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Want to Keep Your Business Out of Trouble?
Here's How by Tom Beane
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February 2008
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 Three
sentences I wrote in our first
newsletter have served as our guide for everything we've
done since then, and they bear repeating here: "Even the
best of companies sometimes hit bumps in the road. But one way
to avoid them is for the owners and management team to make
a thorough and honest assessment of their financial and operational
practices — at least on a yearly basis. It is far better
to identify potential trouble spots before problems get out
of hand than to deal with the prospect of restructuring, bankruptcy
or liquidation because the early warning signs were ignored."
Perhaps that's why the article drew this immediate response,
emailed by one CEO: "After reading the article, I need
help! See you in a few days."
Equally significant was our choice of the image to illustrate
that first article — the iceberg — because it serves
to warn all of us that the most significant problems facing
our businesses are often the ones that we cannot see.
The classic example of trouble going undetected is occupational
fraud, the topic of our second
newsletter. According to the Association of Certified Fraud
Examiners (www.acfe.com),
U.S. organizations lose 5 percent of their annual revenues to
fraud. Based on the 2006 U.S. GDP, that adds up to about $638
billion in losses, despite increased emphasis on anti-fraud
controls and recent legislation to combat fraud.
As we noted then, in most cases, a company's problems don't
start with insider fraud. Rather, fraud tends to occur when
a manager or employee sees financial troubles developing and
takes steps to try to cover it up.
Two of our suggestions for minimizing the risk of fraud losses:
establish strong ethics policies and improve internal controls.
Later in the year, we shifted our focus to strategies that not
only help companies stay out of trouble but also can help them
improve their bottom lines.
In our third
newsletter, we discussed the use of advisory boards as a
tool to provide CEO's with big-picture suggestions to improve
a company's operations.
In an interview, Jim Lucas, a group leader with Vistage, the
world's largest membership organization for CEO's, touted the
value of advisory boards. He said: "Smart CEOs and owners
realize they have 'black spots' — holes in their own skills.One
of the things a top-performing leader recognizes is how to fill
those black spots. If a leader is weak on finance, then you
might really want an accountant on your advisory board because
they can give first-hand advice on a strategic level, say, on
what's the impact on cash flow if you decide to add another
store. If leaders recognize their 'black spots,' they can fill
them in with an advisory board."
Ultimately, the success of any business depends upon its product.
The idea is to make more, do more, sell more — and in the
most efficient manner possible. When we take on an assignment
with a troubled business, one of the most important aspects
of our review of its operations is to promote the concept of
"lean thinking," the manufacturing technique to vaulted
Toyota to the top of the auto-manufacturing ladder.
All sorts of businesses — and even government agencies —
are learning that lean techniques can help them eliminate waste
and save time and money.
In our May
newsletter, Mill Brown, managing director of our Atlanta
office, summarized it this way:
"Virtually every set of procedures can be streamlined.
Lean thinking is all about getting rid of unnecessary steps
and motions, getting rid of any piece of the process that does
not add value to the final product. It's about making what you
need, when you need it, rather than stockpiling huge inventories
that take up valuable space and might not ever be sold."
Following the advice outlined in our first four newsletters
can certainly help businesses — but not every CEO is going
to do that. So, last August, we offered advice on how
to choose a turnaround consultant, and followed that up
with an explanation of how
the consultant assembles a management team to put a business
back on track. Key points to note: When a company is in trouble,
don't waste time figuring out who to blame; get to work on fixing
the problem. And, perhaps most important of all, teamwork is
the ultimate competitive advantage.
Indeed, teamwork is what Beane Associates is all about. If you're
in trouble, we're ready to help you out. If we can help keep
your business out of trouble, that's even better.
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