interesting times with the colourful backdrop of the USA and some parts of Europe going bust, it’s not surprising the banks aren’t lending? In the real world many businesses are doing well; automotive and aerospace engineering; in the UK, but tragically there are unnecessary casualties. We still find Alan Sugars’ hypotheses that most businesses (as is) asking for money actually need an IP, still holds water. But there remains so much misunderstanding around financial turnaround. The backdrop might sound dire but it’s our choice as to whether we batten down the hatches, or get excited and get on with it.
why do most businesses go bust? In a turnaround external professional service firm’s (PSFs) dance around the business owners and try to sell services to the failing management. Icebreaker finds “all knowing” turnaround professional solution to be flawed; being a true professional is more about recognising when to take advice. No matter how technically capable the turnaround team – the business often fails, leaving the turnaround VCs circling to pick up a bargain after the PSFs fail to engage. The inability of the PSFs to engage leaves the failing business owner bridgeless sailing often close to the wind, always into unchartered territory with a cargo of rats… the classic hindsight of the failed business owner is – if only I had acted!
setting the bar too low why does it matter what good looks like? The tragedy of the standard due diligence process does not identify what the business could achieve, nor is the proposal “owned”. Furthermore if you don’t set the bar high enough – it is like a thermostat – you will never realise the business potential. In the last 7 or so turnarounds icebreaker have led ,we have leveraged our award recognised experience to realise about 30% more value than the standard process had identified. That said our primary focus is taking ownership and delivering the outcome we set out. A financial turnaround is not about growth and nice to have improvements;–the prerogative is to run the business pared back to its profitable core, yet resourcefully and sustainably achieve new highs in performance; requiring outstanding resourcefulness and management skill.
just fire the management? Do you recognise the human roadblocks to the outcome you target? How do you get buy in turnaround situations? How do you leave a successful legacy in a distressed environment? How do you avoid an insolvent liquidation or the abject failure to engage? Or is Jon Moulton right that VCs should only invest in businesses with dire management? There is no doubt that the issue is always traced back to incumbent management decision making. Interestingly the team behind Open Ocean are an example of a new breed of funds in Europe: entrepreneurs rather than ex consultants, bankers, etc i.e.: previously successful, so bringing a level of confidence – not oblivious to execution challenges.
the paradox of turnaround Even the very best turnaround executives and business owners are human beings. Humans during a turnaround or during another time of extreme difficulty; tend to malfunction – yes malfunction. The insightful turnaround manager builds a legacy, yet the words often used during a turnaround are stressful, confrontational and high risk. Turnaround Execs are too often real destroyers of value. The professional accreditation bodies of turnaround professionals too are at odds – the IFT like to play to the worst fears of the banks pushing narrow financial restructuring solutions, yet the TMA recognise turnaround requires extreme focus, a real spark; innovation and breadth of skills are what is required to resolve the complexities of a turnaround.
standard pitfall. The inability of experts to engage is the main cause that leads to the business having to enter administration. In turnaround scenarios clients are distressed and nearly always in denial. The ability to engage with customers and to be able to get to productive dialogue at the first meeting is the difference between success and failure.
skills because even the best fail to engage – customer businesses are unnecessarily put at risk, icebreaker spent 2 years 2006-2008 developing professional development for their team with John Webster CEOGB an investor and BIMBO pioneer. The event enables C-level executives to recognise the human roadblocks, how to engage and get buy in turnaround situations. It is grounded in some tools core to icebreakers award nominated work, and best practice ways of engaging and implementation. We run this intense 2 day event at Ashridge Business School; providing an excellent opportunity to network with C level executives and leading like minded professionals, and probably rerun the event later this year in September.
The driver of the success is defined by the ability to engage. The icebreaker team are experts at engagement.
If you are up for “raising the bar” call us on +44 (0)207 193 5518 or E: firstname.lastname@example.org