A Turnaround Artist Can Keep Your Business Afloat

Qualifications of a Turnaround Specialist

There are many people who profess to be general turnaround specialists, but their sole expertise is in looking at a balance sheet and figuring out what expenses to cut and how to reorganize debt and bank loans. This skill and knowledge is certainly important, but it is only part of the answer. It is also the easiest part of fixing a company. Understanding how to manage people and build sales is just as important, along with understanding the industry the business is in.

The turnaround expert you pick should also possess the following qualities:

• Understanding of industry: The value of understanding the industry is that the turnaround specialist doesn't have to spend time being educated about the business and will bring contacts and ideas on how to fix the business.
• Turnaround experiences: Don't hire a manager who hasn't suffered through adversity and who hasn't successfully turned a business around. Companies often hire competent, successful managers, but the manager has never worked with a sick company. They haven't worked with employees who have lost faith in themselves, vendors who are screaming to be paid and clients who are reconsidering giving additional business to the company.

  Knowing what to say and how to respond to each constituency can make all of the difference in the beginning, and if you can't initially control the major issues, the business will not survive.

• Expertise: Not every situation calls for a manager who understands the financial, management and sales issues. In fact, it is hard to find someone who has proven, above-average results in all areas. If your major problem is consolidating debts and reorganizing bank loans, then a financial specialist is maybe all that you need. If your business leader is terrific with numbers but is poor at communicating and energizing people, then an expertise in managing people is essential.
• Compensation requirements: Turnaround specialists who work for large management firms are either paid by the hour or by the project. For a small company, this may not be financially feasible. Small management firms and independent consultants are more flexible and are willing to take a combination of cash, equity and bonus based on performance.

  If you are hesitant about having an outsider holding equity -- fearing, perhaps, that they might sell their equity to someone you don't approve of -- you can design the contract to say that you have first right of refusal to buy their stock back.