Tips for restructuring a company in a volatile environment

^{Frame from the movie The Walk, Robert Zemeckis}

Restructuring of problem enterprises, as a rule, includes several different forms: a change in the combination of own and borrowed funds, the revision of loans and on-lending. The global financial crisis and the spread of uncertainty in global financial markets have fundamentally changed the options available for crisis management in order to successfully restructure enterprises.

Debts, equity and commercial papers of companies in the face of financial turmoil are no longer declared as high-yielding or even junk. Currently, many assets are marked as “toxic” . Even obtaining the status of a debtor in possession (DIP, a company that, with the consent of the court and creditors, continues to dispose of its property after the commencement of the bankruptcy proceedings) is not easy today. The current situation has resulted in an increase in the number of companies emerging from bankruptcy through sale or liquidation, and a drastic reduction in financial and operational restructuring procedures, even with the possibility of overcoming the crisis.
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Given all this, the logical question will be: is it possible in such a hostile business climate to increase the company's profitability? In my opinion, the answer to this question is definitely positive. Any company can regain its former success without attracting additional funds. Let's see what is needed for this.

Based on the experience of many companies, I dared to formulate seven points.

1. It is necessary to accept the fact that external financing is no longer available, except for those who are ready to take risks who have already invested in your business (a kind of securities holders).

Even in this case, we should expect a minimum investment, only supporting pants. In such a situation, the management simply must assume the duties of commanders in a hostile territory, with the consequent impossibility of obtaining reinforcements. Any issues should be resolved by your own available forces. The sensible commander will focus on strengthening his position, saving food and ammunition, as well as tactical counterattacks carried out in conditions of limited resources. In such combat conditions, survival has an undoubted priority.

2. Blocking existing financial resources is quite possible.

Banks or lenders may try to pressure you to repay the loan ahead of schedule. A professional should endure and try to break through the question of extending a credit line to the end of the term on previous conditions, for banks restructure your debts with a higher interest rate and strict contractual terms. Do not forget that the increase in the interest rate of loans already issued in the interests of banking institutions.

3. Plan in multiple time frames.

Forecasting cash flows over several weeks is very important, but the longer-term one cannot be missed because it helps to prioritize and formulate goals more accurately. This approach helps to achieve restructuring goals to ensure sufficient liquidity and accurate fulfillment of target dates.

At the same time, the crisis manager must keep abreast of and monitor some short-term indicators. Monitoring weekly indicators allows you to assess the current success and predict the activities of the next week.

4. Do not neglect the inventory and try to put your inventory in order.

Be sure to monitor surplus and obsolete stocks, used materials and the amount of product produced, the minimum amount of deliveries, reserve stocks and other important data.

Eliminating surplus and obsolete stocks may seem a daunting task. Sometimes it is more profitable to process products in a new production cycle than to simply sell at bargain prices. It is also possible to use surplus in order to advertise and stimulate sales, for example, offering such products instead of discounts.

Minimum deliveries from suppliers and reserve stocks should also be reviewed regularly. It is better to pay a slightly higher cost per unit of product than to get rid of surplus.

5. Reducing costs is worth it anyway, even if it is risky.

In a self-financing renaissance, this is normal, since it allows you to make a kind of bookmark for the future, otherwise, there can be no future at all. Paradoxically, but customers expecting price cuts require better service from suppliers.

The benchmark in this process can serve as a reduction in the back office. It is difficult to find opportunities for cost reduction and it is most expedient to make reductions in those departments that have less contact points with the client. For example, it is much safer to partially reduce the financial department than customer support. Personnel who are at a considerable distance from the client can always be hired back, especially in conditions of tough competition in the labor market, it is often possible to hire specialists that are better than reduced ones.

6. Use short-term informal communications.

Long meetings, discussions and discussions look good on television screens and nothing more. Anti-crisis managers should take an example from sports trainers. Short timeouts, in which the coach in very informal expressions and actions set the direction of the game, ensure that all players simultaneously receive the same message. Communication in a company at times of overcoming a crisis should be as fast, efficient and, as far as possible, face to face.

7. Take a sober look at product development.

Although cash is the lifeblood of a company, cash is not everything. Upgrading or improving products indicates an intention to stay in business and give its customers the opportunity to remain customers. For successful self-healing, it is necessary to find ways to more effectively develop new products, ideally, developing new products should be free of charge, or at the expense of the funds already spent on this article.

Companies selling a wide range of products in this case often lose to small, oriented teams that are able to come up with new products much faster and for ridiculous money. For large slow-moving enterprises, it is recommended to go by the Apple method and implement the internal entrepreneurship of small groups with a high degree of autonomy.

In any case, you must understand that the magic pills do not exist. Will these tips help? Do they always work? The experience of insurgent companies is not a kind of cookbook under any circumstances, not to mention the restructuring measures they have undertaken. The adoption of certain measures should always be clearly laid down in the system plan for business optimization.