proactive turnaround management

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Proactive Turnaround™ M a n a g e m e n t


The Go-To Company for Business Reinvention.

The Best Business & Executive Coaching.

Period TM

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W bizedgegroup.comOur Brand Statement


Business Edge International provides critical conversation, distinctions, tools, leadership models and practices that allow business leaders access to creating a fulfilling impossible future, now. We are in the business of listening for and reliably delivering that which makes a measurable difference in what business leaders are dealing with and what they really care about.

We are doing so through the following business propositions: 1. High Impact Business & Executive Coaching™2. Business Reinvention3. Proactive Turnaround Management™4. Executive Advisory Board5. Interim Management Services

The Business we are in


Our Clients

•Bank One •BestInService.com •Berisha & Associates •Breakthrough Resources •Center for Wealth Mgmt•Century 21 Town & Country •Clean Team Incorporated •Continental Automotive •Connect Inc •Credant Inc •DMC- Detroit Medical Center •DMB Group •EDS •Epilepsy Foundation of Mich. •Doshi & Associates •Dynasty Funding •Ford Motor Company •G. Long & Associates

•HAP- Health Alliance Plan •Harvard Resources •Help My Team.Com •Henderson Financial Assoc. •Humax Corporation •I.D.S Corp •IMT Studios •Ingersoll Rand •IPS Ltd •JSC Consulting •Johnson Control Automotive •JP Morgan /Chase•Karcher Financial Services •Michigan National Bank •MSX International •MYCO Enterprise •Nationwide Insurance •National Australian Bank

•People's Auto Choice •Power Stream •Quinco Tools Inc. •Rose City Industries •Sterling Commerce •Softura, Inc. •Ripinski Real Estate •Rose City Industries •Rosewood Family Solutions •RSL Ltd. •Family Justice Center •The Inspired Box •The Rockmore Group •TransTech Inc. •UGS •Vision IT •West Pole Technologies •XilliX Corporation

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What makes us different?

1. What we do really works 2. Our principles are tested and highly effective3. We are partners, not advisors – our skin is in the game!4. We have great compassion for what it takes to be a leader5. We listen6. We talk straight7. You can rely on our integrity8. We don't shy away from tough, challenging work9. We discover leadership talent everywhere10. We love our work


Model Overview


The business caseHistorically, when we ask a business owner or corporate executive the question; “What do you think the problem is?” they often answer: “We have a problem with ….” as if they identify the source of the real problem.

We have learned that more often than not, they are actually describe the symptom and not the root cause. If you address and treat the symptoms alone, it will keep coming back again and again over time.

Our Proactive Turnaround™ model operates with the assertion that there is a root cause for every symptom (a problem) and finding it is 80% of the solution. If you treat the root cause (source of the problem) the symptoms will not keep re-occurring and your Organizational Health i.e. higher performance becomes permanent.


Traditional Turnaround

Traditional Turnaround is a process that focuses on restructuring the balance sheet and shedding debt to improve the cash flow of the company.

It focuses primarily on financial indicators to determine a course of action which relates to the company’s debt to assets ratio as a viability matrix and not Healthy Organization’s Operating Habits™.



Symptoms

Root Cause

Financial Breakdown Low E.B.I.T No Sales Customer Retention Operational

Breakdowns Service Issues Customer Complaints Communication Problems High

Turnover Delivery Breakdowns Slow Production Credibility Issues Loss of

Productivity

What is the cause of the symptoms?


Temporary Impact


Proactive Turnaround

Proactive Turnaround™ is a process that focuses on improving the profitability and operating performance of a company. Throughout the process, there is an emphasis on changing the Management and Leadership Operating Habits™ so that the implemented plans and improvements become permanent.

[The way a company (wins) operates is based on a collection of Management and Leadership Operating Habits™.

There are habitual ways in which the organization is operating - habitual ways management is thinking and acting - habitual ways that management is listening and speaking to their employees, customers and stakeholders. ]

A critical change in management culture and Operating Habits™ will take place during the process.


