Corporate Turnaround Artistry by Jeff Sands

Author:Jeff Sands [Sands, Jeff]
Language: eng
Format: epub
ISBN: 9781119539995
Publisher: Wiley
Published: 2020-02-19T00:00:00+00:00

The Income Statement Turnaround

Our turnaround started with cash flow and changing the business from cash‐losing to cash‐generating. It can also mean moving the cash balance from negative to sustainably positive. Positive cash gives you the freedom from creditor pressure and the financial means to fix the business.

Although cash flow is the crisis stabilization part of the turnaround, the income statement is where the actual turnaround takes place. Somehow the CEO needs to get revenues exceeding costs, and do it consistently. It's mathematically simple, but there are only a few controls to work with:

Increase sales. If you're in retail, you can increase sales almost immediately. If you make engineered parts for large infrastructure projects or pharmaceuticals, it may take you years to actually book new orders and increase shipments.

Increase gross profit margins. Short term, this means price increases and cost cutting. Longer term, it takes the form of product design and courageous pricing.

Cut costs. This always works and you can (largely) control the pace and aggressiveness of cuts. Most turnarounds are cost‐cutting exercises in which the business is simply made to fit within its gross profits.

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