Turnaround Crisis Management:

Creating a Business Recovery Plan

When it comes to turnaround crisis management, the business recovery plan is much different than the typical Business Plan. First, it covers a shorter period of time, usually 90 days or less, and is updated every 30 days or sooner. Second, the Business Recovery Plan requires an extensive amount of analytical research on the part of the author. To effectively execute turnaround crisis management, your plan must contain the following major areas of information:

• 1. BUSINESS BACKGROUND.
  Not everyone who will need to see your recovery plan will be intimately familiar with your business. Be sure to include how your business was formed, what it does (in some detail), who owns it, what your role is in the business. This portion of the plan will, of course, remain constant as you frequently update your plan.
• 2. CRISIS BACKGROUND.
  You need to acknowledge exactly what your crisis is and how it developed. If you were in charge when it happened, you need to be honest about your role in your business when the crisis started. This portion of the plan will also remain constant as you update your plan.
• 3. CASH CONTROL.
  Every business in crisis has, or will have, a cash crisis. Therefore, it will be necessary for you to take extreme measures to control and maximize cash as it flows through your business. The readers of your recovery plan will want to know how you are going to do this.
• 4. BUSINESS EQUILIBRIUM.
  This is very important to turnaround crisis management and is the key section in your business recovery plan. For the business in crisis, this refers to the condition where cash-in equals cash-out. In other words, you need to halt any further decline of your business and stop the cash hemorrhaging. This is the area that requires the most analysis and planning and also the area where the reader of your recovery plan will have the most interest.
• 5. REORGANIZATION.
  A real crisis will require a serious reorganization of employees, because you simply cannot survive doing “business as usual.” You have to eliminate those management positions that were in place while the crisis developed. You then need to push responsibility down the organization.
• 6. FORECAST.
  In all the prior sections, you told the reader of your recovery plan what you were going to do, and how you were going to do it. Now, you need to explain to them what the effect of all these changes will be. You need to present a forecast of results in the form of short-term financial pro formas.

This is a simple outline of a typical business recovery plan. This plan will be used primarily by your advisors and board members, your bankers, and certain of your creditors. It can also be shared with your employees, but there are additional means of communication you should utilize with your employees. This plan is key to getting everyone on board your turnaround program. It needs to be prepared as soon as possible after you commit to execute a turnaround. Your turnaround crisis management strategy will depend on how well you develop and follow your business recovery plan.

For more detail on turnaround crisis management and how to prepare a business recovery plan, refer to Be Your Own Turnaround Manager: A Common Sense Guide to Managing a Business Crisis.