By Laurent Vanat
A frustrated business owner facing a situation in which everything seems to be going from bad to worse may be tempted to close his eyes to reality and assume that things will somehow work themselves out. Yet the wiser course is to acknowledge frankly that everything is going wrong and ask what can be done to turn the situation around.
The first step is to identify the root of the problem, meaning its underlying causes rather than its direct or indirect consequences. For example, declining sales are rarely the fundamental cause of a company’s problems. The difficulties that arise when management is caught off guard by such a situation are often rooted instead in an inability to anticipate, poor market monitoring, weak contact with customers, a decline in the quality of the products or services sold, or longer delivery times. Only a sudden crisis in a market or with an important client is a case that is not necessarily foreseeable. To help the business owner get to the source of the problems, an external perspective can be a valuable asset by providing distance, independence and objectivity.
This review will probably quickly reveal several causes of difficulty. In that case, the point is not to get lost in an exhaustive inventory, but to identify the key causes and select those on which the company has the fastest levers for action and the greatest degree of direct control.
Measures should therefore be put in place immediately to address the problems at their source. Half-measures are not appropriate when “everything is going wrong”. As soon as it becomes clear that the first actions are beginning to bear fruit, the next steps should be launched in line with the priorities established.
In order to assess the impact of the initiatives implemented, it is essential for the company to have a robust financial control tool or, at the very least, coherent and up-to-date accounts. Very often, one of the underlying causes of difficulties is precisely inaccurate accounting or bookkeeping that is six, 12 or 18 months behind. By way of a second example, consider the typical case of a company confronted with shrinking margins: in reality, the decline is not the underlying problem itself. The problem is that the company failed to identify the situation quickly enough because its accounts were not up to date. Otherwise, it could, for instance, have adjusted its prices. This can lead to situations where a company only discovers at year-end that it has been selling at a loss for 12 months!
When, after various measures have been implemented, the company gradually recovers, management will need to remain more vigilant. Indeed, warning signs often appear well before difficulties become acute, such as:
