5 Warning Signs That It’s Time to Call the Turnaround Expert

As managing partner of GGG and the Turnaround Authority, I get the pleasure of providing guest posts by our other partners. The following post is by our newest Partner, Vic Taglia.
In business, it can be hard to see the forest through the trees, especially when it’s night time and you have no flashlight, the only supplies you have left are bubble-gum and a rubberband but your wife always tells you you’re no MacGyver, and the forest creatures are attacking you with cries of “blood!”
If you just said, “That sounds about right,” or “What the heck is this guy talking about” then you may want to read these 5 warning signs and see if it’s time to bring in some professional help.
  1. Fatigue – yours and your creditors. One late Friday afternoon, you’re beat, and you realize that you’ve spent the entire week talking to your vendors. You’re not placing orders or negotiating terms. You’re not swapping stories; you’re begging for extended credit terms. You’re pleading for deliveries without knowing how you’ll pay the over-90-day balances. You’re talking to the credit manager, not the sales manager.  And you have a new bank officer visiting Monday morning from some new department called “special assets.” This is creditor fatigue.
  2. You’re out of new ideas, and the old ones don’t work. You used to be able to cajole deliveries from vendors based on a promise, and you could make your promise reality. Not so anymore. Your product collateral looks old and tired. Your website’s most recent news refers to a 2008 press release about a new salesman (who you fired in 2009). And worst of all, you haven’t anything new to add that you want to share.
  3. A different look in your employees’ eyes. The old-timers wonder where your magic went. The newbies wonder how you ever got anywhere.
  4. Longer hours, less progress. You haven’t had a vacation in three years.  The lake/mountain/beach house is just a pile of cancelled checks and fond, but fading, memories. You’re missing ballgames and ballet recitals with your children. You haven’t had a nice dinner with your spouse since your anniversary; but maybe it was the anniversary two years ago. And the inventory in the warehouse seems to be growing in size and dust.
  5. Less cash, more debt, fewer receivables, more payables. You’re calling customers and finding they aren’t paying because your shipments are late/wrong/incomplete. Bankers’ reference letters refer to your account as “low five figure” as opposed to “high six figure.” You ask your CPA /attorney/friends for some advice on a new banker “who understands this terrible economy/insane competition/horrible cost pressures” better than the banker you’ve been with for ten years.

If any of these describe what you’re seeing, it’s time to call your friendly neighborhood turnaround professional.

Cash is King (I), A Fact in Three Parts and guest post by Vic Taglia

As managing partner of GGG and the Turnaround Authority, I get the pleasure of providing guest posts by our other partners. The following post is by our newest Partner, Vic Taglia.


Cash is King, and every other business consideration is merely a poor pretender to the throne of a troubled company.

When a company is in trouble, its management needs to focus like a laser on cash, asking these questions:

1. How much do we have?

2. How do we get more?

3. To whom must we give it?

These three questions should form the basis of every decision the management of a troubled company makes.

Stop worrying about market share, profit margins, sales trends, capital expenditures, etc. – except as they are directly related to cash. You have to survive before you can worry about these more traditional business issues.

We Need Cash, STAT!

Think of your troubled company as a patient in the emergency room. The ER doctors start with the ABC of survival: airway, breathing and circulation. They don’t look for broken bones; they make sure the patient has a clear airway, is breathing and isn’t bleeding out.

Now think of cash as your troubled business’s oxygen and blood.

1. Your first step is to clear obstructions to your cash picture. How much is in the bank? How much are your held checks? Are there any customer checks not in the bank?

2. Check your company’s breathing. Is there cash coming in? Are there leaks in the windpipe? Are your customer checks getting to the bank quickly? Are you getting immediate credit for your deposits?

3. Finally, is your cash leaking out?  Are your expenses/cash disbursements going on the floor? Can you apply a tourniquet to the wound and staunch the leaks?

And consider hiring a specialist to help you.  When you go to the Emergency Room, you see ER specialists, not the family doctor.

Once management identifies these first critical answers, it needs to expand its analysis by applying some time measurements and adding some details to its cash picture, both current and projected.

That, we’ll talk about in next week’s post – so stay tuned!

What are your experiences with your business and cash flow? Any questions?

Want to learn ways to avoid being bitten by the alligators and keeping cash at the top. Check out this classic post.

