The rescue of ailing businesses is to manage the company and its problems. The process takes time and requires a specific set of skills. The business problems are often caused by the owners or administration to be aggravated by financial difficulties, the first time and are reluctant to change. That's where a turnaround specialist, his art brings to the process.
The client's identity must be clear. the customer's identity at first glance, it seems clearView, but can quickly blurred. For example, the owner of a company with limited participation are so busy with personal guarantees for the survival of the company. Moreover, when the value, "said the expert, the expert must make clear to all parties if the value of the company or the customer.
Recovery specialists are usually middle managers or consultants. Interim Manager to replace the CEO, take the reins of decision-making messCompany and run it in its turbulent waters, hopefully to safety. Turnaround Management Consultants advise existing without an operational role in society. Although some experts are prepared to act as interim managers or consultants, as most prefer to act together.
A company in difficulty can also use the help of an experienced director or an expert in one particular aspect of the company. A company in difficulty, often has a unique problemrequires an industry expert familiar with instead of an experienced director. Of course, this decision depends on the particular company, industry and the associated problems. Note, however, that the knowledge about the industry not the same as the reorganization of knowledge management. A qualified rehabilitation specialist can often be another company that uses his talent for running, despite the initial awkwardness with the technical aspects of the company.
Many experts also TurnaroundFocus on different stages of the decline in business. While some professionals working with clients in bankruptcy or close, while others are exclusively early death.
It is a turnaround specialist required?
Before this question can be answered, it is important to understand why companies fail. The response is generally poor management. Some of the many internal and external factors are controlled by the management:
* The result of autocratic managementManagement overwhelmed, clear lines of authority.
* Message ineffective, pointless meetings, etc.
* The role of human resources by the excessive volume occupied.
* Inefficient compensation and incentive programs.
* Company objectives that are not understood or realized.
* The reduction in the customer's business strategies and shows are out of date.
* Inadequate analysis of markets and strategies.
* Lack of financial resources and timelyInformation.
* History of the expansion plans failed.
* Uncontrolled or little growth.
Management is often inclined to correct the ills of society on the external factors to blame for seemingly beyond their control and responsibility instead of the situation. Some of these external factors include:
* General
* The legislation unfavorable
* Fluctuations in interest rates
Labor disputes *
* The increasing cost of labor
Competitions
* Litigation
declining market *
* The rising cost of raw materials
Warning Signs: How to diagnose problems?
What are the warning signs of a company is headed for trouble? This is one of the most common turnaround specialists. The problem comes from a variety of causes. The obvious symptoms are rarely the cause of the problem. to lose money, for example, is not the problem, but the result of other problems.
The warning signs are not subject toincluded, but can give an overview to fight over the company. The symptoms associated with the operational performance include:
* Reduction of the levels
* Lack of planning for the prediction of short and long
* Problems of quality control - the goods returned, complaints
* The delay or slow
* In fixed costs in proportion to the increase in sales
* The management and sales team
* The employee discontent and overall
* The waiver
*Decline in revenue per employee
* Credit difficulties and restrictions on trade
* Not to buy with cash rebates and other
* Deadline for callbacks
* Late submission of financial banks, creditors, suppliers
* Quote Board
* The resignation of an auditor or the turnover
* Lack of advice to perform their duties conscientiously monitoring
* Back-ups "retirement" for the management position visible
* Inability to adapt to newTechnology
Signs on the financial performance of a company include:
* Reduction of the levels
* Reduction of sales
* Standard Bank credit continued to make arrangements
* Decrease in cash
Clinical signs of the abuse of resources are linked:
* Extension of the cash position - a reduction of capital
* Quick equity ratio declined
* Increased transmission
* The decline of the shareholders
* Price drop in sales of assets
*The sales decline in accounts receivable
* The reduction in receivables aging
* Inventory turns Descending
* The deterioration in the accounts payable aging
* The loan balances Creeping
* Reduction of R & D
* Changes in accounting principles
* Funding for the purchase of fixed assets Working capital
* Very expensive for the assets or businesses
* Acquisitions and expansion of non-core businesses or cut or in competition with the coreBusiness
These characters are the symptoms not the problem. The characters are simply proof that there is a problem, and that is the problem rather than a symptom that should be recognized and corrected.
There are formulas for predicting no more.
A well-known is the Z-Score, developed by Professor Edward Altman of New York University. In consideration of various financial ratios to predict, the attempts of the Z-score, if a manufacturing company bankruptCandidates.
The formula: Z = 1400000000 & 1.2 + 3.3c + 0.6d + 1.0
Where:
A = Working Capital / Total assets
B = retained earnings / total assets
C = Earnings before interest and taxes / total assets
D = market value of shares * The book value of total debt
E = sales / total assets
(*) If the company are not publicly traded, the book value of equity should be replaced by market value.
