If you’ve been following along for the past two weeks, we’ve gotten the books in order and done a deep dive into reporting.

Now, the real work begins—turning the ship around when things go south.

Here’s how.

First, you need to know where the problem lies. From there, you’ll set short-term goals and an overall, long-term vision. Finally, you’ll come up with a set of concrete actions that you can take to get there.

I’ll be walking through each of these in detail this week.

Let’s get into it.

Diagnose the Issue

While every business is unique and your reporting should point you toward the problem rather clearly by now, there are a couple of common culprits that I see when owners bring on Scalable to help.

1. Bloated Opex

2. Gross Margins are too low or shrinking

In both of these instances, the root cause tends to be one of two things. Either the prices of labor and materials or prices overall have been rising for some time while owners have neglected to raise their own prices.

Set Your Goals and Vision

Begin by setting your short-term goals. These should be focused on stabilizing the business and relatively quick to achieve.

For example, in the case of rising input prices or shrinking margins, I could set the following goals: decrease Opex by 15% and raise prices by 10%.

Once you’ve set your short-term goals, determine in great detail where you’d like your business to be in the next 3-5 years. This could be a revenue target, a specific rate of growth, or a sustained increase in gross margins.

Make and Carry out Your Action Plan

Once you’ve determined your short- and long-term priorities, it’s time to work backwards a bit.

To ensure you reach the goals you just set, you need to make an action plan that contains the following:

1. Tasks and Responsibilities: Lay out specific action items with owners and deadlines. Try not to assign more than one person to each task. Keep in mind that the actions you take should be both operational and financial in nature. Your operational action items are the ones that drive tangible change in the business, such as trimming the fat in your manufacturing process. Your financial action items are the internal changes you’ll make to better manage cash and allocate resources.

2. Milestones: Identify natural opportunities to track progress along the way and make adjustments as needed. Alternatively, you can establish a weekly, monthly, and/or quarterly cadence for reviewing with the team.

3. Performance Metrics: Select black-and-white KPIs from which you’ll be able to quickly and easily define success or failure.

That’s great, Connor. But what actions am I supposed to take when my costs are rising and margins are shaky?

While the best course of action will vary based on your business, here’s what I typically recommend.

Feel free to implement what applies to your situation and leave the rest.

For tasks and responsibilities, I like to see vendor price negotiations, staffing plan reviews, graduated price increases, and conversations with employees about day-to-day actions to help the financials of the business.

If they aren’t in place already, consider adding in 13-week cash flows based on A/P and A/R schedules predetermined for the week. This model then allows you to decide what vendors you’ll pay and which clients you’ll follow up with for the week.

Under milestones, lay out your timeline for each of these action items. Perhaps you’ll begin to raise prices 60 days from now and begin cost-cutting efforts immediately. Whatever order and timeline you choose is up to you. Just make sure they’re concrete and attainable. I also recommend setting up monthly financial reviews here.

There you have it. How to turn the ship around when your business is in a tough spot.

I hope you enjoyed this 3-part series and will be back next week to discuss the 7 essential business lessons that every owner should know.

See you then.

In the meantime, if you’re looking to diagnose and address any issues in your business but want to be sure that you’re on the right track, feel free to reach out. As always, I’m happy to help.

Putting It All Together

Here are your top takeaways from this week’s post.

1. When your business is in a tough spot, do the following: diagnose the issue, set goals and objectives, and then come up with an action plan unique to your situation.

2. Your reporting should help you find the root cause of the financial troubles. However, rising costs and shrinking margins are the most common issues my firm sees when clients bring us on to help.

3. Short-term goals are set to stabilize the business and should be quick to implement. The long-term vision is there to help you move past reactivity and into strategic planning once the business is steady.

4. Your action plan should include not only what you’ll do to address the root issue, but also identify who will do what, how success will be measured, and when.

Hungry for More?

1. Follow me on Twitter and LinkedIn for daily content to take your business to the next level.

2. Shoot me an email with your questions or requests for what you’d like me to write about next.

‘Til Next Time,

Connor