Corporate Turnaround Artistry

Chapter 5Turnaround Management

With a reprieve from the bank (however nominal it may feel), you now have to fix the underlying business. I call this patching the holes in the bottom of the boat. The analogy I paint for clients is that if this business were a boat we'd have a $100 million boat with $100 million worth of holes in the bottom of the boat. What we must do is find the biggest holes and make them smaller. “Think about it,” I say, “You've got $100 million of other people's money passing through your hands every single year and you haven't figured out how to keep any of it.” That's the whole problem. It's not revenue; it's you being at the bottom of the food chain. You have all the risk but you're the one who's not getting paid. Everyone else has been paid well for years except you.

To find our way out of this problem, what we fix first is the business model. If we're losing money, then our model is broken, simple as that. Do we have competitors who are profitable? What's better about them than us? Are they charging more, servicing better, have economies of scale, better customers, do they pay less, are they shrewder, what do they have that we don't? That's the difference. If we have five competitors and three are making money and two doing okay, then what's unique about them? How do they make money? We can also consider our past to see if the business had ever been profitable. When was that and what's different now? If a company has a historical profit that it can ...