Consider All Your Options Before Making a Decision
I find that in a crisis, some leaders often accept bad advice without thinking through their options (I’ll address the issue of mistakes leaders make in crisis more thoroughly in my upcoming White Paper).
In the case of our bankrupt restaurant, the Board of Directors got bad advice to file for Chapter 11 Bankruptcy. It’s not that they shouldn’t have filed at some point, but their timing was terrible.
To survive a Chapter 11 you have to prepare properly, and by filing without making the appropriate preparations, the company created more problems than they already had. With more time, we could have found a better DIP lender and/or located a purchaser for the entire company.
But what can you learn from this?
Don’t Wait Too Long to Ask for Help
It can be difficult to know when you need professional, outside help. For 5 signs on when it’s time to call a turnaround professional, read Vic’s guest post.
Generally, when you’re either panicking or deferring to unqualified people for advice, it’s wise to consult an outside professional. Don’t worry too much about whether or not you think you don’t need help, as turnaround managers with integrity will tell you honestly if you don’t need their help. Better safe than sorry.
I have many meetings with business leaders who, being proactive, invite me in to discuss how GGG can help them and their businesses, but at which I tell people that they can solve their problems on their own. Knowing that I’ll tell it to them straight establishes trust, a key to success in this business, and ensures that I’ll hear from them (or their friends) when there really is a matter that requires my involvement.
Whether or not GGG is hired, CEOs who speak with me early are confident in their abilities to face their companies’ challenges. It is always better to know that you are okay than to ask for help too late.
In the case of this malfunctioning restaurant, we were needed – but sooner than when we were called.
If we had . . .
. . . arrived when emergency mode kicked in, we would have advised against filing for bankruptcy when they did and salvaged more of the business as a result.
. . . been involved before the large judgement against this company, I could have negotiated their crippling settlement down and mitigated its demoralizing impact on the team.
. . . been brought in at the beginning of the crisis we could have saved the whole company. In fact, the bankruptcy could have been avoided altogether, but it was done before we were consulted.
Let this echo the lesson that you ought to bring in the professionals before it’s too late.
Our Expertise is Fixing Problems
There are a lot of talented people in the midst of a crisis like this, but they’re not looking at the big picture the way a turnaround professional worth his salt is. Lawyers are looking one way. Accountants are looking another. But we have an overall grasp of all the legal, accounting and business angles, and we’re the perfect catalysts to see a turnaround through. After all, that’s why they call us turnaround professionals.
One of our key objectives in crisis situations is to empower the company leader by acting as his sounding board and instilling a sense of confidence while recommending creative and unique solutions based on our experience saving companies. This works no matter the company’s widget and ensures future potential crises are managed with greater success and poise.
The probability of successfully reorganizing in a Chapter 11 is statistically less than 25%. Without proper planning, reasonable terms for a DIP loan, and a focused Board and management, the probability of a successful reorganization is NIL.
Have you ever waited until it was too late to take action? What happened and how will you behave differently next time?