I’m the guy that gets the call when a business is in trouble…
… when they need a business turnaround from the verge of bankruptcy to a successful business.
Friends call me.
Banks call me.
If I’m lucky, the entrepreneur calls me before it’s too late.
The truth is, it’s always challenging for me to see another entrepreneur failing…
… especially when they have major debt owed, personal guarantees and their biggest dreams hanging in the air as collateral.
It’s even more heartbreaking when kids are involved.
It crushes me inside.
That being said, the game plan to turn things around is ALWAYS the same.
The #1 thing it takes is uncomfortable discussions, honest assessments and quick decisions.
Hard? You have no idea.
However, staring at the light waiting for the train to hit you isn’t the right move either.
Recently I was able to take a company losing tens of thousands each month, to profitable in 14 days.
In this week’s video I provide a step by step process for getting you off the tracks, and pulling a sharp 180 regardless of the challenges you’re facing.
It’s the same strategy that I shared with many entrepreneurs who had successfully turned their failing company around into a successful business.
When it comes to the steps and process they go like this:
- Get clarity from the numbers (scary as hell, but necessary)
- Test the business model
- Cut deep but not the bone
- Focus on the customers
- Write the rules
- Build it back up
The truth is, this strategy is something most companies should use to evaluate their real success.
Too many times I’ve had founders tell me their business is doing “GREAT” only to ask a few questions and have them realize they’re way below the market norm.
Stop being romantic about your business and get serious about how you’re measuring your progress.
Leave a comment below with your business, industry and top question you have about your business model or challenges and I’ll be sure to provide some insights to help you evaluate your progress!
What follows below is a lightly edited transcript of the video.
Dan: How to turn around your business. This is a very serious video. If every month you’re looking at the numbers and it’s going slim. All right. If you’re feeling embarrassed because you don’t feel like you’ve made some great decisions or you’re arguing or frustrated or you have loved ones that care about you, and I’ve been telling you this, if you know in your heart that it’s that if you don’t do something today that you might sacrifice the whole business and a lot of you guys may even have personal lines of credit or personal guarantees in your business. I want to teach you guys a very simple, here’s what I do. You know, to turn businesses around to the point where they’re profitable. Again, they’re actually generating cash and you know what? You’re getting paid a great salary. I mean, that’s the one of the first things that goes is like, I’m not going to take a salary that’s not going to solve the problem.
Dan: I’m going to walk you through exactly how to do it so that you have the financial optics to understand how your decisions impact revenue, impact expenses and profitability. All right? That’s what we’re going to share today because you know, a few months ago I was working with one of my clients and they had great growth. This is the challenges. Most entrepreneurs are growing really well, right? They were doing a little under a million in revenue, but they’re up from 300,000 a year before. So when they’re looking at it, they’re thinking we three, we’ve doubled or tripled the business in the last year, but they didn’t look at their profitability. They didn’t look at the expense structure to say, where’s the profit? Do we have the cash to actually scale the business and are we charging what we need to to actually grow and continue this rate of growth? Right? That is the challenge that most businesses run into or they make a decision and they go off and open up a new location or a new division in their business and they don’t ask themselves, what’s the capital requirement?
Dan: The cash that we need to do is, what’s my timeline in horizon? What’s my marketing program to make sure that I get those new clients to support that new business? And it’s always this, this game. And then once it’s out there, how do you shut it down? Right? So the first thing I’m going to encourage you to do is get the numbers. Here’s how it works. You call the accountant, okay, most of you guys probably don’t have great accounts here. Here’s what I want you to know. Accountants don’t give a crap if you fail as a business owner. They don’t. It’s, and it’s not because they’re bad people. Their job is not to run your business. Their job is not to understand your decisions. Their job is to take the numbers you give them and post it based on gap accounting practices and to give you back the reports and for you to understand the financial literacy to make the decision.
Dan: So you might be upset with your account and say, well, I have the dumbest accountant in the world. Why didn’t they tell me things are this bad? Trust me, it’s not their fault, it’s yours. You should have built some financial literacy into your understanding of running a business, but the number one thing you need to do to start the turnaround is getting all the information, get all your credit card transaction, get all your lines of credit transaction, gets your bank accounts, get everything, get the expenses, get all the numbers, your P, and L, your income statement, your cash flow statement, whatever you can get from the accountant. How much tax do you owe? How much payroll stuff, like all your exposure, your liabilities, get all the information, the real numbers. Now what you think it is, because a lot of entrepreneurs when they’re watching this video and they’re like, that’s where I’m at right now.
Dan: It is. You’re probably worse than you think because you probably don’t want to look at it. You need to get all the numbers. Number two is to create a financial model of simple. I’m going to give you the simple financial model that is essentially a cash flow projection. It’s saying, what’s my income, what’s my expenses, what’s my profit? And then what’s my liability is like, understand how your business operates. How much money does it make? What’s the profitability level? Most businesses, because they have so many decisions they’ve made, they don’t have this in one spot. It’s a spreadsheet each month. It’s projections, right? Wherever you’re at now, this month, just get the information and then start a new spreadsheet and put it there. Look at the customers. Look at the previous year’s revenue to get some estimations, but don’t make it up. Make sure that it’s real numbers because I don’t want you to end up back in this position, right?
Dan: The worst thing you could do right now is put the time and energy in and make half assed decisions. That’s not gonna support you. I really want to help you turn things around so you get all the numbers, you have those uncomfortable meetings, you talk to your accountant, and you give them a sense of urgency and say, look, I know you haven’t finished the books and we’re only halfway. We’re at the end of the year. You only get halfway done. I need the numbers. I’m going to come to your office with my shoe box of receipts and we’re going to get this worked out. But you got to get the numbers. Creating that financial model is gonna allow you to understand how bad it is. You know, and unfortunately every time we’ve been asked to come in and turn around a business, it’s always worse than the entrepreneur thought.
Dan: They’re always losing money. This new division is sucking the profit from this business, this new software. Initially, I get that one all the time. I’ve got to serve as business. I want to start a software company and I’m funding it and it never occurred to me that even though this is highly profitable, that new business or division or department is sucking the profit out of the business, so we need to get real on where we’re at.
Now that we had covered the first two steps lets look at the remaining five steps of the process in turning around any struggling business to a successful business.
Dan: Number Three, which is the toughest one and I always encourage entrepreneurs is just getting ready for the worst case scenario. Like you’re not going to lose sleep anyway. You might as well just get ready for the worst case scenario and that means cutting deep. When you do layoffs in your business, you can’t do surface level things. You can’t do surface level expense cutting.
Dan: You need to go deep. You need to cut through the fat and hit the bone like it needs to cut all the fat off the business and say, what do we absolutely need to run our business? Okay, if you’re not profitable, it’s only a matter of time. If you look at a cash position, your bank account, and you go, okay, we have a few thousand bucks, but all that’s accounted for, you’re weeks away from insolvency. If your line of credits maxed out, if your credit cards maxed out of all these things, you know, if you only got a small percentage of it available, potential borrowing avail, like that’s just bad. Your business shouldn’t be like that. So you’re gonna have to cut the expenses, you’re going to have to cut deep. And I always say cut past just the fat. Get into the bone. You want to hit the bone, you’re going to have those uncomfortable conversations.
Dan: Look, the reality is if you got to lay somebody off and you’re not obligated to, to pay them past that point, you have a business to save, right? And I know that you want to do what you can and do, right? And these are family and these are people and you care about. And I totally get that. But the truth is if you’re at this position, the decisions made for you, right? If you just logically look at the numbers and say, you know, every month I’m losing thousands of dollars in revenue, then you’re giving that up. You are causing potential for your, your family to, to lose their home. Especially if you have personal guarantees. That’s, that’s the part that hurts me the most is when I see these businesses and they don’t realize like that credit cards personally guaranteed that bank loan, that line of credit was a personal guarantees.
