A Deep Dive Into How To Turn Around a
Troubled Business

Business owners who encounter corporate distress often go through the same emotional stages as dying people: denial, anger, bargaining, depression, and finally acceptance.

Executives who recognize and acknowledge the signs of trouble and get help in the earlier stages have a much better chance of a successful recovery for their company.

Most businesses in distress display more than one of these external and internal signs of trouble:

An Ineffective Style of Management. 

• A president or founder of a company often is reluctant to delegate authority or refuses to do so.
• Dishonesty or fraud may exist yet go undetected or unreported.

The board of directors may be non-participative and ineffective.

Over Diversification. 

• The business has yielded to pressure to diversify to reduce risk.
• Too much diversification may cause a company to spread its managerial, financial, and competitive resources too thin.

As a result, the business becomes vulnerable to loss of market share to better competition.

Poor Lender Relationships. 

• A weakened financial condition leads the company to developing an adversarial and unproductive relationship with its lending institution(s).
• Fearing that its loan relationships and facilities may be in jeopardy, the company tries to conceal financial information from its lenders.

This kind of a lender relationship only leads to more trouble and compounds the difficulty of managing the declining business operations.

Rapid Growth. 

• Companies achieving fast growth from concentrating on increasing revenue often overlook the effects of that growth on the balance sheet and cash requirements.
• High capital investment requirements in R&D, capacity, and working capital may be needed.
• Leveraging a company to meet these increased funding needs means the management team must operate with little or no margin for error.

Growth has led to overwhelming the capabilities and effectiveness of the management team and the employees alike, who may not be able to work successfully at the new level.

Customer Mix 

• The business relies on a few big customers for most of its revenue.

The loss of just one of these key customers could put hundreds out of work and send the business into bankruptcy.

Lack of Operating Controls. 

• The company is operating without adequate reporting, accountability, and responsibility documentation.

Management decisions based on inadequate, untimely, or inaccurate information can make a bad situation considerably worse.