10 Lessons from Business Failures and Turnarounds

Let's study turnarounds

You might see this title and scratch your head, wondering why you'd want to read about turnarounds or business failures.

It turns out there are incredibly valuable nuggets of wisdom in these stories.

Let's summarize 10 takeaways from studying various turnaround books and articles (plus, I'll share my 3 favorite readings on this topic at the end).

A quick note – I'm not advocating you should do all of these things; rather, these are traits of successful turnarounds that we can consider in our everyday business ops.

10 Turnaround Takeaways:

1. Act fast – Skilled turnaround managers move quickly and rarely look back on decisions they've made. It's almost surgical, like an ER doctor triaging a sick patient. When has it benefitted you to dwell on a wrong decision?
2. Clean house – "The team that leads a company into a crisis is rarely able to get it back on track." We've all heard the adage "fire fast, hire slow." This becomes imperative in a crisis situation, but we should consider this advice more often in our normal course of business. And don't be afraid to "fire yourself" if the situation calls for it.
3. Align the team – A clear strategy that is well understood by the entire organization is vital to success. This goes for any business, not just turnaround situations. And when you think you've communicated the strategy enough, communicate it again.
4. Find the margin – Most businesses have at least one product line or customer segment that is far more profitable than the rest (unit economics!). Know where your profit is coming from and focus your efforts there. Sell off, stop doing, or minimize attention on everything else.
5. Stop the bleeding – Knock down your costs before trying to grow. "There are a whole series of ugly, biting, scratching cost lines between the top and the bottom." Expense creep is very real and it doesn't fix itself.
6. Track your progress – Pick a handful of metrics to chart your progress and watch them closely. These typically include both financial and non-financial metrics.
7. Bad books kill businesses – You need accurate, timely, and consistent numbers to navigate in business. This is true for both successful, struggling, or failing businesses.
8. Cash flow over profitability – Cash is king. Those who track cash closely generally come out on top. You want to monitor both how much is available (liquidity) and what's coming and going (cash flow).
9. Get better instead of bigger – Implementing processes, getting organized, and improving your products naturally lead to profitable growth. Focus on operations and product improvement instead of getting bigger. What do you do better than anybody else?
10. Don't try to grow your way out of a hole – Any Profit Mastery student can tell you that growth consumes cash. Aside from the cash suck of revenue growth, pushing for more sales generally diverts attention and resources away from other opportunities in your company. It's fighting a war on multiple fronts.

Here's an excerpt from an excellent article on the 1990's turnaround at Continental Airlines:

Homework – If you want to read more about these topics (turnarounds and business failures), here are 3 of my favorite reads:

1. ​The story of Continental Airlines​
2. ​The Six Month Fix by Gary Sutton​
3. ​Billion Dollar Lessons by Paul Carroll​

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