Don't wait to long if your business needs a turnaround specialist

Chances are you don't even know a turnaround specialist. But if the day comes when you should call one, there are at least two things you should know: Most turnaround specialists are very hands on, and most have negotiating skills that can be crucial to your business' recovery.

Even if your balance sheet is dripping red ink, making a call for help can be tough.

"There's a lot of denial," says James Rubenstein. "Business owners avoid going to a professional until it gets really bad."

Really bad often comes when "You've hit a liquidity crunch, when you're sweating payroll," says James Shein. "Then there's a big difference in the action to take, because you have to move fast."

Rubenstein is president of Alert Consultants Inc., a Northfield turnaround firm that specializes in interim management -- often for businesses where the lack of a succession plan has forced a crisis.

Shein is professor of management and strategy at Northwestern University's Kellogg School of Management in Evanston.

"The turnaround specialist doesn't just give advice and leave," Shein says. "We go shoulder to shoulder" to help right the business.

An ability to negotiate is among a turnaround specialist's most important skills. "There are several stakeholders when a business gets in trouble," Shein explains. "Turnaround people are used to negotiating with lenders and suppliers" to stretch loan and credit terms.

If there's a liquidity issue, the negotiations become particularly important. For example, Shein says, "The bank will want a 13-week cash flow forecast -- by the week and sometimes by the day. This isn't a GAAP forecast, when you book the income when the sale is made. We need to know when the customer actually will pay, when you expect the check to clear and when you must pay cash out."

Part of the turnaround process is to accelerate the timing of cash coming in. "Most business people are non-aggressive when it comes to collecting receivables," Shein says. "Sometimes it's as easy as picking up the phone."

"The best option is to not get in trouble," says Ron Jodlowski, president of Preventive Crisis Intervention Ltd., Naperville. He advocates putting advisory boards in place to provide oversight and guidance before problems arise.

Rubenstein has additional ideas:

• "Don't expand into a recession," he says. "If you've got a big machine on order, cancel it. Cut all possible expenses."

• Reduce debt on your business -- and on your home. "If you get in trouble," says Rubenstein, "the person holding the money will tell you what to do."

• Don't go silent. "No one likes surprises," Rubenstein admonishes. "People will be more willing to work with you if you've been talking to them. Talk to your employees and vendors. Talk to your banker."

• Consider closing the doors. "If your business has always been marginal, this could be a good time to exit," Rubenstein suggests.

© 2008, 121 Marketing Resources Inc.