Operating Habits Define

Habit - dictionary definitions:

• manner of conducting oneself

• the prevailing disposition or character of a person's thoughts

and feelings: mental makeup

• a settled tendency or usual manner of behavior <her habit of

taking a morning walk>

• a: a behavior pattern acquired by frequent repetition or

physiologic exposure that shows itself in regularity or increased

facility of performance b: an acquired mode of behavior that has

become nearly or completely involuntary <got up early from

force of habit>


Proactive TurnaroundSymptoms

Root Cause

Financial Breakdown Low E.B.I.T No Sales Customer Retention Operational Breakdowns

Service Issues Customer Complaints Communication Problems High Turnover Delivery

Breakdowns Slow Production Credibility Issues Loss of Productivity

What is the cause of the symptoms?Proactive

Turnaround™Management Operating Habits™

Business Transformation

New and Changed Operating Habits™Critical

Critical Critical


The framework

1. Business Model

2. Strategy

3. Leaders

hip4.

People & Culture

5. Products

& Services6.

Marketing

7. Sales

8. Operatio

ns

9. Finance

10. Custome

rs

Proactive Turnaround™ impacts and addresses the (10) most critical factors in organizational and business success.

The process focuses on improving the profitability, operating performance and the overall health of the company.

Rock Solid Business


Ineffective Operating Habits

Poor cash flow management Emotional decision process

Poor or no communication Hope Reactionary decisions

Denial Do not want to know… Ignorance Internally

focused leadership Being right or “righteous” Resistance

to change Lack of accountability Management by fear

We’ve always done it that way… We’ve tried that before…

Whose fault is it? etc..


The (7) Seven States Process

Exit Exit

Transaction

Financial Analysis

Market Analysis

Business Reinvention

Business CPR

Input

State #1Discovery

State #2Analysis

State #3Control

State #4Prevention

State #5Restoration

State #6Reinvention

State #7Fulfillment

Success Probability

Rating Control Prevent Restore

Built to Last

Business Accelerator Engagement

X-Ray Summary

Report

Voluntary Liquidation or

Exit

Operating Habits Paradigm™ – High Impact Management Coaching

Customer

Supplier/ Vendors

Employees

Management

Business Partners

Board Members

Stakeholders

Busi

ness

/ O

rgan

izatio

n Pe

rfor

man

ce X

-Ray

Proactive Turnaround

TraditionalTurnaround


State One - DiscoveryThis is the first state in the process and one of the most important, we will collect all of the relevant data and conduct a comprehensive analysis of the current viability and health of the business.

The activities will include:

Organization Performance X-Ray: (Include the 10 most critical Key Performance Indicators)

Comprehensive financial analysis – (Current and future) Complete market analysis includes: - (Current and future)

Company positioning Competitive analysis Service level and customer satisfaction review Brand management evaluation Marketing department evaluation Sales department evaluation

Customer

Supplier/ Vendors

Employees

Management

Business Partners

Board Members

Stakeholders

Financial Analysis

Market Analysis

Input

X-Ray Summary

Report

Busi

ness

/ O

rgan

izati

on P

erfo

rman

ce X

-Ray


State Two (2) - Analysis

?

This is the most critical state in the process. In this state we will review all of the information, findings and summaries to determine the Success Probability Rating – SPR to determine if to proceed with a proactive turnaround or to move with a Voluntary Liquidation.


Complete review of the Discovery State Conduct a strategy session Complete a Probability Rating analysis Complete an immediate action plan 30-60-90 days

VoluntaryLiquidation

or Exit

SuccessProbability

Rating


State Three (3) - ControlThe activities will include:

Cash management. Projection of income and collections with time. Prioritize cash outflow – critical expenses:

(payroll, payroll taxes, benefits, insurance, leases, utilities, bank payments, CODs.)

Prioritize unsecured creditors & suppliers: category 1, 2, and 3. Implement cash management control to keep the critical outflows

covered, with the residual available for partial distribution to the unsecured.

Cash management must be forward looking – 4, 8, 12 weeks.

Control


State Four (4) - Prevention

Prevention


Product line profitability evaluation Product pricing evaluation Customer profitability analysis Inventory analysis Cost reduction identification Direct cost evaluation SG&A cost evaluation Financial structure evaluation Refinancing options identification Establish metrics to track implementation Evaluate and change management reporting system


State Five (5) - Restoration

Restoration


Debt restructuring and refinance Implement plans for product line rationalization Implement change in pricing and bid practices Implement all cost reduction programs Implement short/long term improvement programs Establish metrics to track implementation Establish management operating budget


State Six (6) - Reinvention

Built to Grow

Exit

Or

?

