Dear Banker, Let’s Talk About The Turnaround

Dear Banker,

It can be done. An upside down business can be turned around, we do it all the time. It requires a number of specific strategies designed to successfully navigate this downturn and if accomplished, a business can be turned around.

The business must be downsized deeply enough to force profitability. The business owner must tighten up his business, paying attention to the numbers and installing key indicators. He must manage by watching his numbers carefully and consistently, and daily. He must market using an effective Internet strategy that includes blogs and video. He must reinvent, emphasizing the profitable aspects of his business and rejecting the marginal aspects creating niche success and becoming the best at something. He must emphasize service, service, and more service. He must deliver peceived value, a fair deal. When all these things are implemented together, this works.

Why not allow the borrower in default to exercise these strategies and turn their business around? If the business is once again successful, everyone wins. If not, the bank is not really in a worse position. You can always foreclose and liquidate; the business may still have improved its position from the workout efforts.

I understand that most borrowers in default do not have the skills required to deliver such an effort successfully, however, if the borrower in default hires experienced turnaround consultants it can be done, especially with the bank’s support. This should be the only requirement – a bona fide turnaround expert who submits a cash flow pro forma and a plan with benchmarks like what by when, with careful inspection by the bank to make certain that what is being projected is being delivered, and that the business is, in fact, being turned around.

Accountability, inspection and monitoring the results in the best interest of both the bank and the defaulting borrower. Let the workout happen, it is in everyone’s best interest.