Ben’s 10 commandments for a turnaround
Ben’s 10 recommendations for turnaround
![S&K lawyers hero image: compass showing a direction](https://sklaw.au/wp-content/uploads/2023/04/sklawyers-hero-image.png)
![Liquidity issues](https://sklaw.au/wp-content/uploads/2021/03/slide-1-liquidity-issues.png)
Liquidity issues are symptoms – find the root causes
WHY
Most analysis is symptomatic and unhelpful (i.e. they have a cashflow problem)
HOW
Work “on” the business, not just “in” it (is it losing a big customer, an unprofitable customer, general mispricing or low productivity, for example)
![Actively manage credit](https://sklaw.au/wp-content/uploads/2021/03/slide-2-credit-management.png)
Actively manage credit
WHY
Company bankruptcy is caused by debts being out of control and (usually) poor communication with creditors
HOW
Apply sensible cash flow management and work with creditors
![Customer mix](https://sklaw.au/wp-content/uploads/2021/03/slide-3-bad-payers.png)
Review the customer mix and steer away from bad payers
WHY
80% of income usually comes from 20% of customers (Pareto principle)
HOW
Focus on customers that deliver the majority of value and reconsider efforts to woo unprofitable customers
![Keep up-to-date financial records](https://sklaw.au/wp-content/uploads/2021/03/slide-4-financial-records.png)
Keep up-to-date financial records
WHY
Getting accurate financial information is essential for developing a turnaround plan because if you can’t measure it you can’t manage it
HOW
Ensure that your business has reconciled financial accounts checked by an accountant
![Don't put prestige over profit](https://sklaw.au/wp-content/uploads/2021/03/slide-5-prestige-over-profits.png)
Don’t put prestige over profit
WHY
Rational management and minimising waste is essential for a turnaround plan
HOW
Consider the return on investment for all sponsorship, promotions and employee remuneration
![Don't have too few customers](https://sklaw.au/wp-content/uploads/2021/03/slide-6-few-customers.png)
Don’t have too few customers
WHY
Concentration in a small number of customers undermines the overall value of a business
HOW
Look at the customer mix as a portfolio and look to spread risk
![Set a target growth rate that is not too high](https://sklaw.au/wp-content/uploads/2021/03/slide-7-growth-rate.png)
Set a target growth rate that is not too high
WHY
Targeting aggressive growth through new products/services during financial distress may not be sensible
HOW
Look at capitalising on existing opportunities and customer relationship before starting new projects
![Treat your employees like human beings](https://sklaw.au/wp-content/uploads/2021/03/slide-8-emploees.png)
Treat your employees like human beings but manage by objectives
WHY
Often Australian business owners try to be mates not managers
HOW
Develop metrics to assess employee productivity
![Downsize the business](https://sklaw.au/wp-content/uploads/2021/03/slide-9-over-expand.png)
Don’t over expand – you should probably downsize
WHY
Rationalisation of the business is likely to mean downsizing in the short term
HOW
Termination of unprofitable customers and
unproductive employees
![Manage your loans](https://sklaw.au/wp-content/uploads/2021/03/slide-10-too-much-loan.png)
Don’t borrow too much or at to high interest rates
WHY
Borrowing with high interest lenders reduces the chances of a successful turnaround
HOW
Look at cash flow management, negotiating terms with creditors and reducing costs
Sewell & Kettle Lawyers
Lawyers, Restructuring Accountants and Restructuring Practitioners.
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