The problems that plague small businesses that fall victim to the death trap get much worse and when that happens, the downfall gets accelerated. Like a snowball, they tumble down the hill. The problems get bigger because the solutions to those problems (to keep the snowball from getting bigger) become costlier and more complicated. With each slow day that goes by, the crisis gets worse and worse. One of the many benefits of bringing in an outside turnaround professional early is that he can take an unbiased view of the problem and address it head-on. If you find a good one, they can keep the snowball from going faster and bigger. The question every owner asks next is what that help costs and what it actually buys.
Full Fee Structure
Start with the money. Good turnaround consultants cost a lot. There is no menu price, and anyone who promises a bargain rescue should be taken with a giant grain of salt. What matters more than the number is how it is disclosed, because a business in financial stress cannot absorb surprise fees. There is no excuse for a consultant who doesn’t tell you up front what his charge is. Any good turnaround practitioner will sit with you at the beginning of the engagement and lay out what will happen and what the estimated costs will be. A good consultant will take you step by step through his or her cost structure and make sure you understand each component. There’s no need to be embarrassed - this isn’t about passing a test. It’s about knowing exactly what you’re being asked to pay and why. Unless they reveal their full fee structure up front, or they make some attempt to have you agree in advance as to their fees, you are just wasting everyone’s time.
Is the fee worth it? If you can solve the problem yourself, there is no need to pay someone to do it for you. If you can’t, a good consultant should make up for what they charge by making you more money - or saving you money - in their short time with you. They do it by fixing the financial problems that are holding the business back, so it can move forward.
Solve the Company’s Financial Problems
But what are you actually buying? Paying a consultant, by definition, buys something - acumen and a pair of fresh eyes. What a company is buying is a comprehensive understanding of the business, a dive to its operational and financial roots. A turnaround consultant’s job is to solve the company’s financial problems, and in a cash flow crisis that can mean selling assets, restructuring debt or fixing structural problems. Every turnaround situation is different, although the basic options are clear. In some cases you can free up cash by inventorying what the company owns and selling what it does not need. The first order of business for any turnaround consultant is to understand the scope of the problem and the situation. Their job is to be the investigator, the questioner, and the planner. They don’t just look at the numbers. They ask why the numbers are what they are. Where did the cash go? The consultant will work with you to define what the real problems are, and to work out a plan to fix the issues and move the business forward.
In a small company, cash is almost certainly the manifestation that’s going to cause you the most immediate trouble. But a shortage of cash is usually a symptom, not the disease, and a consultant who only plugs the hole will leave the real problem unresolved. A good consultant fixes the problem and puts the business in the best possible position to succeed. That means solving the cash shortage while also dealing with whatever caused it. Turnaround is a difficult process, but if done right, it can help you refocus on the underlying problems that are holding your company back.
Evaluating the Individual Consultant
Because so much rides on the choice, check the consultant’s track record before you hire. Many offer anonymous case studies describing the problem, the solution and the result, and a good one will show them to you. Even if you have to move fast, ask follow-up questions. How long did the turnaround take? What services did the consultant provide, and what did each one accomplish? How many jobs were saved? Did the business repay its debts, and how long did that take? You’re entitled to know what they have actually done before. Then ask the bigger question: have they dealt with problems like yours before? Can they provide detailed answers to your questions? Those are the real indicators.
What size business is the consultant best at? Every type and size of business has turnaround specialists who work mainly with companies like it. Look for a consultant who has successfully worked with companies of your size and in your industry. There is no one-size-fits-all turnaround; every company and situation is different. Make sure you’re hiring someone who specializes in your situation - not someone who just claims to “do everything.”
Then there is the human side. Turnaround work depends on building trust. Handing your finances to a stranger and asking them to fix things quickly takes a leap of faith, so meet the consultant first, in person or virtually. Before you hand over the books, ask yourself: is this person someone you can trust? Do they seem honest and straightforward? If you don’t trust this person, then don’t hire them. An ideal consultant will sit back and listen to you. They’ll ask you questions, dig into the numbers and make sure they understand your goals. Because turnaround consultants work only with businesses in crisis, they should understand the stress you are under. A good one doesn’t bluster, but they will tell it like it is. A turnaround consultant also has to talk to everyone, from stakeholders, board members and investors to managers and employees, so good communication skills are essential. You need someone who can explain your company’s problems and propose realistic solutions in plain language to both owners and employees. If people do not understand why drastic changes are needed and what is going on, there is a good chance they will not support them. Getting everyone on the same page is critical.
Finally, set precise criteria for a process and a timetable before you commence the assignment. With this much at stake, you can’t afford the turnaround to take too long; the business could die before you save it. Whoever you choose should be able to give you an overview of the process and a timeline before the work starts.
So what do turnaround consultants charge and deliver? They charge real money, and they should tell you exactly how much before you commit. In return they should deliver a fix for your financial problems that more than covers their fee. When it comes to hiring a turnaround consultant, there is no substitute for evaluating the individual consultant. Whoever you hire should be thorough, have a proven track record and the trust you need to give them the keys to your business. They should also know businesses like yours, communicate clearly, and come with a clear process and honest fees. The right choice can save your business. Don’t find out the hard way that the wrong one is worse than no one at all.