Results are interpreted as resulting from that showFollowing:
-> Less than 1.8 - the company has a high probability of bankruptcy in the next two years.
-> Between 1.8 and 3.0 - the gray area, where the trend is really the most important criterion.
-> More 3.0 - The company has a low probability of failure.
A second statistical method, with Jarrod Wilcox, a former assistant professor at the MIT Sloan Business School will be developed, known as Gamble's Ruin Prediction of insolvency. This formula, designed toPredict the possible bankruptcy of the production and trading company for up to five years in advance, as follows:
= Liquidation value of assets - liabilities
Where:
Assets = 100% in cash and marketable securities, over 70% of receivables, inventories and prepaid expenses of 50% of assets increased.
Change in value or liquidation of the previous year's earnings before extraordinary items of 100% of dividends 50% of capital expenditure minus depreciation years30% increase in inventories and receivables from the prior year.
If these calculations show negative amounts, the company as a candidate for bankruptcy.
Most companies sensitive to disturbances
Taking into account the forces of market economy, companies as susceptible to problems as they are attractive for success. We live in a world of changing technology uncontrolled. Even with these changes, a company that are well managed will continue to thrive. Butsome sectors are more sensitive than others to avoid problems due to various factors and characteristics.
The fortunes of companies in cyclical industries often the forces under their control, such as commodity prices or weather conditions. The most likely to resist the effects of these forces are those who learn to adapt. Must be sufficiently diversified, without the core business, or who is to control the situation, the fixed costs in changing conditions. TheAdaptability is the key.
in the new deregulated industry companies must learn to survive estimated to be in a competitive environment, without the legal protection before. Deregulation is usually accompanied by a remodeling company expects weaker, indicates that the forces of competition in the market.
As the U.S. economy has been developed by industry from a manufacturing-based economy increasingly driven primarily by service-before,Management must recognize that their assets are irreplaceable. Human Resource Management is now more important than ever.
Companies without a specialty - or "me-too" companies - are under attack from all sides. Examples of these companies are retail and non-graduates in the service sector. They are low barriers to entry, both the capital and experience and a large number of competitors.
Many companies and entrepreneursStart-ups are a unique product of individual and corporate clients. To succeed, companies usually require this in order to develop new products or to diversify the competition and serve customers. Only a few are able to preserve its successful start-ups, but difficult to compete with existing and new competitors. Young takes years, in which the company is vulnerable.
Fast-growing entrepreneurial companies are often motivated by jealousy and overwhelming emphasis onTurnover. Often little attention is given to the impact of growth in the balance sheet. With the significant increase in revenues and substantial investment in R & D, all of a sudden, these companies are in a situation where the record simply can not handle the growth.
Companies are highly leveraged several factors of that success must converge are often more vulnerable to uncontrollable external causes of business failure, such as fluctuations in interest rates orincreased costs for raw materials.
closely held companies and family businesses, by their nature, for the leadership is not a system based on talent management, but because of family or personal relationships with shareholders. More than in other companies, owners / managers to link their personal psyche for your business. For owners / managers, business failure is often seen as personal failure. Owner / managers often think they are irreplaceable, orAfraid to admit they are not. You want to keep control and they can not develop, therefore, no management team or a management plan for the transition. These owner / managers are reluctant to recognize the warning signs of failure and are also likely to ignore them.
Perhaps the declining industries to the more difficult task of all. declining industries are those that shrink in which a total unit shipments of the industry. The maintenance of market share is declining.Keeping the band includes a growing market share (ie under business from its competitors). In the Administration to admit that the industry refused in the future or decline of Paris to the industrial recovery, are more prone to error.
About 70% of entrepreneurs and start-ups within two years. Entrepreneurs are not necessarily managed funds. They have vision that the future look like before, the rest of us look the best mouse to useTrap. Her approach is to start on her head as a way to benefit implement your vision into reality profitable. The same skills to keep a business focused on an idea, regardless of obstacles, nothing from the competition on the heels on the market anymore. Finally, the stock market crash, forcing the entrepreneur to compete in a mature industry, instead of a nascent industry. As entrepreneurs survive the transition to professional management andand gain control of new technologies on the economy, new industries.
Hiring a turnaround specialist
Before the search for a recovery specialist, the company should try to understand their needs and wishes and are prepared, the reality of the very difficult problems to face. With statistics showing generally poor management at the origin of most crises, the company should be aware that the turnaround specialist, will conduct a rapid assessment of management capacity.to commit the management needs to recover, agree that learning the turnaround specialist, the catalyst for recovery, and commit to as much as possible, so they better the business end of the obligation to recover.
So, before a turnaround specialist, management should ask themselves some hard questions:
* This is a turnaround and feasible?
* Management is aware that can be a real recovery take years to achieve?
* Please trade issues of personal problems were isolated? Or is the main objective of the commitment of a specialist for the owner of a personal guarantee of protection and preservation of the assets owned personally?
