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The
Small
Business
Accelerator™
Dave Westfall, MBA, © 2009 DewPointe Ventures LLC All rights reserved.
8/28/2009
Profit Improvement Programs and Turnarounds
Are you working harder and harder on your business putting in more and more hours, but things
keep getting worse? You are not alone!
I understand how you feel, I've felt that way myself and I've found from designing and
implementing dozens of Profit Improvement Program (PIP's) in my career that the most
successful ones were implemented as an Action Plan supporting a Profit Improvement or Cost
Reduction Strategy in an overall Annual or Five Year Business Plan. So, you need to learn how
to work "smarter" and not "harder" to put PIP's in their proper perspective and turnaround your
business.
In one notable PIP, my management team was able to reduce operating costs by 33%, while
increasing revenue by 200%, producing a multi-million dollar turnaround in just 18 months.
Now, before you ask, yes, we could have achieved break-even almost immediately by simply
reducing costs. But maybe like you, the shareholders were looking for a long-term profit
improvement that didn't destroy the foundation that had been laid previously. So, the moral of
that story is that Profit Improvement Programs are not all about headcount reductions, cost
cutting, right sizing, or downsizing or whatever it is that your past or present organization may
call them.
Please visit the Turnaround Strategist page on my website to see some examples from my
career: http://www.dewpointe.com/Public/Home/TurnaroundStrategist/index.cfm
As you've observed recently on the national media, simply slashing costs and staff
positions does not necessarily result in a profit improvement and the long term "Turnaround" or
survival of the business. A properly implemented PIP or Turnaround must balance the strategic
goals and objectives of the organization and stakeholders and take into consideration what
stage of maturity the Company is at.
Although there are different labels and descriptions, it is generally agreed that there are Seven
Stages of a Business Life:
1. Seed (Idea)
2. Start-up (Pioneering)
3. Growth
4. Established (Stability)
5. Expansion (Replication or Maturity)
6. Decline (Renewal)
7. Exit
The PIP tactics, strategies and options available vary depending what stage the business is at.
I've learned that the earlier the stage, the fewer the turnaround options that are available.
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Most of the traditional Turnaround literature, articles, examples and blogs are primarily aimed at
the larger "Established or Mature" companies because there are more options and dollars
available. This Turnaround Strategy Components diagram from http://www.corprenewal.co.za/
in South Africa (hence the different "British" spellings on some words) shown below is the simplest
example I've found of the components that are involved in a Business Turnaround:
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Here is a more typical (and complex) Turnaround diagram from Corporate Renewal Partners:
Yes, but, many of my Business Coaching Clients have asked: How do I identify my specific
problem so that I can turn it around and stop the bleeding?
It is generally agreed that there are Eight Turnaround or Exit Strategies that you should consider
before deciding to "double down" and work on Turning around your business, including but not
limited to:
1. Selling- your business outright to an Independent 3rd Party (as shown above)
2. Inheriting-Passing the Business on to another family member (aka Succession Planning)
3.Transferring- the business to employees via an ESOP or LBO or another purchase transaction
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ESOP= Employee Stock Ownership Plan
LBO= Leveraged Buy Out (usually but not always by other Executives or Key Managers)
4. Carrying - Entering into an Owner Carry, Seller is financing the sale and becoming a passive
owner
5. Merging- Being acquired by or merging with another company and taking a passive Investor
role
6. Going Public- Thru an Initial Public Offering (IPO), or Merger, or Acquisition with a Public
Shell Corporation
7. Partnering - Transferring ownership to Co-Owners (e.g. shotgun clause or change of control
clauses)
8. Liquidating- Winding the business down voluntarily or involuntarily (e.g. bankruptcy). To me,
It's sad to see otherwise healthy viable businesses run into the grown due to poor health,
divorce, owner disagreements or other life changing reasons.
I don't want to sugar coat it, once a business has started a downward spiral that trend is difficult
to reverse. So, it's important for you to understand that Turnarounds are hard work and most
Small Business Owners need help to pull it off.
But if you decide to attempt the Turnaround one of the best things that you can do to turn things
around is form a Board of Advisors. If you don't already have one, I strongly recommend that
you built an external Board of Advisors for your Company consisting of the following members:
1. Attorney
2. CPA or Tax Accountant
3. Business Coach or Business Broker (if you are going to sell)
4. Financial Advisor
5. Insurance Agent
6. Banker or Lender
I could write on for hours about Turnarounds and Profit Improvement Programs (PIP) since they
are my passion and have played a major role in my career. But as President Franklin D.
Roosevelt said to his staff when instructing them on how to give a good speech: "Be Sincere,
Be Brief and Be Seated!!" So, I'll resist the temptation. But please feel free to ask me any
questions.
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I'd like to end this Turnarounds White Paper by providing you with some guiding principles that I
have been carrying around on a laminated card in my wallet since 1996 - The 7 C's to
SUCCESS by Tom Morris. To be a success you need:
So, in closing, I hope that you've enjoyed this Small Business Turnarounds White Paper and
found some "golden nuggets" or "pearls of wisdom".
1. Again, I want to offer you a FREE review of your Mission, Vision or Unique Selling
Proposition (USP) statements to help you turnaround and grow your business.
2. I'm also offering a FREE Business Audit ($297 Value) to the readers of this Whitepaper.
3. Please visit the Questions page on my www.dewpointe.com website anytime to ask a Small
Business question.
Please feel free to comment or ask any questions that you may have by sending an email to
Dave at: 30days@dewpointe.com
Dave Westfall is a Small Business Coach and eBusiness Consultant providing solid advice
and proven solutions that work to help you turnaround and grow your business.
For more information or to follow Dave or connect with him please visit Dave online .
To your success,