Understanding the Core Question: Is the Business Worth Saving?

When faced with the challenge of turning around a failing small business, the first step is to delve into a crucial question: Should this business be salvaged? It's not a decision to make lightly, as not every company can be brought back from the brink. Sometimes, the financial and operational prospects are so bleak that the decision to shut down is the most practical and ethical choice. This was our experience when, in 2020, we had to make the tough call to close a client company, despite not identifying a clear path for its salvation.

Facing Tough Decisions: Salvage Value and Management Trust

When faced with a difficult business decision, it's essential to evaluate the salvage value of the company. This involves assessing what the company is worth in its current state, including assets, customer base, and potential future earnings. If the answers are not promising, it might be time to consider salvage value and potentially close down the business.

Trust in the CEO’s judgment is also a significant factor. If a CEO claims they tried a market but couldn't find it, their opinion on the company's pivot should be scrutinized. A recovery plan based on such assumptions may not hold up to scrutiny. Confidence in leadership is key to success, but finding a course that leads to profitability is paramount.

Assessing the Core of the Problem: Management and Hiring

Finding the root cause of a failing business often points to poor management and a series of bad hires. In one instance, I was tasked with turning around a business that seemed salvageable. However, my evaluation revealed a culture riddled with bad hires, a cacophony of incompetence, from the bottom to the top. A complete overhaul, either firing or retraining, would be necessary. While some employees could be retrained, many were so toxic that their presence was detrimental to the entire company's morale and productivity.

A turnaround is not about cutting corners or burning bridges. It's about preserving the hidden equity in the company and systematically addressing the underlying issues. For example, when acquiring Open Interface North America, the value was in the engineering team. Recognizing their potential and supporting their success was a critical step in the turnaround process. However, the path can be complicated when many individuals are actively impeding the company's progress.

Testing and Refining Your Plan

Once you've identified the core issues, testing and refining your recovery plan is essential. It involves making small adjustments to assumptions and strategies until you find the right combination of people and results that drive progress. This can be a meticulous and iterative process, requiring a deep understanding of the business and the marketplace.

It's crucial to approach a turnaround with a results-focused mindset. Success is not just about implementing changes but measuring their impact and adapting as needed. This results-driven approach is a core value in the turnaround process, ensuring that each step taken is aimed at driving the company towards profitability and sustainability.

No two companies are the same, and while the strategies and challenges may vary, the commitment to results and progress remains consistent. Whether it's retraining, restructuring, or bringing in external help, the goal is to create a solid foundation for success and accelerate the company's rebound.

Conclusion

In the journey of turning a failing small business around, the first and most crucial step is to determine whether the business is worth saving. Trust in leadership, a deep understanding of the root issues, and a results-driven mindset are essential for a successful turnaround. By following a structured and data-driven approach, you can increase the chances of salvaging a struggling company and guiding it towards a brighter future.