Anyone buying a business out of administration will know that they face a challenge to make it profitable again. Although it may seem a daunting task, there is a process that all buyers must go through and it starts with establishing why the business failed in the first place.
What went wrong?
Assessing the situation from an outsider’s point of view can be enough to form a picture of why a business has struggled to make money. One of the first places to look is usually the sales process, as without an effective sales process, a business will fail.
Ask yourself whether the sales staff are motivated. Do they have high morale and are they managed effectively? Gaining an insight into this is only possible by getting close to this department. It’s important to talk to sales teams, managers and even customers to establish where things could be going wrong.
Once you have a clearer picture of what may have been causing problems in the business before you bought it, seeking the guidance of a professional turnaround specialist or management consultant, can help to provide the experience needed to deal with these complex issues. Again, bringing in someone from the outside after a takeover can help to ensure that the people that caused the problems are not tasked with solving them.
It’s now time to look at your new business in terms of its greatest assets – its staff members. Staff can make a good company great, providing they are managed well and have a positive and productive view of their place within the business. Managers need to be able to identify the star performers and communicate this to you as the business owner to ensure that you can do what is necessary to keep hold of these members of staff.
While identifying and protecting the best staff is important, so is making cuts to ensure poor performers no longer pull the business down. Whether this be through redundancies or management overhauls, the focus on reducing waste is essential. To be able to identify both the best and worst performing staff, performance needs to be measured by managers and they should feel confident in their role of communicating findings to the top.
Taking over a family company can come with unique challenges with regards to identifying who is valuable and who is holding a business back. The influence and expertise of an external consultant can help in this situation and will provide new owners with the ammunition and intelligence they need to do what is required in terms of trimming the excess from the staff of a family business.
At the same time, this approach will only work if you ensure that a clear culture of performance and success is spread across the company and that performance is rewarded and expectations are clear. Establishing clear core values and a working culture that is shared by everyone is the first step to creating the right attitude among all employees and minimising wastage and poor productivity.
Making sure that all employees feel part of team and are able to work with others and support each other is an extremely good way of establishing a strong and positive culture within a firm that was once failing. Common sense should take priority here. Lose the jargon and communicate business objectives to staff clearly to reduce the chances of them switching off and feeling detached. Staff engagement will help limit the impact of the administration process and will boost morale among those you really can’t afford to lose. Although the development of this sense of cohesion and understanding may seem a secondary priority, it should be one of the first steps for anybody buying a failing business. Damage limitation is the buzzword here. After all, who wants to work for a business in which all the staff feel like failures?
Once you have made any necessary redundancies, established a strong culture among employees, briefed managers in their role in quality control and settled the nerves of the remaining staff, it’s time to look to the future.
Using the services of a business turnaround practitioner can once again prove to be an invaluable investment at this stage and especially when trying to secure financing from lenders and investors. Time is important and the quicker you can set the firm up with new funding options, the more chance there is of staff, customers and competitors taking you seriously. A professional’s help can considerably cut the time this process takes when compared with how long it would take without their expertise and influence.
At this stage, establishing a clear vision for the future of the business is the next step. Senior management needs to put time aside to ensure they are thinking strategically about where the business, which was recently struggling to survive, will go in the coming months and years. Although the natural instinct for this process is to keep it behind closed doors until a plan has been agreed upon, this is rarely a good approach and can undo all the hard work you put in to make sure staff are onside.
Instead, don’t be scared to involve staff of different levels in the strategy planning stages. Not only can their input be valuable, they may also be able to give insights that you may not have access to otherwise. Communication is key when developing a fresh business strategy, not least because getting all staff ‘on the same page’ should form a major part of this strategy.
Feeling that their job’s future is in the hands of people who may not understand or be interested in their views is frustrating for any employee. This, in turn, breeds bad feeling and resentment. Trust breaks down and staff have little incentive to work hard for the business that employs them.
Taking an open approach, however, will earn senior staff the trust of the less senior workers, helping everyone to feel engaged with the business’s strategies and targets and that they have a vested interested in seeing them succeed.
Although the declaration of, and adherence to, a defined corporate culture and strategy may seem like a secondary aspects of turning a failing company around, it is in fact one of the most vital steps. If you buy a business out of administration and it’s hard to see why it failed in the first place because its product is competitive and the market is reasonably strong, the key is to look at the factors we have talked about above to set it apart from the competition. Or at the very least, level the playing field to allow your staff to achieve everything they are capable of and deliver the results your product deserves.
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