Saturday, April 30, 2011

Top 5 Areas Businesses Need Turned Around for Success

Top 5 Areas Businesses Need Turned Around for Success

I’ve worked with several companies lately who need to be turned around. These were once successful ventures whose magic formula for success stopped working. The problem is they were not dynamic and change their business model in time, and now are hanging on by a thread. Luckily, there’s usually still hope if they are able to take a step back, reevaluate, and in dire situations hire someone like myself to be the evaluator, mentor & fixer before the business breaths its last breath.

The good news (if you can call it that) is I see the same things fail time and again. I’ve put together a list from real life examples of areas to pay attention to as a business administrator or owner. Steer clear of the pitfalls I’ve seen far too many people fall into, and hopefully you won’t need a visit from a turn around maven.

1. Evaluate your metrics monthly

I was rather surprised recently when called in to help out a company who had been in business almost 4 years now, and only recently had they taken their first look at a Profit & Loss statement. All they knew was cash always was in the bank, so things must be going okay. Suddenly, the balance was creeping downwards. With no skill set in the management team financially, even with a full set of financial reports they were lost. Spend the time to learn how to read a balance sheet, profit & loss statement and a cash flow report and you’ll be well on your way to understanding how the business is performing.

Once you graduate past learning to read financial statements, work on setting some financial and non-financial metrics to benchmark your company against. The specifics will depend on your industry and what is important to you. Revenue per customer, number of sales leads, gross margin, etc. are just a few to get you thinking.

2. Is your marketing working?

Throwing money at advertising is great as long as the advertising you are doing is properly targeted. Recently I ran into a company who had gradually increased their spending on radio advertising (their only means of advertising) over the last few years. Still though, the returns weren’t there and business was dropping off. Ever hear the saying “throwing good money after bad”? That is essentially what they were doing. As it turns out, their target market for the most part wouldn’t be listening to the radio whatsoever. Unless their mission statement was to turn an audience with no use for their product into loyal customers, they were going about things all wrong. Make sure the advertising you are doing is first the correct medium, and second evaluate the effectiveness of it.

3. Hire professionals to do professional jobs

The one trait I see different between successful and unsuccessful people is the successful peoples willingness to hire professionals to help them grow their business. No one person is a true jack of all trades. Like the person in example 1 above, if they had someone on board who knows financials and numbers, they could have easily grown the business substantially over the years. Instead it withered away.

While no one likes the idea of spending money, give it a try. Even if it’s just a trial basis, see what having someone else on board, an outsider with knowledge in their area, can do for your business. Pick the most painful area for you and let someone else do the heavy lifting, whether its marketing, financials, sales or operations.

4. Lack of goals and direction

It’s easy to settle in and accept the norm, especially when things are cruising along, everyones being paid, the business is showing some slight growth. While there’s some glory in having a self-sustaining business, you are really failing to capitalize on potential growth. Setting achievable goals for the business in all areas (some call them Key Performance Indicators), you’ll have targets to hit and hopefully a passion for reaching those targets. Don’t just set goals, that’s just the beginning. Then figure out what actions you and the company have to take to reach those goals. It’s easy to say we want a 20% increase in revenue this year and cross your fingers. It’s another thing to think about what additional work needs to happen to make a 20% increase tangible.

5. Lackluster staff

I’ve seen good businesses held back not by management but by the staff. No one likes change, and the idea of replacing someone who does a so-so job seems more painful than it’s worth. Seemingly. What is that person really costing you? I’ve seen people in all positions who should have been replaced asap. Bookkeepers who make errors, sales people whose approach is driving away more customers than it brings in, the web guy who only knows basic html. They are all okay at their jobs, but you know deep down there are far higher caliber people out there looking to make their new boss very happy.

For the most part, any turn around situation I’ve walked into involved replacing at least someone. I don’t go out looking to really shake up the staff, but the reality is it’s an often found problem. The few weeks or months of transition will be well worth it in the long run when the new bookkeeper doesn’t screw up the financial report, the new sales guy is much more liked by customers, and the web developer can launch a full online marketing campaign.

In Summary

Hopefully if you feel your business needs some help, one or more of the points above rang true. Now you can at least set out on a course to make things better. As always if you need help, don’t be shy about contacting myself to help evaluate what went wrong, where things need to go, and what plan of action needs to be put in place to make it a reality.

Chris Benjamin, Rogue CFO

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