How to save a company in crisis (or avoid sending it to us)

How to save a company in crisis? In situations of difficulty or business crisis, the first thing you need is clarity of what to do, where to start, with what objectives. We need a plan, we need a path, in technical terms we need a Business Relaunch Plan . Especially when we talk about micro businesses and professional firms it is often the confusion that prevents us from understanding the difficulties and intervening objectively.

The questions asked by the owner of the micro enterprise or professional studio in difficulty are:

• Where to start from? What are the stages of the relaunch?
• What to do? What to do now? What to do next?
• What difficulties or resistances exist in reviving the business?
• Who can help the entrepreneur in difficulty?

The goal of this article is, if your company is in crisis and you don't know what to do, to help you at least to make order. If, on the other hand, you are not in crisis today, studying what does not work will make you understand how to avoid finding yourself tomorrow managing a company in crisis.

Company in crisis: the phases of the relaunch

1) Find the resources to finance the recovery plan

If a company is in crisis, or experiences the first difficulties, the first step is to find the necessary resources to finance the actions that go from identifying the problem to solving it.

For example, find the money needed to pay consultants who can help identify the causes of the crisis, identify solutions, manage legal issues, tax disputes, and then the budget necessary for any marketing or commercial operations for the relaunch of the business.

In many cases this all starts with a cut in business expenses. In fact, in such situations often the shareholders have already put the capital at their disposal in the company, and the banks are not very willing to grant further credit or loans.

2) Identify the real causes of the difficulties

It is a fundamental step. If external responsibilities are simply attributed to the crisis, such as high taxation, the banking system, competition, etc. most likely the true causes of the corporate crisis are not known. Very often, in fact, external causes are identified superficially, and in doing so the true internal motivations are not investigated.

Internal motivations are often linked to an absent or ineffective corporate strategy, the absence of a corporate or professional vision, the absence or incorrect delegation, an absent or incorrect marketing strategy , the waiting position on the market, the absence of innovation , financial errors, etc.

These are causes that often depend precisely on business choices that are absent or taken without a real business strategy. Identifying the cause that most generates the difficulties is fundamental to then give the right priorities to the corrective actions.

3) Take stock of the economic and financial situation

In addition to identifying the reasons related to business choices, the economic and financial situation must be very clear. It means in terms of commercial results, number of customers, margins of products or services and customers, incidence of fixed costs, situation of debts and credits, and liquidity. Situation both current and in the coming months.

Points 2 and 3 are clearly linked, but must be addressed separately to avoid seeing the financial problem as a cause, when perhaps it is only an effect of a problem that lurks in another business area. For example, a low sales margin, which leads to economic losses in the financial statements, could be caused by an ineffective marketing strategy in generating the right contacts, or by an incorrect positioning on the market.

Analyzing the economic and financial situation in companies in crisis naturally serves to measure the severity of the disease, in other companies it serves to anticipate any symptoms and understand in advance the emergence of any problems.

4) Have a recovery plan

Once the problems underlying the crisis or difficulty have been identified, and the starting economic and financial situation has been clarified, it is possible to trace the route that will lead the company to safe waters . In concrete terms, it means preparing a recovery plan that explains in detail the objectives divided into phases (e.g. the next 3 months, the first year, etc.), expectations, useful maneuvers, the resources necessary to implement these maneuvers, and the indices to measure the effectiveness of these maneuvers.

It is a matter of often redesigning business strategies if they existed or designing them if they were not there before. In both cases it is a matter of filling in the Business Plan, which in terms of content is not different from the Business Plan of a new business activity, but in this case it assumes the role of a relaunch plan, which cannot be separated from the initial situation of the company itself.

The relaunch plan is therefore not composed only of numbers but also and above all of the business strategies envisaged to support those numbers. For example, in terms of Marketing and Commercial strategy on the development of the revised business, organizational strategies, etc.

In addition to the strategic part, company budgets must be envisaged, from the commercial budget to that of operating, marketing and commercial expenses, to that of general expenses, up to the economic and financial plans.

Clearly, finding ourselves in a company in difficulty, particular attention will have to be paid to the financial plan, where to find the necessary liquidity to restart, how to correct the starting financial situation, how to finance the recovery phase.

