You are the owner of a business and you’re worried about how it is performing. Things aren’t going right but with some luck, they might get better.
When is it time to call in a Profit Expert?
- When performance first starts to dip?
- When the problem has gone on for six months and whatever you’ve tried doesn’t make much difference?
- Or when it’s very hard to find the cash to pay your employees and suppliers?
When is the right and best time to ask for external help?
What Is A Profit Expert?
In his book “Red To Black in 30 Days”, Allen Bostrom has this definition for a profit expert…
“An accountant who has expertise in advising small businesses in controlling cash, reducing expenses and increasing revenue.”
It’s certainly true that many insolvency experts and turnaround specialists are accountants.
As performance struggles, emphasis has to be on the key numbers and how they fit together in your overall business system.
Cash flow forecasting and management is also essential.
One saying is very true…
However the profit expert needs to be a strategist and marketer as well.
Often businesses need to shrink back to a profitable core and then grow from that core by avoiding the activities that force up fixed costs faster than contributions margins, thus making it much harder for the business to break even.
When Is It Time To Call In A Profit Expert?
Below is a graph of business decline and potential recovery.
Company A has a small dip in performance which may not have been recognised for a while if performance monitoring is weak. However the business had the time to assess the situation and to decide on the best course of action before implementing its profit improvement plan.
Company B suffers a much more severe decline. The business owner and senior managers were in denial. They believed the problem was temporary, merely a blip when they eventually recognised the symptoms. Then they panicked, made the wrong diagnosis of the problem, took the wrong actions and wasted valuable time and resources before getting the expert help they needed.
Company C was even slower to react to the decline than company B. Unfortunately it ran out of time and money before it could put together an implement a proper turnaround plan.
When do you think is the best time to call in a profit expert or turnaround consultant?
I would say that it’s between the situations of company A and B.
Professional help costs money and it is an interference that you might not want. Inviting a third party into the inner workings of your business will challenge what you do and the way you do it.
It has to.
As Marshall Goldsmith said “what got you here, what get you there.”
Albert Einstein defined insanity as “Doing the same thing over and over again and expecting different results.”
Unless your performance decline is due to a temporary factor that you are absolutely confident will automatically go away quickly, you must change and adapt.
The closer your business gets to Company B, the more difficult it is to create the turnaround you need. More change is needed at a time when stress is high and it’s difficult to think clearly. As the business loses more money, it loses its ability to make changes and the list of viable options reduce.
Business B doesn’t know how far away it is from business C where decline has gone too far and failure is inevitable. At this stage, no matter how good the help you get, nothing can be done. The turnaround options have gone, frittered away by ignoring the problems, making the wrong diagnosis and trying the wrong solution and management pride that ignored the need for outside expertise.
Turning To Expert Help Is A Sign Of Strength Not Weakness
Recognising that you need professional help to improve your profitability and to turnaround your business is a sign of strength.
The weak managers continue on their own with little hope, frightened of spending money to save or generate money.
It’s easy to get into that situation.
I’ve sat in meetings where the management has decided to call in an insolvency professional. There is a feeling that everything is coming to an end. I felt sick even as an external advisor getting a small portion of my income from the client. I can only imagine how those whose salaries depended on the survival of the business felt.
It’s much better to call in an expert in improving profitability early in the decline.
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- My Business Is About To Fail, What Should I Do?
- Turnaround Management vs Turnaround Coaching
- 10 Things You Need to Know to Turnaround Your Business Problems by Alyson Ogilvie-Lee