For those of you interested in “getting into the turnaround business,” it’s not to late to register for the
2009 Annual Convention
“When Flat is the New Up: Turnarounds in a Troubled World”
October 7-9
J.W. Marriott Desert Ridge, Phoenix, AZ
For more information, visit: www.turnaround.org
Today, I spoke with a seasoned collections executive who called to collect money from my client……
Among other things, he told me that this year he has had three times as many clients but collected only half as much money as he has in other years…..
As you may have noticed, my entries are getting shorter–Working 80 hours a week will do that to you….
My thought for this week: Every time I read in the business news that “Revenues are up,” I ask myself, what about profits? Are they up or down?
Daily, I receive multiple emails from people who are “interested” in what I do and want to “talk to me about getting into turnarounds.”
Recently, when I explained to one that I have been receiving too many calls to be able to meet with everyone, he told me that one of my competitors is charging $300 per hour to people who want to meet with him for such purposes.
This question popped into my mind today: What would be the impact on the U.S. economy if most businesses were run efficiently instead of inefficiently?
It’s a question I’ll be thinking about and writing about–but probably not for a while because I just started a new Interim CEO engagement and will be extremely busy for a while…..
When revenues decline, and profits are non-existent, companies often believe that if they buy or merge with another company, the increased revenues will solve their profitability problems. In my experience, however, these “solutions” often exacerbate the problems.
To be successful, all companies need the essentials:
- A capable leader
- A carefully conceived plan
- A system for ensuring accountability
When these pieces are missing, a joining of two financially and operationally troubled companies is destined to fail.
An example from one of my clients:
- Company A was in an FDA-regulated industry
- The industry was experiencing both intense pricing pressure and consolidation.
- Company A, with multiple manufacturing and distribution facilities, was not only losing money but was also experiencing both product contamination and delivery problems.
- Company A, which was bleeding cash, bought Company B, which was also bleeding cash.
- Neither company had any of the three essentials listed above.
- After the acquisition, the expected “economies of scale” did not materialize; costs for the combined entity actually increased as a percent of revenues.
- The already stressed delivery system was now even more stressed.
- Expected revenues did not materialize because frustrated customers switched to other suppliers.
- Chaos ensued.
We were able to save the company, but it was a close call…..a very close call…..
Two wrongs don’t make a right, and two sick companies do not make a healthy one.