As a senior manager or owner of a small or mid-size company, you can find your organization stuck in a slow, but steady decline. Often our response to this situation is wait and see, hoping the trend will reverse itself when market conditions improve. If this situation happens to you, one of the most effective strategies is making a plan to prepare for the worst – perform a worst-case scenario simulation. Like all planning strategic exercises, you start at the end and work backwards. In this scenario, you start thinking like a triage surgeon – save the patient so he can fight another day.
A word of caution before you embark on this simulation. This is not a team activity. Consider involving your CFO and/or your controller and it is a wise idea to seek objective council from an experienced project provider. The goal of this planning strategic exercise is to create a plan and strategies that you never plan to use. The value of performing this exercise is to control fear and worry by being prepared for the worst so you can direct all of your efforts to increasing sales and turning around the trend.
To start, I want you to put on your turn-around expert hat. The first step is taking control of the money. Like the triage surgeon, the first objective is to stop the bleeding. Start cutting expenses not directly related to making sales, delivering service to existing customers, or costs to keep the doors open. Cut your expenses to create a new break-even monthly cash flow. Create a variety of strategies to conserve cash – the life-blood of the business. This is a perfect time to explore outsourcing opportunities. Like other planning strategic exercises, starting with the worst case scenario and working backwards to the present will open the door for creative thinking how to reorganize your existing value delivery chain.
Remember the goal; create a plan you will never have to execute. Perform this exercise like a turn-around expert. Manage cash like your life depends on it. Consider how you would negotiate with suppliers and your banker. Think about the long-term implications and costs associated with reducing staff. Prepare three scenarios: worst case, best case, and one in between. File this away with the intent of never having to use any of it. The value of planning strategically creates piece of mind so you can focus on the real objective – creating new strategies for competitive advantage. GMO