You haven’t lived as a business owner / entrepreneur until you’ve done the turnaround. Starting a new company is exciting, but turning around the business that you started and somehow let get away is mind-boggling. In getting through the turnaround, you are simultaneously admitting that you’ve totally messed up what you started and that you’ve got the cojones to rebuild it, six-million-dollar-man style.
Having done all of the above, here are a few pointers from the 30,000 foot level that may help you if/when you find yourself in need of a 180.
The first step in fixing a problem is recognizing that there is a problem
The numbers don’t lie. If you’re an entrepreneur, you’ve stared at numbers until your eyes crossed, especially if you’ve raised money or been acquired. The basic numbers you should see every day of your business life are the very numbers that are going to tell you things are not so rosy any more. The odd thing is that, as founders, we can look at these numbers and fool ourselves into thinking “everything’s OK”, when it certainly isn’t. This is why you have a board or advisers or mentors or all three. Look at the trends, and give your mentors permission to tell you “this sucks!” If your board didn’t tell you before you hit bottom, your board sucks. Fire them.
Embrace the change
That’s what got you here in the first place, right? Change? You wanted to change the world, or at least an industry, or at least a market, or at least a space, or at least your career. You saw something that you knew you could do better and you did it…for a while. So now you should see something else that you can change: your bottom line! Embrace it. Change it. Fix it. Note: some people live for the thrill of change, and may even self-sabotage just so they can get the rush of “change” and fix something that they purposely broke. Don’t do this. Again, be honest with yourself and give your mentors permission to be brutally honest with you.
Make the hard choices
It’s your company. Nobody’s going to make these decisions for you. In the back of your mind, you already know what they are. You’ve known all along. I had to fire friends. I had to call debtors and vendors and be brutally honest with them and tell them, yes, we were going to pay, but it’s gonna be slow…really slow. I had to call customers and partners and reassure them that we were still in it. Yes, “it’s just business”, but you know good and well it’s also personal. It took nearly 2 years, but all those debtors and vendors got paid everything they were owed. That sucked, but it built equity with those individuals and those companies. Next time I see, talk to, or engage with any of them, they know they can believe what I say.
Make a plan
In my turnaround year, my “plan” might have been accepted at some Valley accelerator, but would have been thrown out of HBS. It was 5 points, scribbled on a single piece of paper with a big Sharpie, and I crossed them out as they were accomplished. Like Dave Ramsey says, rejoice in the little victories and gain momentum from ticking things off the list. You had a plan to build the business and you succeeded for a while. Now you need a plan to dig out of the whole, turn the ship around, get back to winning. Keep it simple, and work the plan.
Focus, focus, focus
This will take more intensity than starting the business, because there’s more to lose…your equity, your customers, your reputation, your employees, your sweet cool loft space, your place in the market, your competitive advantage. When you started, you were hyper focused, but you had nothing to lose. This is different. Now you have lots to lose. Let that serve as the motivation to turn it around.
Learn from the turnaround
The only mistake is the one you don’t learn from, right? So write. it. down. What got you into this mess? Yes, more brutal honesty required here. Looking back, I can see with 20/15 clarity what got us into the mess: we got greedy and we lost focus on our real competency. We competed with our channel, and we got into side businesses with more resources (people & money) than we ever put towards our “real” business. We did not have real advisers in place, and we convinced ourselves that we could, and should, take extraordinary chances with the opportunities that we saw, instead of sticking to our original business model. After hitting rock bottom, it was the return to the original business model and focus that turned the ship around.
There are plenty of B-School studies on the corporate turnaround. I’m talking about small business, but Apple, IBM, HP, and plenty of other giants have undergone a turnaround and been better for it.
How have you survived, even thrived through a turnaround?