doing?<ul><li>Business Review</li><li>Key Performance Indicators Operational {leading}</li><li>Financial Review {lagging indicators}</li></ul>While these questions are essential, it is vital that the leadership team also focus on:<ul><li>The well-being and mental health of their employees.</li><li>Pay attention to the input of customers who have a stake in the health of the company.</li><li>Streamline processes, practices and systems.</li><li>Create a high sense of urgency; we can turn this business around.</li><li>Develop a relentless focus on “Cracks in the table”; where are the cash leakages?</li><li>The focus on cash is extremely important and business assumptions about the inflow and outflow of cash must be managed in a disciplined manner.</li></ul><h2>Receiving Outside Assistance</h2>After answering these questions and take assessment of the business situation, the CEO, business owner, and the Board of Directors may discover that the current management team needs external assistance in developing the turnaround plan; it is not a sign of weakness to ask for assistance from a qualified professional. We turn to fitness gurus for our physical health, we ask our ministers and rabbis for spiritual health, and we see counselors for our mental health. During this turbulent time, management has to ask, “Are we paying sufficient attention to our organizational fitness health” and “Do we have the capabilities to fix the ailing business”?In addition to stringent cash controls, the turnaround team must focus on accounts receivable {cash inflow and days outstanding}, accounts payable {cash outflow days behind} and debt payments. Too much debt will sink a company in short order and too much cash allocated to payments deprives “oxygen” from product development, capital expenditures and other key areas of the business.<h2>How Parker Revenue Growth Strategies Can Assist Your Company</h2>Parker Revenue Growth Strategies revenue growth and turnaround capabilities assists companies that are facing significant financial, operational, financial deterioration and business trends. We work to course correct the direction of the business with an assembled team of trusted advisors who work to improve competitive advantage in the marketplace.Our industry knowledge and functional core competencies enables the turnaround team to address critical issues quickly and with great dispatch so business stabilization occurs in a short period of time.Working hand in hand with the management team, we craft an “Organizational Fitness” review that leads to strategic, operational and financial plans that govern and guide the company through the business difficulties and spot those opportunities that will increase revenue and ultimately profits for the business.Finally, the lessons learned from the restructuring and business turnaround should be applied on a regular basis; cash controls, streamlined decision making and processes, a focus on accounts receivable and accounts payable and performing as a market leader, not a market follower.If you are a CEO or business owner who has identified a need to develop a turnaround plan for your company and are feeling overwhelmed, there is a solution! Our interim management, revenue growth plans, and turnaround strategies can turnaround your company for maximum return on investment because we are an outcome driven company to maximize value and operating results. Don’t wait another day – Contact us at Parker Revenue Growth Strategies today for a complimentary business assessment and start your company’s path to long-term success!&nbsp; (858) 232-7273