?

After restoration of the company’s vital signs, it is now becomes critical to determine the future direction of the company.

Determination may be done based on any of the following factors:

Owner(s)\ Stakeholder(s) preferences Financial viability and capabilities Access to expansion capital Valid market data Business lifecycle More…


State Seven (7) - Fulfillment

Business Accelerator

Program

ExitTransaction

Or

Identify the strategic objectives Create and agree on 3-5-10 year financial goals Complete a strategic business plan framework Define the project/engagement scope and size Agree on a fulfillment and delivery format Agree on a budget and timeline

List the company for sale Complete a potential buyer profile Complete a certified business evaluation Complete a possible term sheet Create a sales promotion campaign Align and agree on deal financial structure


Operating Habits Workout™

Parallel to working on the immediate financial and operational issues, Business Edge senior executive coaching staff will conduct an Operating Habits Workout™ with the company’s management team and other individuals that are critical to the future success of the company. The process includes a quick and effective overview of state 1 to 4 in the corporate reinvention model:

Operating Habits

Workout

Source Document

Design

Management Realignment

Corporate Strategy Review

Exit Exit

Transaction

Built to Last

Business Accelerator Engagement

•Discover•Retire•Reinvent

•Reason for Existence•Redefine your business•Brand Statement•Organizing Values•Operating Principles• Vision(Context)•BHAG 5-10Y•Focus 1-2Y

•New Operating Habits•Management Constitution•Leadership Accountability Statement•Cultural Design Platform•Transparency Model

•Brand Design•Biz Model Design•Market Positioning•P/S Realignment•Balanced Scorecard•R&D Model•Talent Development Model


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Case Studies


Commercial & Industrial Electrical Co - Toledo, Ohio. CS No. 080906 Senior Project Advisor: ■ David W. Martyn

CS No. 080906 ■ Senior Project Advisor: David W. Martyn

Engagement Profile ____________________________________________________________

A $50 million, minority owned, commercial and industrial electrical contractor had been reporting $2 million in net losses for several years. The owner had focused on growing the company’s top line revenue but was not paying attention to the net income of the corporation. The company needed a new business strategy to allow it to become profitable and a new capital structure to be able to cash flow its existence. The company suffered from poor employee morale and a declining reputation in the industry. The company was faced with:• An imminent bankruptcy filing. • The company’s bank had called its $10.5 million line of credit. • The company was virtually out of operating cash. • Loss of key management personnel.

The Predictable Future: - The company was within weeks of going out of business and having its assets auctioned. THE BREAKTHROUGH TARGET______________________________________________________ 1. Secure operating cash for the short term. 2. Identify actions needed to improve profitability in the short and long term. 3. Establish a business strategy to allow the company to recover from its near disaster and begin growing

profitable sales for the future.

01Case Study


Commercial & Industrial Electrical Co - Toledo, Ohio. CS No. 080906 Senior Project Advisor: ■ David W. Martyn


ACTIONS TAKEN__________________________________________________________________

1. Negotiated a standstill with the company’s bank to have access to operating cash from its line of credit.

2. Implemented immediate cash and supplier management. 3. Implemented immediate cost cutting, shutting down 2 of 5 offices that were not generating

enough cash to cover their operating cost. 4. Retargeted the marketing efforts to bid only on projects that were profitable or that paid a

premium for minority owned company participation. 5. Modified the bidding practices to win only profitable projects. 6. Sought an equity partner willing to invest new capital into the business.

THE RESULTS ____________________________________________________________________ 7. The company’s financial performance improved from a $2 million net loss to a $1 million net

profit in 12 months.8. Located an investor to inject new capital into the company while maintaining its minority

owed status.9. Structured a sale of assets to the new investor by putting the company into a voluntary

receivership. This allowed the assets to be sold while setting the stage for a negotiated settlement with the unsecured creditors.