 

In general, even in companies not in crisis, having a strategic plan, a business plan and a development plan serves precisely to avoid being in crisis situations, is used to act, is used to have a clear route to follow, with clarity expected results, actual results and any corrective actions.

5) Monitor the implementation of the plan

As with any plan, implementation is needed. Without constant and daily implementation, every plan risks becoming useless. This is why it is essential to provide a series of periodic checks with the aim of measuring the results actually obtained, comparing them with the hypotheses envisaged in the plan, making any corrective actions and, if necessary, providing for an update of the plan itself.

This monitoring is important both for the aspects related to numbers (e.g. turnover, margins, cash flow) but also for the timing. In fact, in a company in difficulty, it is not "only" necessary to achieve economic and financial results but it is also necessary to do so in certain times. In fact, the state of crisis or difficulty cannot always be prolonged for too long.

The typical difficulties of implementing the Company Relaunch Plan

In reading the passages listed above, however, it is necessary to be aware of the difficulties often encountered both in the analysis phase and in the preparation of the recovery plan, and finally in its implementation:

1) Resistance to change

It seems paradoxical but often in a company that experiences moments of difficulty, if not already of a corporate crisis, the first obstacle is to convince those who led the company to the crisis, that it is necessary to change. Bring awareness that if strategies and actions don't change, the results will inevitably be the same.

The phrases "we've always done this" in such moments are the main obstacle. The same resistance to change is that which prevented the company in the moments before the emergence of the difficulties of renewing itself, or implementing innovation and the necessary updates that today all markets require.

2) Emotionality

In general, in micro and small businesses it is always difficult to separate personnel from professionals, the family sphere from the corporate sphere, emotions and numbers.

This is accentuated precisely in situations of crisis or difficulty in which lucidity is maintained for obvious reasons.

The consequence is to mix rational and entirely emotional choices that do not always help the search for solutions, which by their nature should be as rational as possible.

Being fond of customers who generate losses, wanting everyone to stay in the very expensive location, not wanting to accept to temporarily reduce the staff, are just examples.

 

In more serious cases the emotional part even leads to refusal even just to want to deal with certain issues, and can prevent even just being able to talk about certain topics.

3) Search for the short way and shortcuts

Even for the above, often the entrepreneur, to avoid moving from a plan that is experienced as "painful" because it forces him to change or to face the weight of the consequences of the crisis or difficulty, seeks shortcuts, miraculous solutions capable to magically take him to solve problems.

Then we look for yet another financing able to cover the needs, without wanting to accept the fact that often this only moves the problem over time, but then the problem will recur even bigger. Or they are looking for short ways like the Internet trying to make up for the technological delay in a month, maybe years.

The consequence is that the search for these shortcuts will only result in wasting the few financial resources and wasting further time. Both resources are scarce in situations of crisis or difficulty.

4) Change of key people

Sometimes in the analysis phase of the causes that led to the situation of difficulty or crisis, it emerges that one of the causes is one or more collaborators who occupy particularly important roles without having the correct skills or qualities.

This is quite frequent in small family businesses because employees are chosen from among the members of the family, assigning them roles that are very important from a business point of view.

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Examples that are found very often is the wife in accounting management, the family to do marketing or to sell, etc.

In many cases, the chosen person, in addition to being a member of the family, is also competent and capable.

Sometimes also if an area is problematic, the cause is not always linked to the person who takes care of it but the problems can derive from wrong choices made by the owners, or from an incorrect strategy, etc.

In other cases, the problem could derive from low specific technical skills, skills that can be acquired simply thanks to adequate training or coaching in the field.

Unfortunately, however, in some cases it happens that the person does not have the human qualities to occupy that position, or simply does not have the right motivations. In this case, the replacement of the person often opens discussions that go beyond the simple transfer of the person to another role, but results in family or personal discussions.

5) Speed ​​of decisions

For the reasons and the problems expressed, it happens that the owner, between emotion and family discussions, tends to delay the decisions useful for the revitalization of his business, precisely because making these decisions requires breaking certain internal balances, internal to the corporate sphere, but perhaps to the family one.

The consequence, unfortunately, is that it is often preferred not to decide, or to choose compromise solutions that do not really solve the problems.