Business Restructuring & Turnarounds – What You Need to Know

The “Great Recession” began in December of 2007 and officially ended in late 2009. There were few businesses that were not hard hit or left unscathed from the financial meltdown that destroyed thousands of small businesses and brought a number of Fortune 500 companies to the brink of insolvency.Thirteen years later, most of us have forgotten about the pain and suffering that afflicted so many American households as their financial safety nets evaporated in a world where credit became almost non-existent.The unemployment rate is at a 17-year low, applications for unemployment insurance payments have dropped for several years in a row. Corporate profits are at all-time high and the stock market has quadrupled since 2009. This scenario reminds me of Michael Crichton’s movie, Westworld, “Where nothing could go wrong, go wrong, go wrong, go wrong”!!??The question for small and medium sized businesses {$5.0 to $50.0MM} is, “Are you fully prepared for the next recession”?Here are the critical items a business can put into place now in preparation for the next recession:DEFINE THE VALUE PROPOSITION:&nbsp;What does the business stand for? Identify what the company is the “Best in the World At”. Clearly define why the company exists along with its competitive advantage in the market.<h2>ITS ABOUT THE PEOPLE</h2>Management Team and Systems Add Value:&nbsp;The CEO or owner is the “Orchestra Leader” and no longer plays an instrument; the management team is considered self- sufficient and has clear roles and responsibilities.Create Effective Performance Management:&nbsp;Build an effective business model that links employee performance with the operating and financial plans.<h2>FINANCIAL MANAGEMENT</h2>Drive “Good” Sales:&nbsp;Enter niche markets, patent new products to create barriers to entry. Develop the gross margin matrix by customer; high volume/low margin, low volume/low gross margin, low volume/high gross margin and high volume/high gross margin.Lower Cost of Goods Sold:&nbsp;Develop scale economies, acquire captive access to raw materials, increase efficiencies in processes {production, distribution, services and labor utilization}, implement cutting edge cost control systems. Put inventory management processes in place; measure turnover of inventory for efficiency and cash management.Control Operating Expenses:&nbsp;Budget and monitor expenses, identify fixed versus variable expenses, manage expenses at lowest level possible, keep track of recast items.Create Effective Planning:&nbsp;Build cash reserves that are at a minimum six times monthly operating expenses {operating expense is $50,000 X six months equals $300,000 in cash reserves}.<h2>OPERATIONAL MANAGEMENT</h2>Increase Economic Value/Decrease Capital Base: Invest in only positive high growth projects. Withdraw or liquidate underperforming businesses, implement product line profitability capabilities to determine winners and losers. Utilize information technology to drive decision making; institute business measures and key performance indicators that lead to outcomes {results}.Reduce Business Risk:&nbsp;Perform at a higher operating level compared to competitors, long–term contracts, etc. Institute financial transparency, including the retention of audited financial statements.Reduce Cost of Capital:&nbsp;Maximize use of debt to support equity, possibly use less costly equity substitutes, such as mezzanine debt, reduce surprises {volatility of earnings}, consistently test the market cost of debt, walk down the private capital access line whenever possible.&nbsp; &nbsp;&nbsp;Reduce Customer Concentration:&nbsp;No single customer should account for more than 20% of sales.If You Can’t Measure It, You Can’t Improve It. Management thinker Peter Drucker is often quoted as saying that “you can’t manage what you can’t measure.” Drucker means that you can’t know whether or not you are successful unless success is defined and tracked.Remember, you cannot predict when a recession will occur, yet you can successfully prepare for it before it arrives.

The Next Recession Is Coming – Are You Prepared?

