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What Do High Growth Businesses Do Differently?

Over the past 5 years the importance of the “High Growth Business” and how this relatively small group of businesses disproportionally impa...

Friday, 21 November 2008

Grumpy Old Man on Behalf of Sissies!

I was looking through the multitude of information and articles that stream across my desk - mainly because I have this butterfly mind and its much easier than concentrating on one thing; when I came accross this article

Downsizing is for Sisses: Putting My Money Where My Mouth Is! by Jim Gilbert

It was to me like putting a red rag to a bull and I just couldn't help myself here's my reply I think I'm right well I would wouldn't I

"Hi Jim,

Sorry, I have to say what a load of old twaddle!

Layoffs aren’t for sisses, making redundancies is a very unpleasant thing to have to do. Neither is it done through lack of imagination, its done through lack of other alternatives. Most business turnarounds require an element of crisis management, where the company, and this is where I agree with you, has through poor management allowed their position to deteriorate to the extent that they need external help to keep it from going under.

Under these circumstances in 9 times out of 10, the company has insufficient cash resources to maintain and support its current debt burden. Whether that be salaries or payment to creditors or bank loans. In simple terms in this situation no self respecting creditor is going to wait for payment on the chance that you might be able to increase sales at some indeterminate point in the future such that they can get paid. In most cases a creditor will demand some concessions from you for its continued support. These concessions are typically proof that you have cut down your expenditure. In most businesses the largest single variable cost is labour. Therefore that is where you have to go to find the savings to allow the business a chance to succeed.

In any turnaround two things typically have to happen; firstly the need to reduce your cost base and secondly you need to try to increase sales. This in turn is crucially dependent on two things; firstly the relative competitiveness of your product or service and; secondly the state of your marketplace. At the risk of stating the obvious if you are in banking you are unlikely to want to substantially increase your loan book in these highly volatile times.

Having said all that, I had to agree that too many businesses do not explore the sales and marketing opportunities available to them. This is particularly true in the smaller business sector where owner-managers have built up a business based on the fact that they are good at what they do, rather than because they are good at running businesses.

Rgds Laurence Ainsworth
Exigent Consulting
Business Turnaround Specialists since 2002 "

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