Compass North Inc. article:

How to Respond to Business Trouble or Crisis

Unless the Company is bankrupt or it has no money to spend, there are always positive things that can be done if you wake up to a problem in your business. Here is an action list of what I suggest:

1. Stay calm by deciding not to panic.

2. Determine the time you have before action must be taken.

3. Categorize your business's problem(s).

4. Consider all options available.

5. Decide and then don't hesitate to execute on your decision.

You should note, however, that when businesses get themselves in real difficulty, they generally need someone new to help get things turned around, even if only on a temporarily basis. This is because usually the Company's problems have become compounded and have been building for some time, and management has either lost perspective, ability or credibility.

If you are in this situation, you can turn to Compass North Inc. CNi can provide your business with a full time, interim turnaround manager who will be able to sort out financial and general management problems, develop and execute on action plans and help you get things back on a better track.

Staying Calm

If you act rashly, you will probably have the opportunity to regret in leisure.

Finding the right solution to your problem requires seeing the situation clearly. Because panic fogs the mind, your best bet is to decide firmly to keep your mind calm, clear and capable.

Available Time Frame for Action

Bad business situations can be sorted into one of the following groups:

Immediate Emergencies: - true crisis requiring action be taken within days


- Bank is calling your loan
- payroll can't be made

Pressing Problems: - something that kill your business within months


- running out of funds to operate business
- business losses that are out of control

Looming Trouble: - a slide that could be terminal within a year or two


- dropping gross margins
- poor return on investment
- significant differences between actual and plan results

Categorizing Your Problem

The key to solving your business's problems lies in correcting diagnosing their causes and these generally can be categorized as follows:

Operational: These are specific technical problems in core operations that require specialized technical solutions, such as problems with computer systems, production processes, maintenance or logistics.

Financial: These relate to:

i)   cashflows out of control and typically negative often because they have not been planned or actively managed through preparation or 12 month projections and comparison to actual;
ii)   financial mismanagement including that of receivables, inventory, debt levels and terms, trade credit, and shareholder, stakeholder or lender relationships;
iii)  financial reporting mistakes covering accounting irregularities and errors, or
iv)  financial control failures including management processes and systems that are unable to ensure positive economic results.

General: This broad category, where most business problems arise, includes:

- missing or inappropriate key personnel;
- ineffective management style;
- poor decision making processes;
- bad judgments;
- over diversification;
- mismanagement of growth;
- lack of an effective response to important market changes;
- customer relationship mismanagement;
- inappropriate or no strategy;
- ineffective planning; or
- unforeseen events.

Consider The Options

It is only after your business's problems have been properly diagnosed, and their cause and category identified, that credible, custom-tailored solutions can be identified.

At time like these you shouldn't forget that, unless you have burnt your bridges along the way, most people will still be hoping for your success and, depending on the terms, they might be willing to continue providing support. But to find the right response to the challenges you face, you need to consider all the options available.

Realistically, this doesn't include playing the blame game, or denying or hiding from the problems, or praying for something external to change in order to improve your situation.

At this stage, I recommend turning to competent outside advisors, and not trying to go it alone, for evaluating and selecting among the full range of action alternatives is when ability, experience and perspective play a vital roles if you are to get the odds for success in your favor.

Decision and Action

Importantly, make timely, considered, firm decisions. Not doing so will cause you to run the risk of becoming economic 'road-kill'.

Lastly, remember that finding the right solution is not all what needs doing. In order to complete the deal, you will need the right people, cooperation and execution if you are to succeed.

Tony Johnston

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