How to Turn Around a Failing Business

5. Assuage clients' fears. Meet with all of your top clients to reassure them that you are not going out of business. Admit there is a problem, but let them know that you have developed a plan to fix it. This is critical because your competition smells blood and is whispering in your clients' ears that you are not long for this world.

6. Be honest with your vendors. When I took over one company, we owed 60 vendors and a lot of taxes. I received 12 valentines from law firms threatening to shut us down. I wrote a nice letter inviting each firm to the company, where I handed over a copy of our business plan and offered access to our financials. Each one advised the client to trust me because I was totally open.

7. Embrace alternative financing. As everyone knows, the banks only lend money when you don't need it, and factors lend money when you absolutely need it and can't get it from anyone else. We had terrific receivables, so I sold them. Factors are invaluable in turning around a company, because they typically don't require personal guarantees and are more flexible.

8. Get rid of the least-profitable clients. One of the companies I ran had some major contracts with the entertainment industry. That is an industry that thinks working with it is such a privilege that vendors don't need to make a profit. I prefer dull, boring clients that pay on time and allow me to make a profit.

9. Never take your eye off the cash. Every day I asked my controller how much cash we had in the bank, and I made sure we parceled out the money. Employees and taxing authorities are paid in total; everyone else receives something so they know they won't be stiffed.

10. Encourage risk. Now is the time to be daring and encourage employees to come up with new ideas for products and services. This reinvigorates the company, creates positive buzz with clients and prospects and repels competitors.

The long-term key to success is to stay calm and levelheaded. Like the commercial says, "Never let them see you sweat."