Every time the decision is postponed or its implementation is wasted, the problem shifts with the consequence that, being business, each shift of the problem equates to new budget losses, new debts, and bigger problems to solve in the future .

For these reasons, the management of the relaunch path can hardly be managed by the internal team but requires the presence of external figures capable of managing and resolving any conflicts, reporting the implementation of the relaunch plan on the rational business plan, naturally respecting expectations and family roles, but without losing sight of the business side.

Recognizing these phenomena, however, is also important for those micro enterprises that are not in crisis today, but that perhaps are already blocked by one or more of these causes. It is much better to deal with such situations in a company without difficulty than in a company already in crisis.

Which professionals can help the entrepreneur in difficulty?

The team of professionals who can help the entrepreneur in the difficult phase is different according to the degree of crisis or difficulty of the company itself.

Business consultant

The entrepreneur often in cases of problems or difficulties first of all turns to the accountant , who is seen, not always correctly, as the sole referent of the entrepreneur. This is true as long as the accountant himself has, in addition to tax and corporate skills, also a profound business experience of doing business. Or these skills are present in the Studio

An accountant, expert in tax and corporate aspects, may not have the time to analyze in depth the margins of the products or services or to manage also the forecast company liquidity, or it is not said that in the past he managed companies in crisis, that he is competent including management control, business plans, etc.

Unfortunately in my experience I have seen accountants advise debt thanks to the friendly credit broker, when the company was already in a situation where adding debt was the last thing to do, because the problem was perhaps commercial or marketing. Or give advice on what to do without having analyzed in depth the margins of the individual products or services.

Having said this in any situation of difficulty, the figure of the accountant is important, precisely to manage all those fundamental aspects for the fiscal management of the crisis or difficulty situation. Such as, for example, relations with the tax authorities or the management of tax arrears or contributions.

So without taking anything away from the accountant, I am very scared of the accountants who improvise experts on corporate finance, management control, marketing, etc.

Management Control and Corporate Finance Expert

The other important figure is the expert in management control and corporate finance , able to assess the current state of the economic and financial situation. Measure the intensity of the problem, objectively assess the seriousness of the problems, both in terms of quantitative dimensions (e.g. losses, debts, etc.) and the timing (e.g. financial deadlines).

Precisely on the basis of these analyzes, you will be able to understand, for example, the urgency of the recovery plan, and its contents. In fact, a well-made economic and financial analysis is also able to highlight the area or problem areas (e.g. marketing as number of contacts, commercial for closing rates or sales margins, etc.).

Lawyer and Credit Broker

After this analysis there are two figures that need to be activated only in certain situations: the lawyer and the credit broker.

L ' lawyer very often in such situations it is necessary to handle the legal aspects of the crisis, recovery situations of potential credits, manage conflicts that may be present with employees or suppliers, and in the most serious situations manage corporate crises. In addition, the figure of the lawyer is always useful for all issues related to the protection of the entrepreneur's personal assets.

The credit broker , the professional in charge of managing relations with the banking world and finding new financial resources, must instead be used when in light of the recovery plan, it is clear if and how many resources are needed and above all how they will be used in the corporate recovery phase . It is absolutely not recommended to resort to new debts (e.g. new mortgages or loans, credit extensions) only for a short-term emergency without having then clear how to relaunch the business that is burning liquidity.

Marketing consultant

In parallel, or immediately after putting financial emergencies under control, the other central figure is that of the marketing consultant , who has the role of helping the entrepreneur to design the business strategy to relaunch the business, starting from the marketing strategy up to to arrive at the real marketing plan, which in line with what is defined in the Business Plan and in the Relaunch Plan, is able to reposition the business, develop contacts in line with the target customer, differentiate itself from the competition, etc.

Each of these figures has its own specialization, its skills, its specific preparation. In a world like the present one, the first person to keep away from your company is the all-rounder, the 360 ​​° fixer, the expert of everything, or who has at least a thousand skills in all sectors.

In conclusion, what to do concretely?

If your company starts showing the first symptoms of difficulty in one or more areas, you may find the  "Business Plan and auditors in UAE for Business Success" course useful, a practical and experiential course to rethink, relaunch and get your business off the ground. Build the Business Plan to avoid continuing to navigate "on sight" or make decisions based on emotion and start defining concrete, measurable objectives, strategies and actions .

 

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