10. Negotiated an agreement with the company’s bank to have the bank finance the purchase of assets by the new investor.

11. Developed a business plan to allow “profitable” growth at 20% per year.

02Case Study



Engagement Profile ________________________________________________________________

A $250 million environmental company had a $15 million division that treated inorganic hazardous waste in a RICRA licensed facility. The division suffered from flat sales, poor facility conditions, a difficult, manual paperwork tracking system required by federal regulations, and mediocre operating income of $600,000/year.

The division was faced with: 1. Inability to grow sales. 2. Low profitability 3. Capital investment was needed to upgrade the facilities to keep up with tightening regulations 4. Capacity was bottlenecked by the manual tracking system for handling hazardous waste treatment.

The Predictable Future: - The division would be shutdown or sold off. A shutdown would require $5 million in environmental remediation and closure costs for a facility that was handling hazardous waste. THE BREAKTHROUGH TARGET______________________________________________________

5. The breakthrough targets were as follows:6. Identify actions needed to grow sales. 7. Identify actions needed to improve profitability. 8. Determine whether the business could generate sufficient cash flow to pay for the needed upgrades.

01Case Study

Hazardous Waste Treatment.Detroit, Michigan. CS No. 08092 Senior Project Advisor: ■ David W. Martyn


ACTIONS TAKEN__________________________________________________________________

1. Identified the key decision making criteria that customers were using in deciding which treatment facility to use.

2. Implemented an electronic tracking system to track each step in the approval process for waste acceptance from customers. The goal was to reduce the time between the receipt of a customer’s waste sample and the issuing of a permit to allow shipment to the treatment facility.

3. Implemented an electronic tracking system to track each step in the treatment process from waste shipment receipt to final disposition. The goal was to eliminate the paperwork constraints on production capacity.

4. Implemented improvements in communications between the different departments and functions in the business to streamline all business processes.

THE RESULTS ____________________________________________________________________ 5. Response time to customer requests to ship waste was reduced from the industry average of 6 weeks

down to 2 weeks.6. The faster response time was the key factor in winning customer orders.7. Improvement in winning customer orders allowed pricing to be increased without a loss of orders.8. Elimination of the paperwork tracking constraints increased plant capacity by 30%.9. Increased capacity, higher pricing, and growth in the percentage of customer orders won increased the

operating income of the division from $600,000 to $3.5 million in three years.10. Sales began to grow at a rate of 15% per year.11. The division was able to generate sufficient cash flow to finance the upgrades required to stay in

business as a healthy, growing business.

02Case Study

Hazardous Waste Treatment.Detroit, Michigan. CS No. 08092 Senior Project Advisor: ■ David W. Martyn



This company had a $50 million revenue division manufacturing specialty products for use in food products and for industrial applications. The division was administered as part of a $1 billion commodity products division. Manufacturing consisted of seven small production plants scattered across 6 states in isolated locations. The division was generating a mediocre $500,000 in operating income on $50 million in sales and had been stagnant for years. The division was faced with: 1. No growth in sales or operating income for a period of years. 2. Lack of leadership in establishing the direction for the business. 3. Lack of capacity to launch new, high margin, specialty products. 4. A need for capital investment to address the lack of capacity. 5. A lack of communication between the manufacturing locations for capacity and talent allocation.

The Predictable Future: - The division would be shutdown or sold off piecemeal for lack of return on invested capital. THE BREAKTHROUGH TARGET______________________________________________________

6. Identify and implement structural changes to the business and its management to improve profitability.7. Address the capacity issues. 8. Establish a direction and management culture to allow the business to grow in the future.

01Case Study

Fortune 500 Food Manufacturing Co.Decatur, Illinois. CS No. 041117 Senior Project Advisor: ■ David W. Martyn


ACTIONS TAKEN__________________________________________________________________

1. Established a management structure to run the business as a specialty business rather than as a commodity business.

2. Modified the commodity division accounting system to break out the specialty division accounting separately. This allowed the individual plant economic performance and product line profitability to be evaluated.

3. Established each plant as a free standing profit center. 4. Closed and sold one unprofitable plant. 5. Changed out two of seven plant managers to instill new life and fresh ideas into the plants. 6. Eliminated several unprofitable product lines which made capacity available. 7. Eliminated the need for capital investment by using the now available capacity for new, high margin

products that were waiting on the capital investment.

