By John M. Collard
Restarting companies after Coronavirus shelter-in-place, stay-at-home, shutdown, and social distancing orders is a formidable task, but can be done. This will require changes in thinking about how the company operates and what it will look like. When you add revenue without increasing indirect costs and overhead you drive profit. Here are some ideas to restart new profitability. You can think of more.
Add New Products and Services to Offer Existing Customers.
Look for new task and change orders to expand work for customers under contract. Find new products to add to offering.
Enter New Markets with Your Existing Product and Service Offerings.
Figure out what you do best and try marketing to and developing new business in new areas.
Understand and Adjust Pricing Based on Cost-Driver Activity.
Think in terms of Activity-Based Costing and Net Profit Margin. When Overhead is allocated (or not) on the wrong cost base, then profits become skewed in the wrong way, which can adversely affect pricing. Develop managerial accounting systems that give visibility to costs required to produce revenue by activity.
Don’t fall into the trap of allowing one product activity line to subsidize another.
Give Customers What They Want.
When you deliver value, that outweighs price, because that value helps the customer meet their needs and produce better results. When you give customers what they want, they can become referral sources.
When you give customers more than they ask for, they willingly accept the extra benefits for no extra cost. Give them only what they are willing to pay for.
Sometimes You Need to Fire a Customer
When you find yourself in the situation where one customer is absorbing all of managements’ time and attention, and they are not a profitable account, renegotiate or fire them.
Meticulously Manage Assets and Resources.
Assets that are not actively being used to generate profit should be sold for cash. Use proceeds of sale to reinvest into your business to increase its profitability.
While resources of the human kind can’t be sold, they can be furloughed. Carefully manage resources that are not billable to contracts. Increase percent billable.
Make Sure Your Team Knows What Is Expected.
Instill a sense of urgency throughout your business. Never allow a business atmosphere of complacency. Promote excellence throughout your business, from the front desk to key executives.
Base Incentives on Profits Instead of Revenue
Link compensation to productivity for everyone in the company. Employees should only get paid for results when they produce, and not paid when they don’t.
Merge with or Acquire a Partner Company
Add complimentary skills and products. Utilize the best attributes of both organizations, and eliminate duplication. When you add revenue and related direct costs for operations you typically can run the combined entity without duplicate overhead.
Create an Advisory Board to Seek Expert Input from Outside Your Organization.
People are very creative, particularly if properly motivated. Outside expert influence can bring a fresh perspective, and new ideas that you may not have thought of before. It is often difficult to separate your current vision for your business from what is actually going on. Don’t be afraid to explore strengths and how they can be applied elsewhere to drive profits and cashflow. Don’t be afraid to explore weaknesses and how they can be overcome and improved. Studies show increased profitability when advisors get involved.
Drive your team to think in terms of profits, cashflow, expansion, and creativity. They will reward you with profitable activity. Be proactive.
Keep us in mind when a company in restart or transition has a requirement for a board of directors or advisory board seat to guide a turnaround, transition into new markets, new business development, or the need to recover invested dollars. We are turnaround managers who get results.
There is a turn-around process which involves bringing leadership, setting strategy, building a quality management team, acquiring new business/sales, establishing sound capital structure, implementing processes, and nurturing resources. Distressed company leadership is about value preservation, recovery, communicating with multiple stakeholder groups, rebuilding, saving jobs, and leading in adversity. We bring an understanding of these skills.
John M. Collard is a Certified Turnaround Professional (CTP), and a Certified International Turnaround Manager (CITM), who brings 35+ years senior operating leadership, $85M+ asset and investment recovery, 45+ transactions worth $1.2B, new business developed $950M+ and win ratio 3.5 of 5.0, and $80M fund management expertise to run troubled companies, serve on and advise boards of directors, and raise capital. John has served as CEO, CRO, senior executive to turn around troubled entities, and serves as an outside director. John is inducted into Turnaround Management, Restructuring, and Distressed Investing Industry Hall Of Fame.
John is Past Chairman of the Turnaround Management Association (TMA), Past Chairman of the Association of Interim Executives (AIE), and a Senior Fellow of the Turnaround Management Society. John is a Founder of TMA. John is honored as Prince Georges Business Leader of the Year. John is honored with the Interim Management Lifetime Achievement Award from the Association of Interim Executives. John is honored as Most Admired CEO in Maryland by Daily Record. John is honored with SmartCEO Distinguished Leadership Award, and others.
Strategic Management Partners, Inc. (www.StrategicMgtPartners.com) is a turnaround management firm specializing in board and private equity advisory, executive CEO leadership, receivership, asset and investment recovery, and investing in and rebuilding distressed underperforming troubled companies.
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