If Your Business Cash Flow Is Plummeting, Consider a Turnaround Consultant


Turnaround consultant for small businesses

A turnaround consultant may help you resolve your financial and operational issues. But act fast!

Are you experiencing serious financial and operational issues? If so, are you monitoring your business cash flow and observing a rapid decline or a consistent negative cash flow trend? What should you do? First, DO NOT PRACTICE DENIAL. If your situation is dire, you may need to immediately engage a business turnaround consultant. If so, should you decide to engage one, where do you find one?

Finding a Turnaround Consultant

How do you go about finding turnaround consultants? First, ask your banker or other debt provider. Most banks and large loan providers have workout groups that often hire turnaround consultants and turnaround firms to help resolve problems loans. Therefore, banks will often maintain a list of at least three consultants that they would use or highly recommend. If you don’t have a good relationship with your business banker, reach out to another banker in your personal circle for a reference. Alternatively, you can ask your accountant or CPA firm. If the CPA firm your company uses does any forensic accounting work, there is a greater likelihood your CPA firm will have a referral/recommendation.

Finally, you can reach out and ask your board of advisors or directors. (However, if you have a board, they may already be in the process of hiring a turnaround consultant!) If you have none of these relationships, check with TMA or ACTP for a list or database of turnaround consultants in your area. Then check the Better Business Bureau (BBB) to ensure the consultants have no complaints filed against them or, if complaints were filed, they were satisfactorily resolved.

Turnaround Management Association

The Turnaround Management Association (TMA), www.turnaround.org is the industry group for turnarounds; many turnaround consultants and related professionals belong to this group. TMA also separately oversees and provides the CTP (Certified Turnaround Professional) designation. For a list of CTPs in your area, click here.

From the TMA website, “CTPs have a proven track record and years of experience in working with companies or large business units that are in financial crisis. CTPs must be or must have held positions such as, but not limited to, turnaround practitioners, consultants, workout lenders, or attorneys and must demonstrate competency in the legal, financial and management aspects of a turnaround.”

Turnaround firm engagement

Agreeing on the terms on the turnaround consulting engagement is critical to a successful turnaround.

Engaging a Turnaround Consultant

How do you engage a turnaround consultant? After finding one (on your own or through referrals), call. Sounds simple, right? However, calling is often the most difficult step. Make the phone call. Set up a meeting or conference call. (Turnaround consultants often have an extremely heavy travel schedule, especially in recessionary periods.) Briefly highlight the issues as you know it and obtain the consultant’s preliminary insight. If you like what you hear, request resumes and references. Thereafter, if you both agree to move forward, the next step is to meet in person and for the consultant to tour your location, talk to employees, and review the current financial statements – and all supporting information.

The next step is to move to an agreement in which you discuss with the turnaround consultant the scope, the time frame, and the expected outcome of the engagement. This will require a detailed discussion of EVERYTHING, as you, your board, management team, etc. knows it. Do not hide information or omit embarrassing results or behavior. The turnaround consultant is there to help. If you omit ticking time bombs, the consultant cannot truly help. After airing all your dirty laundry, the turnaround firm or consultant will tell you whether or not your business is salvageable as a going concern and if so, what is the plan for salvaging the business. The final agreement will outline payment terms, whether or not the consultant(s) will take over C-level positions, and more.

Turnaround Process

In a true restructuring when a business owner or management team has waited too long to act and bankruptcy is nearly imminent, i.e., several months away, a turnaround firm will often slot people into the roles of CFO, COO, and/or CEO, depending on the size of your firm. The turnaround firm MUST have control of your company to effect the turnaround. Constantly having to get decisions approved by the original CEO or COO slows down the process when time is absolutely of the essence. Furthermore, it’s sometimes difficult to accept but you or your existing management is what got the company into trouble in the first place. Therefore, your management/ownership team needs to step aside and allow the turnaround consultants/interim management to make the necessary changes and decisions that will return your company to a healthy state and release it back into the original management team’s control as soon as possible.

If you need assistance, please contact us. At The Resourceful CEO, we help you tap the resources you need to build a high cash flow, high value business.