THE RESULTS ____________________________________________________________________ 8. Over a period of 18 months, the division moved to an annual operating income of $5 million/year, up

from $500,000/year.9. The business culture was changed from running a commodity division of high volume, low margin

manufacturing to a specialty culture of low volume, high performance, and high margin products.10. The plants now ran as free standing profit centers but functioned as a team to allocate both personnel

and production capacity across the division to maximize the profitability of the specialty division as a whole.

02Case Study

Fortune 500 Food Manufacturing Co.Decatur, Illinois. CS No. 041117 Senior Project Advisor: ■ David W. Martyn



After 7 years of operating the company is straggling to cause a significant growth in revenue and market share. The company is facing the following challenges:

1. Lack of ability to cause significant revenue growth2. The revenue stream is sufficient to cover operating expenses and to provide the owners with average yearly

income3. Lack of ability to penetrate a largest market share4. Creating an effective marketing strategy and marketing management5. No proactive sales approach6. Some level of frustration on behave of the management and some sense of resignation7. To reinvent the company that will live and operate beyond its founders8. Do the management team has the confidence and the know how that is require to cause the breakthrough

The Predictable Future: - The company will continue to straggle in its attempt to growth the business with high level of frustration.

The revenue will continue to growth in a very unsatisfactory rate. The financial state of the company will stay the same and more likely will be deteriorated gradually

THE BREAKTHROUGH TARGET______________________________________________________The company owners created the following breakthrough targets:• 230% increases in total revenue • 200% increases in hourly billing • 300% increases in the number of active contract • Create a consistency in owners compensation on a monthly basis • 100% increases in owners personal net worth

01Case Study

Health Care Management Systems.Farmington Hills, Michigan. CS No. 050120 Senior Project Advisor: ■ Doron York


ACTIONS TAKEN__________________________________________________________________

After a year of coaching we produced some remarkable breakthroughs towards the company’s future:

1. 186% increases in total revenue 2. 128% increases in hourly billing 3. 220% increases in the number of active contract 4. Create a consistency in owners compensation on a monthly basis 5. 35% increases in owners personal net worth

THE CLIENT SAY __________________________________________________________________ “It is very difficult to measure the return on investment for this remarkable

transformation. It is significantly more than 10 fold and over the next 5-10 years will be beyond measure.”

Managing DirectorNew Product Development

02Case Study

Health Care Management Systems.Farmington Hills, Michigan. CS No. 050120 Senior Project Advisor: ■ Doron York



A three year old West Coast Application Development firm that specializes in corporate collaboration tools was facing the following challenges:

1. Lack of ability to cause significant revenue growth2. Lack of ability to penetrate a largest market share3. Creating an effective marketing strategy to effectively communicate their value proposition4. Sales force that is scattered and not focused lacking a define sales strategy and management5. High level of frustration on behave of the management and investors

The Predictable Future: - The company will continue to straggle in its attempt to growth the business with high level of frustration.

The revenue will continue to growth in a very unsatisfactory rate. The financial state of the company will stay the same and more likely will be deteriorated gradually

THE BREAKTHROUGH TARGET______________________________________________________

The company owners created the following breakthrough targets:

• Breakthrough in the ability to generate revenue• Dramatic increases in profitability• Creation of a viable operating model• Complete alignment between the founders• Increase effectiveness to match increasing demands• Creation of a bold future for the company

01Case Study

West Coast Software Development Co.Palo Alto California. CS No. 030911 Senior Project Advisor: ■ Doron York


THE RESULTS __________________________________________________________________

After a year of coaching we produced some remarkable breakthroughs towards the company’s future:• Company increased revenue by 146% year-over-year • Profit rose from $58K in loss to $63K in profit • The founders are aligned and committed to speaking “straight” and full self-expression • Created a bold strategic intent for the company that reached years into the future

THE CLIENT SAY __________________________________________________________________ “After 18 months into the engagement, we have merged with a complementary

development firm increasing the overall company value in excess of 200%. The personal equity of each partner increased over their initial investment in excess of 1000%.”

Founder & CEO

02Case Study

West Coast Software Development Co.Palo Alto California. CS No. 030911 Senior Project Advisor: ■ Doron York

proactive turnaround management

Business

palo alto

electronic

effective

identify actions

leadership

company owners

habitual ways

industrial