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Venturn 10 ways to destroy a business.
Working in so many turnaround situations every year, we have summarised our views on what can go wrong in business.
Of course there are always external factors that are hard to predict, but there are also too many ‘own goals’ caused by internal factors.
Here are our views on things that destroy value and potentially the business.
1. No clear direction
Getting the board, employees, customers and suppliers, along with investors and banks to support
your business plan is what running a business is all about. The important point here is that everyone sees the direction that you’re going in,
and there are no misunderstandings. This is all about communicating the plan to all stakeholders and this often is not done effectively leading
to misunderstandings, future disagreements and U-turns on previously agreed decisions. Generally, it leads to confusion, underperformance and missed
2. Not listening
Every companies’ employees are its most important asset. They may or may not be performing their roles effectively, but they are always important.
They are also probably your more expensive cost. It is essential to listen to your team so that you can work out how they are working together,
if they are doing their jobs, and that they understand their roles and objectives.
3. The team don’t know what’s expected of them
Clearly this is related to “Not Listening” as it’s not always obvious what people’s roles are, and they might not have been given any clear objectives.
This is frighteningly common in turnaround situations and can be easily fixed when a turnaround plan is implemented.
4. Poor relationships between the senior team
This is surprisingly common in turnaround situations. Misunderstandings over strategy and expectations leads to disagreements and eventually, mistrust.
This is common in distressed companies and I often find myself saying that “you will see the best in some people, but the worst in others”. The true
skill is to get everyone back on the same page and find common ground.
5. Making things too complex
You would be surprised how issues in a company can become very complex. The simple facts are that everything needs to be boiled down to its component form, and this
can only be achieved when you are objective. Using a 3rd party Turnaround Practitioner or Interim is therefore very effective at solving these issues.
6. Missing the basics
Business is about leading your team, making a healthy margin on your sales and managing your costs. Every part of your business should therefore strive
to improve these simple ideals. We see far too many companies monitoring the wrong things, or missing a simple truth that is holding them back.
7. No management review meetings
Having a plan and communicating the plan are one thing, but you need to make sure that you measure your progress. Simple review meetings should be
held to do this. Four hour marathon sessions fuelled on coffee and sandwiches won’t do the job, but short punchy reviews with clear actions, assigned
responsibilities and due dates will. This is what keeps things moving and makes sure that everyone is working to a plan.
8. Acting on Bad Advice
This is difficult to avoid as you are probably paying for the advice and therefore perceive it to have value, but receiving and then acting upon bad
advice is a unfortunately something that we see quiet often. There are only two ways to avoid this 1) listen to your heart - if it feels wrong, don’t
do it and 2) get a 2nd opinion.
9. Poor Management Accounts
Your accounts are a way of describing how you are trading, and answering two fundamental questions - Are you making money? Where is your cash?
These simple points often get lost and companies sometimes don’t understand their accounts. In additional to this, management accounts are sometimes
inaccurate and aren’t a true reflection of what’s rely going on in a business (see more).
10. Lack of cash management
Planning your cash flow is essential as there are always gains to be made with good cash management. The process on planning and forecasting
identifies these opportunities and helps you to prioritise your cash management
Stephen Moon, Venturn Ltd. January 2011
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