Serious business disruptions come in many shapes and sizes, from changing economic conditions to the “Dismal Ds” (death, divorce, disability, disagreement and departure).
In the midst of disruption, it is all too easy to feel beleaguered and overwhelmed and to become fixated on the immediate crisis.
An English friend of mine told me this is known in the British Army as the state of being “head down, bum up” — when troops crawl along the ground to avoid enemy rifle fire. While concentrating on keeping their heads down, they instinctively raise their hindquarters to compensate, thereby avoiding getting shot in the head but inviting an entirely unintended wound!
Whatever the type of business disruption you encounter (short of your own death!), your chances of getting your business back on track and returning to cash flow positive will be increased significantly if you take the time to assess your business and options properly and thoroughly, and from there, create a strategic plan to move forward. Because time is at a premium for those enmeshed in crisis, it is advisable to engage an outside expert to conduct a 360° Assessment.
What is a 360° Assessment?
Not all-inclusive, this process begins with a review of the company’s historical and projected financial performance, management team, functional areas, capabilities, governance, corporate initiatives, and back office structure. The following key documents and data are typically reviewed:
Financial Documents
- Prior year audit reports
- Prior year internal financial statements (income statement and balance sheet)
- Current year interim financial statements (income statement, balance sheet and cash flows)
- Backlog and vendor data
- Trial balance and other financial data
- Prior year’s budget
Corporate and Operational Documents
- Organizational diagrams
- Strategy plan
- Capability briefing
- Business unit (BU) growth plans
- All hands presentations
- Management business reviews (MBR)
This type of assessment does not constitute an audit or review of financial statements or a formal valuation nor should it be relied upon to disclose errors, irregularities or illegal acts. But, based on the findings, recommendations and action plans can be made to successfully return the business to cash flow positive and/or to stability and growth.
Key Observations, Implications with Recommendations
The results of a 360° Assessment typically uncover issues in the following categories:
Board and Governance
Often, the mistakes and errors that endanger businesses are permitted to occur by the lack of an effective board of advisors, which should hold the management team accountable, or from a poor governance model, which should establish the rules and procedures by which the company makes decisions, undertakes operations and manages stakeholder relationships.
Organizational Structure
Weaknesses in the company’s structure (direct reports, employee responsibilities, skill sets, internal controls, etc.) can prevent it from achieving the optimal efficiency that comes from having the right people, with the right skills and experience, in the right positions.
Historic Operating Results and Financial Projections
An in-depth analysis of both historic and projected financial data can reveal unsustainable operating costs, debt ratios, EBITDA margins, DSOs, pipeline and backlog, and other critical valuation considerations. These frequently lead to improved budgeting, reporting and projection recommendations.
Back Office Function
While back offices may seldom make or break a business, they will in fact break one through poor financial control and planning. Compensation plans, technical accounting, internal controls, indirect cost rates, utilization rates, monthly closing processes, and human resources procedures are among the areas where changes may be necessary.
Business Development
Making sure that business development is strategically positioned to grow and scale the business frequently requires the adoption of a Future State Business Development and Marketing structure that aligns resources and delineates responsibility and accountability.
Future Roadmap
The conclusion of this assessment is a road map to implementing the recommendations and action plans. This needs to be aligned with the company’s strategic business plan, vision, goals and objectives over the next three to five years.
The road map provides focus, reduces the risk of misaligning resources in pursuit of goals, and prevents the pursuit of ill-defined opportunities that might forestall progress toward your company’s goals. It also provides a checklist of actions and something to measure progress against.
Conclusion
Whether you chose to follow the plan outlined in this blog or not, I hope I made one thing made clear: disruptions, in whatever form they take, don’t have to be catastrophic to your business provided you take the time to properly assess your company’s strengths and weaknesses and your options, and then create a strategic plan to move forward.
About the Author
Tom Springer has over 20 years of experience providing strategic planning, business development, interim management and technical advisory services for private equity firms, portfolio companies and public and private enterprises. Tom is skilled at growing enterprise value by creating highly productive sales and service teams, developing new lines of business and fostering client relationships. He is known for solving complex business problems by aligning technology with business and operations.
You can contact Tom at [email protected].
About SD Capital
SD Capital is a premier, full-service, value advisory and investment banking practice that assists middle-market companies in creating and maximizing business value. We provide strategic evaluation and execution of various downstream sales and monetization pathways. With decades of combined executive experience running, owning and advising private companies our team is uniquely positioned to guide owners through the complex process of growing and selling their companies.
Learn more at www.sdcapital.com or contact the team directly at [email protected].
Schneider Downs Capital LLC is a subsidiary of Schneider Downs & Co., Inc.