Dan: If, if the business falters is not the vendors that you owe money to, it’s the fact that the banks going to come for everything else and you’re putting your family and, and your children’s lifestyle at risk. And that to me should be enough for you to make those tough decisions. Look, if you feel bad about laying people off, just think of this way going and serve them by trying to find them their dream job. That’s what I always do. If I got to lay somebody off, you know, I’m gonna make the decision, I’m going to follow the law, I’m going to give their termination knows. And then three days later I’m going to sit down and I’m going to do the work to find them a dream job. That’s if that’s hurting you for making this big decision. That’s the way you can approach it.
Dan: If you have a new division or business and you’re just, you’re feeling embarrassed of cutting it off or shutting it down, it just is what it is. Look, at the end of the day when you turn this around and I know you will if you follow this process, nobody will remember the failures. They only remember this success. You could be, you know, you can have to lay off more than half of your team and turn the business around and people only remember that part and I know it’s tough to see today, but that’s what you got to do. Number three is going deep. Get the cuts.
Dan: Four is, Focus on your customers. If you have customers still around, you need to get on the phone with them and just ask them, how can I create more value for you in the work we’re doing, I need, you need to make sure that the current customers are happy because if you’ve been in that spot, you’ve been probably putting out fires.
Dan: You haven’t given everybody the right attention and they might feel neglected, so you want to get on the phone, schedule the calls, make sure they’re happy because the last thing you want at this point is to have somebody not paying an invoice or have somebody fire you or have a bad customer experience a moment within your, you know, your, your, your service business, your product company, whatever it is, make sure the customers are happy. I think that that is the best way and if you, if you’re a great entrepreneur, you’ve probably have customers that want to tell you how much they appreciate you. They don’t need to know about the restructuring, but you need to make sure that they’re happy. Then it’s all about sitting down and saying, what are the lessons learned? Because at the end of the day this, these are tough decisions and if you don’t sit down and reflect and do a postmortem, then you’re, you’re very likely to make them again.
Dan: What caused you to get in this position? Likely it’s taking your eye off the financials. It’s not looking at your cost structure thinking you’re doing great top line revenue, but you’re not being profitable. It’s not hiring the right people. It’s not having the right advisors in position to help advise you. Maybe it’s not having the accountant, but I wouldn’t blame the accountant because at the end of the day you hired them. So how did you end up deciding that that was the right person? How do you change that decision and approach so that you don’t get another person just like that? Right? So having great advisors to be able to guide you is key. The last step for me, number six, is to build a back up, right? Once you get your top line revenues in check, you reduce your expenses and cut deep. You get the business righted, you start paying off those debts, you put a plan together and you start being profitable again, giving yourself a fair market salary for the work you do.
Dan: Then you need to start really thinking about how do I build this up? Not doing something crazy, not investing in another business, not opening another division in my company, but doing more of the things that I know how to do. That works. Is it repricing things? It’s ensuring that you have the right margin structure. It’s going after the market and doing marketing or whatever it is, but building it back up is the next steps to turn the business around. So the truth is business is all about expansion and contraction. It’s never a linear growth. It’s always step functions of growth. And if you find yourself in a spot where you’re literally month to month, you have no cash in the business. You’ve been, you’ve been challenged, you’re, you’re frustrated, you’re not sleeping, you know you need to make those tough decisions. This video is to give you the encouragement, the steps, the process to get the numbers right.
Dan: Step one, get everything, all the information, build the financial model and the projections to know what does this really look like going forward? If I don’t make these decisions and if I do, how does that change my projections? Cutting deep, getting rid of the fat, hitting the bone. That’s key. Focusing on the customers that you do have leftover and makes sure that they’re super happy. Then figuring out what are the lessons learned out of this whole process so that you don’t end up back here in another three years and then finally focus on building it back up so that you can be proud of yourself and rebuild the confidence that you may have taken a hit on as an entrepreneur. So I hope this video finds you incredibly well, even though it sounds like you’re probably having a challenging time, but I want to give you that framework to help you get through it.
Dan: But step one, schedule the meeting, get the numbers, get the financial projection and just look at what it is for really what it is and take the emotion out of it. I want to challenge you to live a bigger life and a bigger business, and I’ll see you next Monday.