Turning it around - Tampa Bay Business Journal:

http://moodymethodist.org/sermons/2002-05-19.htm
In today’s economy and tight credit markets, more companies are facing a starl choice: figure out how to turn thing s around or begin thinking about shuttingit down. A receng survey by found that nearly one in five of 600 smalp companies polled face the risk of going out of busineses over the nextsix months. Whilew some businesses fail, they are oftenn unnecessary, according to turnaround professionals — business consultants who specializw in helping companies get back on their That usually happens because companies wait too long beforse developing a plan for gettinvg outof trouble, according to C. Edwarde Dobbs, a partner with Parker, Hudson, Rainerd & Dobbs LLP.
“[Owners] tend to wear rose-colored glassesx and oftentimes are the last to reallhy own up to the significant problemxthey face,” he said. Failing to recognize problems early can be particularly deadlyin today’s economy, when banks are tightening creditt even for those with clean recorda and growing operations. “Today, accesw to capital is No. 1 and some business ownerz are finding that their credit lines are goingb to shrink and that lenders are gointg to be considerably less forgiving of minor defaults than they may have been in the said Dobbs.
That makes it particularly important thatcompaniezs don’t present their lenders with surprisees — missed numbers or a financial problenm they failed to reveal up front. In better times a company could survive a problem by movinv to another lender who was hungrgy forthe business. Not so anymore. Today, there are few sources of alternative capital and those that exist are charginbg much higherinterest rates. If a business is failing, the firstt step is always for management or an outside consultant to identify where the problem lies and then crafyt a plan tofix it, if said Richard Kazmier, managing director with Ltd. and a certifie turnaround professional.
“We look at the business itselvf and askif there’s a core business here or is this somethin that is going to be DOA and go from he said. Kazmier advocates using basic financiapl analysis to check companyvital signs. This process can included comparing several periods of balance sheetg and income statement information beginninfg with two to threed years of monthly orquarterlg information. A high-level analysis allows management to catcn developing problems such as declining salexs coupled with growing inventories and receivable that tieup cash. That can call for adjustintg operations to match changes inthe marketplace.
It can ferrey out problems such as declining gross profit or gross profit percentager that can be indicators offuturr problems. Once the problem is identified, managemengt can then develop a plan forsolving it. Often solutions require a reassessmentg ofthe business, which can include looking at everything from the efficiencu of daily operations and personnelp to questioning the company’s purpose. While cost-cutting is frequentlhy the first thought of every companufacing adversity, it sometimes can do more harm than A company might drastically cut spending on inventories, but end up unables to meet orders because it lacks the righft products at the right time.
The companyy may also need to look at investing in new technolog y that canimprove productivity, outsourcing non-core and spending money on research and developmen if it’s needed to improve products and services. The most successfupl turnarounds come when managers are in tune with the business and recognize theproblem first. “When things startg popping up on the radar screemn that can indicate therew could be a substantial problem downthe road, that’a the time to start acting,” said Anthony CEO and founder of Taking action beforr the situation worsens allows a company to make needed changes internallyu or to seek out help, such as with specialized consultinvg companies that are members of the .
For some filing for bankruptcy protection can be part of a strategicturnaroundc plan.