There is so much of cut throat competition these days that many business houses operate on such small margins that even a small miscalculation or a bad decision can derail the company and it becomes very difficult task for the management to revive the company and put it back on the right track. Following are some strategies which can help the management to turn around the company:
- Take Care of the Cash Flow: Showing huge profits in the books is very easy but managing steady cash flow to meet company’s day to day expenses is most important and challenging task. A company failing to manage its cash flow will not be able pay its liabilities and will be heading towards failure and ultimately closure. The first step is to take care of the cash flow. Engage the customers and resolve all the pending issues in a time bound manner. Once the issues are resolved then ask for the payment and at the same time the company may ask for more business with an assurance that no such issues will be allowed to come up in future and the client needs will be given proper attention.
- Money Saved is Money Earned: If the management fails to control the cost it increases the debt and then interest on the debt becomes another cost and it becomes like vicious cycle and if the management waits for too long there will hardly anything left to pay out the debts. The management should be ruthless in cost cutting and there’s nothing wrong in it whether there is a shortage of cash flow or not. As they say, ‘Every penny saved is penny earned’ and sometimes each penny saved can help pay liabilities. Shrinking the company can be more profitable than running a large but sick corporation.
- Prioritize Your Liabilities: Each liability is supposed to be paid back and prioritizing your liabilities will help you arrange and manage funds in a more efficient way. The Govt. liabilities should be the first to be settled on monthly basis and then vendor liabilities, employee salaries and other liabilities can be prioritized depending upon the need.
- Change Your Customer Base:People think firing a customer is like committing suicide as we don’t only lose a customer we also lose prospects of future business. The idea here is not to become choosy about clients but to scrutinize those who increase the productivity levels and those which cause stress. The reason could be any, non-performance, delayed timelines, delayed approvals, derailed project briefings, non-payments etc. What we have to see – where & with whom are we creating mutually beneficial environment. The attempt to get better shall be made- but the idea should be – to create healthy & beneficial associations and customer undoubtedly is the biggest stakeholder.
- Keep Your Employees Happy:This is amongst the most important aspects management should never ignore during crisis. Having bad morale and employees scared of being laid off is a sure shot way to closure of the company. Please understand when a company runs through a crisis so does its employees and they lose motivation to stay and perform. Only motivated employees can sail the company out of the crisis. Give them comfort and management should come forward and communicate their strategy and seek their help to negate the crisis. If some employees are to be laid off due to cost cutting their selection should be done on merit and not on employee’s personal rapport with the higher authorities. And if company has to lay off its employees then their full & final settlement should be done on priority and they should be paid their dues on their last day at work. Don’t give exceptionally high salary increment with a fear of losing good employees. Take them in confidence and explain the marginal increments and why does every penny matter for the company and how will the employees be rewarded on a later stage when the company recovers.
- Keep Your Vendors Engaged:Your vendors are your life line and if you don’t have money and have failed several times in keeping your commitments and you are not sure when will you be able to pay to your vendors the management should keep the vendors engaged. There’s no harm in telling your vendors that the company is running through a bad phase and the company intend to return each and every penny and at this moment you need their support. My experience says your major problem will be solved and there are many vendors who may extend a helping hand during critical junctures. As and when you receive payments set aside a certain amount that you will pay back to your vendors. This will not only help you pay back your debt but also keep trust of your vendors.
- Getting Out of Fire Fighting: Management of a company in crisis tend to spend more time by being reactive to the problem than to foresee the problem and take appropriate actions to resolve it. Sometimes management knows about the problem but is so busy tackling other issues that it ignores the problem. When backlog of problems builds up management is forced to keep long term planning aside and tackle the problem in fire fighting mode. Such reactive management is very hectic, stressful, often inefficient and becomes a routine and management hardly gets time to foresee the problem and take appropriate actions to resolve.