By David Williams MBA – Valyrian Consultancy Limited (MD & Founder)
The economic impact of the Coronavirus pandemic has been brutal and despite government aid in the form of employee Furlough payments, CBILS and other Financial stimulus initiatives, has still left many companies in a position of extreme difficulty. It is perhaps therefore particularly pertinent that I share some of my career experience and what I’ve learned, having spent a significant part of my career helping SMEs through turnarounds.
Straight off the bat, I’ll acknowledge that there is no silver bullet and that every turnaround situation requires specific actions tailored to individual needs.
That said, whatever the cause of business failure, be it failure to recognise change and react, owner ego / hubris, a toxic work culture, poor performance or something else, prior to commencement of a turnaround, there must be immediate recognition and on-going minute by minute attention paid to liquidity.
Run out of cash, the lifeblood of every business and it’s game over. This task literally is business 101 and is paramount; cash really is King! Time and again, I have seen businesses blindly operating with no appreciation of this fundamental fact.
Assuming adequate liquidity can be achieved, there are three fundamental turnaround stages that are completely analogous to how one would treat a patient.
1. Triage – assess the business and diagnose / arrest what’s damaging it,
2. Recovery – granular failure analysis and detailed corrective actions and
3. Long-term health – plan for sustainable growth performance.
Using the above process, most SME turnaround projects fit a 3-month / 3-phase plan, often known as a 100-day plan. As I have already recognised, every business is different although I have found the 100-day plan to be a solid well-structured approach that invariably delivers positive outcomes provided that it is inclusive, communicated, driven and owned by all stakeholders.
Assess the business to identify what is causing it to fail. This phase calls for a quick, initial holistic view of the businesses to identify, which elements are working and which are not. Typically, all business functions need to be reviewed and where significant issues are identified, specific quick to implement containment actions must be established with the management team. This phase is intended to stabilise the business and help to discover what is fundamentally causing the failure(s).
Once the business has been stabilised, the second phase requires robust data-driven corrective actions be developed to address headline issues identified in phase 1. In the case of a professionally run, data rich businesses, this phase usually calls for an analytical approach reviewing management accounts, KPI stats, commercial and shop floor metrics etc., before developing and agreeing improvement plans with management. Sadly, one often finds that SMEs lack basic historic data and as a result, the second phase can become problematic and elongated due to the necessary time needed to develop and populate models and constructs from scratch.
Long-Term Health Phase
By the third phase, the business has been stabilised and immediate performance restrainers identified and acted upon. Having stabilised the business and implemented positive change, the third phase should be spent positioning the business for long-term success. This phase again requires another holistic review to challenge, refresh and validate the business model, whilst ensuring organisational alignment. Strategy, Business Plan, Management Structure, Objectives, KPIs, Processes, Methods of Review etc. – all of these elements need to be aligned, live, communicated and owned.
An outside facilitator is always useful for managing a turnaround project as they can be dispassionate and by lacking any “baggage” are able to more easily be objective and less likely to be distracted from their goal. Throughout any turnaround project, it is paramount that all stakeholders visibly support and participate as those same stakeholders must ultimately take the reins, maintain momentum by driving and owning the business plan and controls, which have been established in the third phase.
The last 20-years of my career have almost exclusively been spent leading and helping Private Equity (PE) backed SMEs operating across multiple manufacturing sectors that have included aerospace, automotive, oil & gas, petrochemical, textile, environmental, F1 and even traffic management! I have worked with multiple PE houses and always enjoy their common desire to achieve growth through the use of data, application of strategic planning, shareholder alignment and ability to support.
The PE modus operandi offers a perfect solution for many business owners currently in a state of limbo and unsure how or where to go for advice and support with turnaround, sale or restructure; this is PE’s comfort zone.
Throughout my career, I have worked with many underperforming businesses that with the right turnaround intervention have been able to survive and thrive. Every time, I get a tremendous kick out of this success and so in 2018, I established Valyrian Consultancy Limited (VCL) as a vehicle with which I could use my knowledge and experience to help companies achieve positive change and growth. For those wondering about the name Valyrian, it’s a reference to the mythical super strong steel so prized in Game of Thrones. I like to think it conveys strength and resilience- both highly aspirational qualities. I also thought it quite unique and more memorable than just my name!
Having begun this article mentioning the Coronavirus pandemic, it is probably appropriate that my final comments do so too. The current pandemic has created a macro-shock that’s impacted nearly all global sectors and industries. Many of the negatively impacted companies are on life-support and desperately pursuing turnaround initiatives. Through personal involvement with such businesses, I have seen the difficulty the pandemic has made to the development of robust turnaround plans.
Quite simply, there are too many uncertainty factors that are largely outside of management’s control – lockdowns and tiering regulations, financial support, customer demand, supply chain disruption, employee absence, speed of vaccine roll-out and ultimately, speed of economic recovery.
For any professional, the above scenario has proven difficult to manage and particularly where the company impact has been severe. Nevertheless, the process outlined above underpinned by the golden rule that “Cash Remains King”, can and will give management teams the best chance of managing their way through this time.
Should you wish to have an exploratory chat, please don’t hesitate to reach out.
David Williams MBA (Warwick),
Valyrian Consultancy Limited,
M. +44 (0)7894 274765