You structured and survived a successful turnaround:
Now What?
Your efforts are starting to pay big dividends, and a successful turnaround is on the
horizon. Business has stabilized, debt and loans are restructured, expenses cut not once
but several times. You're entering the Growth Phase of the small-business turnaround.
As a lean cash-positive enterprise, it’s vital you strengthen the foundation of the business,
by increasing sales and returning to profitability immediately.
Planning for this phase is important. You'll need conservative sales projections and
budgeting in place, to monitor your goals while maintaining a strict cash forecast.
Net profit before taxes should in the 20% range, with sales increasing at 15% or more
during the next 5 years. Always remember: profits, not sales, drive a successful business.
Look at this example and let me ask you, what lesson does it provide?
Company A: $3,000,000 in sales at 20% Gross Profit (GP) =
$2,400,000 Cost of Goods (COG) = $600,000 Gross Profit.
Company B: $3,000,000 in sales at 40% Gross Profit =
$1,800,000 Cost of Goods (COG) = $1,200,000 Gross Profit.
Obviously Company B has twice the profit but that’s not the whole picture. Company A has to
work 75% harder, employ more assets, and borrow more capital to achieve the same profits as
Company B. That's the lesson here.
AXIOM: Remember it's better to risk business failure because your prices
are to high, rather than because prices are to low. You'll have less debt, and fewer assets,
and don’t have to work nearly as hard.
Taking unprofitable orders will lead you right back to cash flow problems, and you'll be
facing business failure once again. The Business Survey
identified your costs and break-even point, and it identified what products contribute the most
profit to your bottom line. Heed what you've learned.
Test your ability to run a leaner and smarter operation. Try to generate profits 30% above
your competitors. If the industry earns 30% margins, shoot for 40% or 50%. Always ask how you
can squeeze out more profit and increase production.
Now that you’ve engineered your successful business turnaround, read my insider tips on
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Growth Phase