6 Questions to Ask Yourself to Face Your Business’s Harsh Reality, Part 2

Last week we discussed the first 2 questions you should ask yourself to confront your business’s harsh reality, which you can read about HERE. This week, we’re going to ask ourselves the next two questions your should be asking.

3. Am I leading by example and delegating to the right people?

Employees follow the example of a company’s leadership. A huge part of being a good leader is knowing how to share responsibility and credit, and ensure that your managers are setting good examples for those who work with them.

All CEOs have egos. How they survive a troubled situation depends not only on their work ethic and ability to set those egos aside, but also the perception by others of these factors. If employees see you put cash straight from the register into your pocket, they will consider that acceptable. If they hear you bad mouthing clients and customers, they will consider that the company’s attitude – and follow suit.

Part of leading by example and delegating is recognizing that, at some point, all entrepreneurs need to either hire a professional manager or become a professional manager in order to reach the next level of success. Typically, entrepreneurs that don’t make this leap are those who ultimately call upon turnaround management professionals.

4. Am I constantly reacting to business issues, or am I being proactive to minimize problems?

Being a reactive business manager won’t work in the long run. You’ll be distracted and putting out fires rather than creating value. You need to be proactive about your product line, financial state, management challenges and business. If you see obsolescence of your main product line and don’t look for substitutes in order to stay profitable, then you’re not a good manager.

Consider the case of General Motors. They allowed their car lines to get stodgy and produced something the consumer didn’t want. Rather than proactively changing the way things were being done at GM, the company didn’t face the harsh reality of its situation and reacted by filing bankruptcy.

On the other hand, there’s Apple. They evolved their product line even before they saw obsolescence with existing products. They invest heavily in R&D, a very proactive approach.

Be proactive – not reactive.

Get ready for next week, when we’ll learn the final 2 Questions we should be asking ourselves in order to face the harsh realities of our business’s situation. Until then, share the kinds of questions you ask yourself about your business in the comments below.

Corporate Liquidations Suggest a Double-Dip Recession Might Still Hit

Every pundit and his brother has a prediction about whether or not we’re in for a double-dip recession.

If we’re to believe the government’s indicators and message, our economy is improving. But it’s not hard to manipulate statistics and present them in the best light. After all, part of a recovering economy is consumer confidence and a return to lending and spending.

Companies Keep Going Out of Business

However, based on GGG’s last three years’ client base the economy isn’t looking so up. That is, more of our clients than ever before required asset recovery, surrendered to bank demands, and have operating losses. Even those that turn around are taking longer than our standard experience.

Now, before you go questioning the quality of our turnaround abilities, it’s worth mentioning that for the majority of our history, workouts were 95% of our business model, with a fantastic 90% success rate based on our client’s – not our – goals.

In 2008 and 2009, however, various forms of asset recovery were 50% of our business. More companies out there are failing or have failed and that makes more business for which we just go in to clean up the mess and recover as much value as possible for whoever is getting paid out.

In my opinion, that just sucks. I love turnaround. I love creating value. I love saving jobs. Shooting the company and burying it -though we do that and do it well – are not the sign of a fun time or a healthy economy.

Will We Double-Dip the Chip?

At the end of 2010, we’re still seeing significant asset recovery situations – around 25%.

Sure, that’s better than the 50% of the two previous years, but it’s still high, and as far as I’m concerned, the number of failing businesses that are past the point of turnaround is a sign that we may not be able to avoid a double-dip recession.

Another indicator of this problem – and one with which I work intimately – is the number of companies failing because they can’t find refinancing after the FDIC takes over their failing bank.

The dip might not be deep or as jarring as the first, but history tells us that it will still postpone a decrease in unemployment and a return to a normalcy in lending.

What To Do

So my advice, both personally and corporately: stay liquid.

That’s how our successful clients stay successful and defy market trends at times like these.

Use that liquidity in an emergency, to wait for wonderful investment opportunities or to buy out competitors when they falter – you could get great deals at low multiples or for deeply discounted asset values.

Consider Fortune 100 companies. They’re keeping more cash on their balance sheets than ever before and buying businesses or repurchasing their own stock at traditionally lower prices.

Everyone else may be dipping but staying liquid could keep you floating.

Until next week, watch out for the alligators.*

*I’ll explain the alligators in an upcoming post so stay tuned . . .