Mike Tyson once proclaimed, “Everyone has a plan until they get punched in the mouth.”
Conor McGregor tested Tyson’s theory, when he faced Floyd Mayweather, in the highly anticipated and much-hyped Money Fight.
Leading up to the match, experts questioned whether McGregor—the ego-centric, mix martial arts (MMA) champion—had the skill-set and stamina to compete with the more experienced Mayweather. As predicted, McGregor found himself in unfamiliar territory as the fight extended into the latter rounds. Exhausted and unable to penetrate Mayweather’s experience and skill, he fell victim to a technical knockout (TKO) in the 10th round.
Similarly, when a business finds itself in distress, can its executives rise to face the unfamiliar challenge? Will the company’s stakeholders bet on leadership to persevere in uncertain times? Do the secured lenders believe that they have the skill-set and stamina to survive when times get tough? McGregor and Mayweather both spent months preparing for the fight of their lives, and leaders of companies facing troubled times must do the same. A successful turnaround requires meticulous planning and shrewd preparation in order to succeed. Below are a few ideas to help plan for a successful turnaround:
1. Mental Preparation
It’s going to be a daunting task and tough decisions will need to be made that will affect people’s lives. There will be events that strike simultaneously, requiring immediate reaction and on the spot decision making will be key.
It’s never easy to admit a business is struggling, and that a change of course is required, but acceptance is the first step. In most circumstances, it will get worse before it gets better; however, being positive, believing in the process, and a strong leadership team can, and will, make the difference.
2. Being Proactive
The best opportunity for a successful operational and financial restructuring is early detection of distress, and proactive decision making. Signs of distress are often apparent well before an actual crisis erupts. Declining productivity, decreasing margins, employee dissatisfaction and cash flow constraints are a few signs, of many, that may provide early warnings of trouble ahead.
Implementing strategies to address these warning signs sooner rather than later, can stop and reverse impending financial losses.
3. Analyze the Opponent
Like any good fighter, you need to know what you’re up against.
Is the business viable? Does the business have sufficient resources so that it can be recovered? Do you have the appropriate management teams in place? There are many key questions that would determine the severity of distress and the strategies required to formulate a plan.
Many distressed problems may not be what the leadership team has identified, rather its more systemic problems that have been allowed to continue under the current management group. That said, businesses leaders should focus on finding the root causes, determine the severity of the situation, and establish a plan of attack.
Asking the right questions will provide an understanding of the underlying problems as well as the objectives and strategies to address them.
4. Assemble an Experienced and Multi-Disciplinary Team
No champion fighter, regardless of their talent, prepares alone. Each fighter has their own experienced team of specialists, advisors and training partners to ensure world-class coaching and preparation.
Similarly, a firm that understands the implications of distressed businesses can provide the skills and resources that the executive team may not possess. The benefit of engaging a specialist is that it affords them the ability to free up valuable time to focus on the key priorities of the operations rather than just putting out fires. As you can see, there is considerable value in having experience in your corner.
Coming in with fresh perspectives, a strong collaborative team will be able to quickly assess the level of distress, the ability of the management team, interact with key stakeholders, and provide creative solutions to help turnaround the business.
5. Document the Plan
The analysis has been completed and the right team has been assembled. It’s now up to the turnaround specialist and the leadership to communicate the strategic initiatives, set the priorities and goals, and take back control.
It’s incumbent upon the team to ensure proper reporting is set-up. The process must be transparent and every stakeholder—including employees—must feel secure and informed during the turnaround.
6. Create Contingency Plans
Turnarounds and restructurings are complex, unpredictable, and, at times, even chaotic. In short, there is never a straight line to success. It’s a given that things will go wrong and some plans will fail. The proverbial punch to the mouth is inevitable, but it doesn’t have to be catastrophic.
Advanced preparation, identifying upfront countermeasures and being adept to changing course will go a long way to ensuring success.
Are you prepared?
In the end, training for a championship fight takes a certain amount of mental toughness and round-the-clock preparation.
Similarly, successful business turnarounds require meticulous planning and an astute understanding of the business. Circumstances will inevitably change along the way and plans can—and will—fail at any given time. Just ask Conor McGregor. A measured and proactive approach that includes a strong collaborative team, an analysis of your strengths and weaknesses, along with a durable, yet flexible, plan will help keep you and your business off the canvas, and in the fight.
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Hylton Levy is a Partner with the Restructuring practice of Farber. His practice focuses on corporate restructuring and insolvency solutions, distressed financial advisory services and corporate consulting advisory services. Hylton can be reached at 416.496.3070 and firstname.lastname@example.org.