* What can expect reasonable and realistic, a recovery specialist?
* The Administration is prepared to admit the problems of the economy are likely to be the result of mismanagement?
* The Administration is willing, in the case of students not the teachers orSuccessor as leader?
* If you are asked to give up control of the company, loan management to do?
* Management is ready to face their own shortcomings and face it, could reflect that your ability?
* Since the turnaround specialist, is often a temporary solution, the administration is willing to change?
* Management can learn in a very controlled environment, are subject to be controlled by foreigners?
* The Administration is prepared to accept the cases "Failure, not simply because some are avoidable and can not be stored in?
* The Administration is prepared to accept the participation of a turnaround specialist if the waiting period is only realistic solution to maximize the liquidation value, even if the end result is the failure of the company?
* The Administration is willing to sell the control and so much to do minority shareholders and employees in a new direction, if any, to attract capital to maintain the business operation?
* Management is in the case of smallEspecially companies willing to provide, the stigma of bankruptcy?
How to choose a recovery specialist
Owners should be cautious and deliberate when selecting a specialist in rehabilitation. The maintenance of a recovery specialist was a heart transplant, a bit of experience can be made without much fear compared. But like heart transplants needed to save the life of the patient, recovery is often what is needed to keep the companyalive.
Interviews and background
Owners should do their homework before doing interviews with recovery specialists. CV and references should be requested and checked in advance. Owners should not be fooled by professional setting and should be avoided, hiring useless skills. Beware of a CEO or unemployed financial manager who is a specialist in rehabilitation. Only with a background as sky does not mean that the applicant has the necessary skills, a goodSpecializing in recovery. Lawyers, accountants, bankers and financial advisers should be consulted and advice to their opinion.
A number of experts should be called into question. Despite their hopes, their owners should not expect miracles, be deceived by unrealistic promises or guarantees of success. What does specialist rehabilitation must be weighed against the possible.
Insight, the questions shown above. But if the turnaround specialistarrives, answer questions, help them find their answers, and to hear above all. Remember that the owners and managers must work together as partners with the turnaround specialist. Action management is a key resource for the recovery of specialists and should be an attitude as much as possible to learn the necessary skills to the company's commitment, handle when the execution is completed specialist wants to adopt.
Commitment Turnaround time to time
Ask the expert about his timetable for recovery. If all the deployment team, especially on the site. Obtain commitments personal commitment to the recovery specialist. Understand the functions that happen and that will be delegated to its staff. For more information about the interaction between management, employees and the use of team.
Select an individual
The personal chemistry betweenImplementation and management team is essential for a successful recovery. So, select a person, not a business or reputation. The overlap is very personal and sensitive. Management must choose the specialist thinks he can, to do the best job, not a business, because it has a good reputation. The call does not come to the firm rotates, can a person.
Credibility
For more information on the relationship of recovery specialist with its value, with potentialCreditors, trade creditors and other vendors. Verify that the expert brings credibility. Troubled companies often need access to goods and capital. Resource Specialist provides relief for the appointment of credibility to financial institutions and thus have better access to credit. A company in difficulty, often need more money than the current loan can make available and therefore means successful management reorganization will require a new value. This logic is oftenignores the relationship between the malfunction of the company and your loan. It is unreasonable to expect a new value is milder. In fact, a new value are likely to require rigorous restrictions and covenants extract much higher costs because of the risk of entering a turbulent situation, and monitor the loan closely. may therefore be the "old" bank, the best source for financing the new business credibility can be restored.
Start writingProposal
Always get a written proposal by the recovery specialist. This proposal should be the first results of the recovery specialist address the expectations of you and your staff, professional fees, use of company staff, a general program, which will be allocated for the mission, how long the turnaround specialist anticipates entering into the commitment of the Turnaround specialists are available to implement the plan, such as the reversalExperts make the appointment, the overall tariff structure and how the recovery specialist to help manage the necessary changes. Finally, celebrate and insist on a written contract before the deadline.
Written reports
Ask for regular written reports of the experts. These reports should be concise and timely manner. They force the recovery specialist to arrange your thoughts, go to the essence of whathappened in the period, there is no need for a substantial portion of his time, and they know who works for the company.
The participation in the operation
Expect the recovery specialist staff involved in the daily operations of the company. Search by company officials to evaluate the performance of rehabilitation specialists. Although upset, the first order of a specialist in recovery may, management and employees should beUnderstand that their jobs are linked to the recovery effort. Share this review with the turnaround specialist.
Privacy and Accessibility
More importantly, expect the demand and the confidentiality and availability of rehabilitation specialists. Although recovery specialist can be brutally honest with the customer, the customer must present the best possible light to others. Given the precarious conditions, the company should have as much as it accessNeeds of its recovery specialist.
Now find an expert to get out of your business.