Yogi Berra, the famous catcher for the World Champion New Yankees once said, “If you don’t know where you are going, any road will take you there”!!!It’s 2022 and it is vital that business owners develop a financial plan and budget that outlines the goals and objectives of the business; in other words, a financial roadmap that leads to increased revenue and profitability.Many business owners think a business plan is more important than a financial plan; I submit that the financial plan is a part of the business planning process. That said, the financial plan must be developed in conjunction with the business plan so there is an integrated process of managing the affairs of the company.Normally, the budget process is developed in October of the prior year; this enables the owner to use nine months of actual results against plan as a benchmark for the ensuing year’s budget. Its never too late to develop a budget and the month of January offers the business owner a chance to plan for the remaining eleven months of the year.Financial planning and analysis have critical segments that leads to a harmoniously developed and executed budget for maximum performance and are best represented in the following cycle:<figure id="figure-4cjvjhbl8ll5tegmn"><img id="4cjvjhbl8ll5tegmn" src="https://cdn.durable.co/blocks/19JC6y9omUE9YDlF9aDDiufrJliB0SYqptDnyqstNkYWA8HyWAgyayTMrxNuFNPL.png" alt="image showing the 6 elements of a financial planning process. Each step is in a different colored boxes" class="object-cover bg-gray-100 " style="aspect-ratio: 1/1; object-position: center center;" data-corners="no-rounded" data-aspect="1:1" data-caption="" data-positionx="undefined" data-positiony="undefined" data-mce-src="https://cdn.durable.co/blocks/19JC6y9omUE9YDlF9aDDiufrJliB0SYqptDnyqstNkYWA8HyWAgyayTMrxNuFNPL.png" data-mce-style="aspect-ratio: 1/1; object-position: center center;"></figure>Income StatementIt is critical to fully understand the five components of the income statement: revenue, cost of goods or services, gross margin, operating expenses and profitability.Cost of Goods or ServicesThese are direct costs associated with the production of goods or services. This component directly affects gross margins which are critical in covering operating costs.Gross MarginThis financial component is determined by subtracting the cost of goods from revenue which leaves gross margin dollars or gross margin percent. Higher gross margins leave more money to cover operating expenses which means {in most cases} more profit for the company.Operating ExpensesOperating expenses are those expenditures that a business incurs to engage in any activities not directly associated with the production of goods or services. Managing operating expenses is vital to the health of any operating business.Profit or LossThe profit of a business is determined by subtracting operating expenses from gross margin dollars. It is a measurement of the efficiency of the business in improving the worth of the company. Profits also fuel cash flow which is the lifeblood of any business enterprise. If a business has a loss, then it is imperative to examine all components of the income statement to ensure the long-term success of the business. Losses negatively impacts cash flow and the balance sheet; a structured and organized review of the aforementioned financial components is vital to improving cash flow.Cash FlowCash flow is the total amount of money being transferred into and out of a business; it reflects the liquidity and efficiency of the business. Without positive cash flow, business owners turn to alternative financing, lines of credit and other financial sources to cover cash shortfall on a short-term basis.In summary, the financial plan, or budget helps guide the day-to-day decision making of the business owner and is vital to the financial health of the business. Comparing forecast numbers to actual results yields important information about the overall financial health and efficiency of the business.In Chapter 6 of Lewis Carroll’s Alice’s Adventures in Wonderland story, Alice said, “Would you tell me, please, which way I ought to go from here?” Without the financial plan, the road map will remain foggy and Google maps won’t help you find your way!!!

Why A Business Owner Needs A Financial Plan & Budget for 2022

I am often struck by the statement of business owners and CEOs, that they want to take their business to the next level. I ask them what does “taking your business to the next level” really mean?<ul><li>Does it mean growing revenue and improving profits?</li><li>Improving the financial key performance indicators?</li><li>Upgrading mid-level and senior management?</li><li>Focusing on innovation and creativity?</li><li>Defining the market position and competitive advantage in the market place?</li><li>Increasing company value?</li><li>Improving organizational fitness by assessing all processes, practices, systems and procedures?</li><li>Developing better customer relationship management techniques?</li></ul>The answer is, “An unequivocal and resounding yes to all of the above questions”!!!<h3>PEOPLE</h3>However, before a CEO or business owner can tackle the financial, cultural, customer focus, operating systems and creativity elements of the company; key personnel need to be in place at all levels of the company. In other words, as Collins stated so brilliantly in his book, “Good to Great”, are the “right people ready to buy a ticket, willingly to get on the bus and finally, sit in the right seats”?The people who participated in the growth of the company from early stage to initial maturity, may not be the right people to grow the company to its next stage of development and growth. The same evaluation applies to the senior leadership of the company; sooner or later, professional management will need to obtain the helm from the founder{s} or current CEO in order to execute a new vision, mission and direction for the business.Bottom line, “It’s about the people stupid”!!!&nbsp; If you are offended by the word, “Stupid” please don’t take offense as it refers back to a comment James Carville made during Bill Clinton’s 1992 presidential campaign. Carville allegedly said, “It’s about the economy, stupid” as a way to keep staff focused on a critical issue in their campaign — primarily because the country was in a recession.It is difficult for a CEO or business owner to let people go who have been with him or her from the initial launch of the company; unfortunately, in order to reinvigorate the direction of the business, it is necessary to refresh the management team with new blood.&nbsp;<h3>STRATEGY</h3>Without a plan that clearly details the competitive advantage of the company, it will be difficult to grow market share and become a top of the mind company for its products and services. Think Apple, Google and Amazon who command huge chunks of the markets they compete in. Each of the aforementioned companies have unique products or services that dwarf the competition.<h3>PRODUCT</h3>To effectively compete in the marketplace, the product and or services that a company offers, must be unique and innovative in order for a company to carve out market share in a fiercely competitive and dynamic market. Without fresh product, the offering becomes stale and inevitably, the company’s revenue will begin to suffer.<h3>FINANCIAL&nbsp;</h3>A business owner or CEO must be more than a leader or manager, they must be proficient in the management of all financial statements {income statement, cash flow and the balance sheet} so the company is managed for growth and expansion. The key to growth has to be either funded internally or via alternative financing methods {private equity capital, asset-based lending, lines of credit, etc.}. Otherwise, moving to “The next level” will prove to be an exercise in futility”.<h3>SYSTEMS</h3>The military has a process, system or procedure for EVERY situation!! I know, I spent five years in the United States Marine Corps and I at times chafed at the bureaucracy that exists to keep all military machinery moving forward. As I become a leader and manager of large divisions of Fortune 100 and private equity portfolio companies, I realized how important operating systems are to a well-oiled and functioning company. Without the proper structure to the business, growing and expanding will become a very difficult proposition.As you can see, moving towards “The next level” is much more than growth and profits. Growth without people, a structured business plan, vision, purpose and mission will result in a long, arduous journey fraught with peril.

