Over the past few months we have been on a search to fill out our team of consultants.

We realized that in order to better serve our clients we needed the added experience of receiverships, fraud investigation and larger turnaround engagements. We have just added two new members to our team.

John Naglick is a CPA with turnaround and receivership experience. John also has municipal turnaround experience. John has participating in the startup and growth of several different companies. He has held positions with Alix Partners, City of Pontiac, Soave enterprises, Chemed Corporation, Price Waterhouse and many more. John also currently serves as an Adjunct Professor at Walsh College. John is also certified in Financial  Forensics. John is a welcome addition to our team.

Dan Skedel has also joined our team. Dan received his MBA from Ohio state. Dan has also completed his Certifed Turnaround Professional (CTP) certification. Dan spent six years with BBK a well respected turnaround firm. While at BBK Dan was engaged in several different roles and assignments.  He also spent five years with Visteon as a financial manager of the chassis division.

We are very pleased with the addition of both of these guys.

The first step in a turnaround is the hardest. You must realize your expenses exceed your revenues, and that no one is going to lend you anything unless you can fix this problem. Start by developing a detailed cash flow model. You must find a way to reduce expenses to a level that can be supported by the incoming receivables. This is not time to be optimistic in regards to how fast your customers are going to pay you. It needs to be real. Once your cash flow model is completed, you will be in a position to determine how much expenses need to be eliminated in order to balance the cash flow. Most likely, this will involve laying off employees, suspending payments to creditors, and determining if the company can survive. If you have more than one product then Activity Based Costing methods should be utilized to determine which products  produce the most net profit. This will also determine what percentage of the general and administrative expenses each activity should be costing. You may be surprised to find one or more products or services actually loose money on every order. If this sounds like a lot of work, you're right. Professional consultants can move quickly to create these models, flush out costs and help make decisions critical to the survival to your company. Half measures will not work.

You have just made it through some of the toughest times our country has ever seen economically. Business is starting to pickup. You have an opportunity to pick up some new business, but you are unsure if you can handle the new business. Your lender is most likely going to be reluctant to lend additional funds to fund the growth so you must be careful. How do you decide to accept or reject the new work? First, since you have been following our directions, you will have a detailed cash flow analysis. From this report you should know how much positive cash flow you have to work with. Question number one is can I provide enough cash flow from existing business to complete the additional work? If the answer is no then you must find additional funds or turn down the work. If you believe your existing business can provide the additional cash required to complete the work then you move on to question number two. Is it worth it? Do the profits of this new work meet or exceed that of your existing work? What happens if they don't? You should not take on work that has the potential of producing less profit and negative cash flow. It has been a long time since you felt prosperity and this project feels right, but make sure your decision is measured. I am not saying do no take the order, but to choose wisely. Every project has its own Return On Investment (ROI) and Cash Flow. Analyze both of them carefully before jumping into an expansion project.

Our ability to think clearly and act quickly when our companies are in crisis is very difficult. We tend to tighten the leash on everyone, and in most cases prohibit the company from doing what it is supposed to do. When cash flow restrictions hit the fan, we will be quick to start second guessing every decision made by everyone. Instead, we should be endorsing those decisions made by your team, as long as they follow a few simple guidelines. Those guidelines are:

1. When selecting methods to complete the task you have been assigned, plan it in such a way as to reduce the cash requirements to complete the work. This may mean you select a vendor or method that actually costs more, but will reduce cash flow exposure.
2. Make your decisions as if you owned the company.
3. Detailed planning will reward you with lowest possible cost of completion.
4. Track your activities to insure they are on schedule and under the projected budget.
5. Work with the other members of team to coordinate your efforts to insure lowest possible cost of operation of all activities within the company. Remember, if you score a win at the expense of the overall company it is really a loss.

If you can transfer these basic guidelines to your team, and then work with them in a supportive fashion you will have far greater results than trying to do it yourself.

I just finished reading The Speed of Trust – The One Thing that Changes Everything by Stephen M.R. Covey. This Stephen Covey is the son of Stephen R. Covey author of 7 Habits of Highly Effective People.  Stephen M.R. Covey has many leadership credentials similar to his father. The subject of this book is how to create and restore trust in our professional and personal lives. His theory is that trust effects speed and cost in out lives. When trust goes down, speed goes down and costs go up. Covey first defines the trust process into the “Five Waves of Trust.” The real heart of the book is in the outlining of the “13 Behaviors of Trust” that is in the following chapters. These include: demonstrate respect, righting wrongs, delivering results, practicing accountability, and other similar subjects. The discussion of these 13 Behaviors explore and explain the dynamics of how trust can be built in relationships. The only disappointment of this book is that some of Covey’s examples seem lengthy and somewhat unnecessary to make his point.