“If you find yourself in a hole, stop digging.” -Will Rogers
These wise words from the Western actor and cowboy still ring true in many situations today, particularly when it comes to running a business.
All entrepreneurs—whether you own a farm, food, or other type of company—must know when to keep going and when to stop. From conducting a certain project or company endeavor to the overall operation of the organization, you need to know where to draw the line.
At Kitchen Table Consultants, we have helped hundreds of passionate entrepreneurs develop and execute business turnaround strategies. A turnaround strategy is ultimately a simple process to help a business that is struggling financially or performance-wise come back to life and become profitable again.
While a turnaround is often used for underperforming businesses, it can also be used to help a successful organization reach the next level.
Throughout our experience, we have helped many organizations do just that: Turn their business around and soar to new heights. Other times, we have helped clients come to the difficult realization that the best option for themselves, their employees, and their stakeholders is to shut it down (either a specific initiative or the company itself) and allow everyone to move on.
Two Primary Factors in Every Turnaround
Regardless of the case, there are two main components to every turnaround: Money and People. You need a clear strategy and metrics in both areas to measure the success of your turnaround.
Managing the money is the easy part. You can put that data into a spreadsheet or software (or have your accounting and finance team do it). Just be sure to check in on your company’s financial situation regularly to confirm you’re not stretching your finances too thin. Having a rolling cash flow is also pivotal to a successful turnaround. This could mean weekly and/or monthly reviews and controls. As always, set a budget and stick to it.
There are two financial areas where most business owners who are already in trouble tend to dig the hole deeper: vendors and credit cards. Keep a careful eye on them—it’s too easy to overextend both of these. Set a limit and don’t surpass it unless you have an actionable plan to get the numbers back to appropriate levels.
Then, there is your team. We’ve discussed previously how your people are your business’s most valuable resource. We have seen too many entrepreneurs who get into deep financial trouble when they’re not profitable. Unfortunately, many of these owners also don’t know when to stop pushing (entrepreneurs are a passionate crowd and their passion works in multiple ways). They often forge ahead because they believe so strongly in their employees and don’t want to let them down.
Of course, as a business owner who cares about your team members, you will always worry about them finding new jobs and being able to pay their bills. But the truth is, talented, knowledgeable, hardworking people will always find other opportunities.
At the end of the day, a turnaround has both a financial and cultural aspect. It’s crucial to communicate openly with your people to ensure they understand how they directly impact the financials and success of the business. Owners also need to be prepared to have tough conversations. That means being open and honest with everyone: banks, vendors, customers, partners, and employees.
Does your farm or food business need assistance developing a turnaround strategy? Contact KTC today to learn how we can help.