Taking Your Business to the Next Level

<h3>Helping Companies To Survive And Thrive</h3>Piloting a business through calm seas can be challenging enough. You have a business plan in place, and you try to follow it. However, when skies darken, winds howl and the full fury of a storm engulfs your business, it is vital that a business owner take stock of the ‘fitness’ of the company. Signs of an unfit organization include leadership that is unclear about direction, lack of communication in planning and execution, inadequate skills, or poor horizontal coordination and implementation. ‘Fitness’ is particularly important in rapidly growing or changing companies that have lost their way in the competitive environment or are still growing but see no bottom line profits. In times like these, leaders must ask themselves “what will lead to sustainable success”?ASK YOURSELF THESE QUESTIONS • Are you willing to question assumptions and change them? • Do you and your team have the capacity (and the will) to learn what you do not know about the business and your own effectiveness? • Do you have the courage to confront difficult business, organizational and human issues? • Will you listen? • Are you willing to realign the basic design of the organization as needed? • Will you replace those who cannot or will not learn? • Is there a process in place of ongoing disciplined inquiry and norms that value valid data?Conducting a comprehensive Organizational Fitness Review will challenge you to answer these questions and more. The review process forms a catalyst for growth for those who wish to get to the root cause of flagging revenue and profits. A review tests whether the organization is aligned with its objectives, strategy, tasks and governing values. When used effectively, leaders can steer a careful path away from tops down or laissez faire management styles, which avoid conflict, to a style that engages people and issues. Building Organizational Fitness is a disciplined and tested management process that accomplishes three fundamental tasks:• Develops a compelling and coherent statement of business and organizational direction • Creates a broadly validated diagnosis of the current state of your business • Provides agreement on, and implementation of a shared agenda for action owned and driven by a broad partnership that spans the business • Provides a road map by which leaders can lead learning and learn to leadThe Organizational Fitness Review provides the leadership team with clear priorities that lead to improved operational performance. Based upon the McKinsey 7S Framework developed by Waterman and Peters, our Organizational Fitness Review is formulated by strategy, structure, skills and capabilities, style of leadership, staff, and shared values culture. The goal is to convert “low hanging fruit” opportunities into an integrated approach of melding people, strategy and financial performance to deliver the desired results. The outcome will be a road map that improves management team effectiveness in planning and execution of the strategic plan.

Blog

Business Restructuring & Turnarounds – What You Need to Know

The Next Recession Is Coming – Are You Prepared?

Why A Business Owner Needs A Financial Plan & Budget for ...

Taking Your Business to the Next Level

Why Every Business Needs An Organizational Fitness Review