Thursday, December 2, 2010

Turnaround Consultants

Again, in continuing with the previous them on taking action and restructuring your business -before its's too late - if you are encountering financial and operational issues - So how do you engage a turnaround consultant and where do you find them?

I'll answer the second question first. Where do you find turnaround consultants? First, ask your banker or other debt provider. Since most banks and loan providers have workout groups that often hire turnaround consultants and turnaround firms themselves to assist with problems loans, they will often have a list of at least 3 consultants that they would highly recommend. If you don't have a good relationship with your banker, then ask another banker you know from your personal circle for a reference. Ask your accountant or CPA firm, especially if your firm engages in any forensic accounting. Ask your board of advisors or directors. If you have none of these relationships, check with TMA or ACTP for turnaround consultants for consultants in your area. Then check the Better Business Bureau (BBB) to make sure they don't have any complaints filed against them or, if they have, those complaints were satisfactorily resolved.

The Turnaround Management Association (TMA), www.turnaround.org - 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."

How do you engage a turnaround consultant? After finding one (on your own or through referrals), call. Sounds simple, right? But that is often the hardest step. Make the phonecall. Set up a meeting or conference call. (Turnaround consultants can have an extremely heavy travel schedule, especially in recessionary periods.) Briefly highlight the issues as you know it and get their preliminary insight. If you like what you hear, request resumes and references. After that, if you both agree to move forward, the next step is to meet in person and for them to tour your location, talk to employees, and see the current financial statements - and all supporting information. Then you move to an agreement in which you discuss with the turnaround consultant the scope, the time frame, the expected outcome. This will require a detailed discussion where EVERYTHING, as you, your board, management team, etc. knows it. If there are hidden ticking time bombs that you omit, the turnaround consultant cannot truly help. This is where the consultant will tell you whether or not the business is salvageable and what's 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, etc.

In a true restructuring when a company is several months away from bankruptcy, the turnaround firm often slots people as the CFO, COO, and/or CEO. They MUST have control of the 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. Also, existing management is what got the company into trouble. They need to step aside and allow the consultants/interim management to make the necessary changes and decisions that will return the company to a healthy state and back into their control as soon as possible.


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