If your business is seeing trouble times and needs some crisis management here are the steps that will turn things around. In a crisis situation every decision can mean the difference between saving or killing the company. Your job as a business owner is to manage the situation in a way that provides the best possibility for success. This process is straight forward and contains many parallels found in managing medical situations when there are limited resources.
- Triage. Determine the priority of your issues. What do I address first?
- Crisis management. Stop negative cash flow. Increase margins lower overhead. Short term action plan
- Stabilize. Build a management team. Move to long term action plan
- Plan for the future.
Triage is a means to prioritize. Time is of the essence in a crisis situation and how you prioritize your time is critical to turning the business around. Triage is a suitable word as its medical origin paint a great picture for its use in the business world. The business is a wounded patient and you want to address the problems in the order of their severity. Don’t mess with the broken leg if the patient has a severed artery. You will also need to take into account the limited resources you have to do what you can do. If you lack the means to solve your largest problem perhaps you have what is needed to address your second largest problem. In the battle field the three categories that patients find themselves in are;
- Those who are likely to live, regardless of what care they receive;
- Those who are likely to die, regardless of what care they receive;
- Those for whom immediate care might make a positive difference in outcome.
Similar categories can be drawn for the problem areas of your company;
- Issues that are likely not to cause further problems, regardless of what actions are taken;
- Issues that are likely to cause further problems, regardless of what actions are taken;
- Issues in which immediate action might make a positive difference in outcome.
The first two categories are highlight time bandit issues that will only bring you closer to bankruptcy if you attend to them. The last category will contain the issues which if addressed could turn your situation around. Keep in mind however there may be times when an issue can be solved but the return on investment to make the change may not be justifiable. An example could be fixing an old piece of equipment for twice the cost of a new replacement.
After you have established the priority of your issues you will need to stop losing money. Your cash is the life blood of you business, if you are pissing it away the company will die before you know it. The metaphor of the wounded patient again holds true; stop the bleeding and stabilize the organization. Often times this will look like layoffs, budget cuts, or any other form of downsizing. These short term actions immediately lessen the drain to the bottom line to lower the possibility of having to close the doors. In short you will want to minimize the cash going out the door and maximize the cash coming in. A price increase may or may not be appropriate depending on your positioning and industry. As a small business however you should already be correctly positioned on the competitive advantage spectrum so a price increase won’t be out of the question.
Stabilizing the Situation
Once the bleeding has stopped you will want to turn your focus to longer term issues. What in the organization needs to change so these problems won’t resurface? Perhaps a pivot to a new market or service is in order? Or, you simply need to find the right person for a key position. In one instance I am familiar with the decision was made to withdraw from a market that was proving to be a drain on the company. What made it so interesting was the fact that the market was complimentary to the primary market of the business. The problem was that the cash reserves were not in place to facilitate both. Basically the money made in the primary industry was being poured into the secondary market for no overall gain. For additional ideas regarding stabilizing I wrote an article titled “Maslow’s Hierarchy of Needs for a Small Scale business”. My intent was to draw further correlations between business and humanity.
No one can predict the future and there is an exponential regression to every forecasting model so planning for the future often lies in deciding who will and will not be around to drive the ship tomorrow. A business is a living organism comprised of human parts. Finding the “parts” that fit is the best investment you can make for a long term growth strategy. Jim Collins refers to this as getting the right people on the bus in his book “Good To Great”.
The Bottom Line
The bottom line, changes need to be made. These changes need to be ones to the core conflict/s of the organization, not just the symptoms. All businesses at one point or another will find themselves in a position of reacting to market change. Advents of technology and the natural maturing of market needs are always in flux and will probably require you to take a second look at your business some day. Two great tools to aid in these efforts are The Thinking Process and the Five Focusing Steps of the Theory of Constraints.
The goal of business is to make money now as well as in the future so you need to be doing all you can to make that happen. This will start to take place as you align your core competencies with the true need of your target market. Providing one product or service well will serve you better than offering many mediocre solutions. This is as true on a business level as it is on a personal one.