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Entrepreneur’s Notebook

When your company is in trouble, work fast to build a plan and sell that plan to customers, creditors and employees.

A recent article, “Common Mistakes Made by Businesses in Financial Crisis” by David Kuptez and Alan Tippie of the Los Angeles firm Sulmeyer, Kupetz, Baumann & Rothman reminded me of the importance of “selling” as a part of a crisis management plan.

Kupetz and Tipple cite eight specific mistakes several of which involve communications. Two specific mistakes stand out: (1) refusing to communicate with, or misleading creditors; and, (2) misleading employees.

I add customers to that list.

These mistakes can be avoided by responding to a crisis with a clear head focused on building a solid, highly presentable plan. When there is bad news, it is essential to build a solid written plan for communicating how you plan to work your way out of trouble.

The plan is the focal point of the entire company’s sales effort. Creditors have to be “sold” sooner or later.

It is better to begin from day one. When selling creditors on your plan for survival, full disclosure is essential. When a creditor knows the whole picture, they can be persuaded to work with you in a structured, professional manner.

Each creditor who is calmed and controlled means one less source of phone calls and one fewer negative on the street.

Employees, too, have to be sold on the survival plan.

If employees are going to be terminated, try to have one round of terminations. An all-at-once layoff is preferable to a few per day over an extended period of time.

Tell the truth. If you are not sure that just one round of layoffs is needed for the company to survive, say so.

Employees are going to be disturbed, upset and angry. That is natural. Selling the survival plan must be the focus of the company’s message regardless of how many employees have to be let go. The survivors need a lot of attention.

Seeing fellow workers and friends terminated is not easy. The message from management must be consistent and professional.

Most business failures have a sales and marketing component. Each situation is different, but there is universal agreement that the turnaround will be accelerated if sales and margins improve immediately.

But crisis is quickly communicated to the market. Customers hear bad things faster than they ever hear good news. And customers have many choices.

In order to keep the company’s customer base, there needs to be a solid, exciting story which is communicated from the top down.

If the president is saying, “We are going to survive; it will take a while, but we’ll make it,” and the local sales rep is telling the same customer, “I’m looking for a new job, this company is history,” the odds of getting that customer to remain loyal are very small.

Many different elements can contribute to a turnaround.

In a recent turn-around engineered for a mid-size meat processing company, one of the most important elements was developing a 12-month marketing and sales calendar and sticking to the program.

This company had been in constant flux during the three years prior to the crisis. One of the weakest parts of their management style was a lack of commitment to a schedule that sales personnel and customers could lock into. This seems like a very simple thing to fix. It was not.

The culture of flux and constant change was very deeply seated. Sales people did not believe the schedule would be maintained.

When our new team delivered three quarterly programs on time and within budget, the change began to become reality, but it took nine months. Building a plan and sticking to it is vital.

Saying the company is going to change is meaningless. Senior management must sell their plan and the reasons for the plan and sell it constantly, for months.

It can be very irritating to be six months into a turnaround and still be told negatives about the company that were true then, but definitely aren’t true now. Beliefs are reality people have very long memories, so senior managers must have very thick skins.

High visibility is a critical element in turnarounds. In a program for a direct mail health and fitness company, we realized that creation of a “War Room” was one of the critical elements of our plan. The War Room allowed management to sell each other on the strength of the plan. The calendar and other visible parts of the plan were plastered all over the walls of the room.

The company does not have to be in a life-and-death crisis for professional planning to be important. Problems with a new product, problems in customer service or with the sales force can be viewed as the trigger point for action.

Stepping into a difficult situation with a decisive, clear, focused structure for dealing with the situation, and then selling the solution, is one of the best ways to meet the situation head on and avoid a bigger crisis down the road.

Action Items

1. Evaluate the opportunities to sell the company’s plan.

2. Build a consistent, professional presentation of the plan.

3. Train everyone to deliver a high-quality presentation of the “party line.” Consistent communication is vital.

4. Make sure everyone from the receptionist to sales rep is on board.

John Haskell is president of Dr. Revenue’s Sales and Marketing Clinic in West Los Angeles.

Entrepreneur’s Notebook is a regular column contributed by EC2, The Annenberg Incubator Project, a center for multimedia and electronic communications at the University of Southern California. Contact Dan Rabinovitch at (213) 743-2344 with feedback and topic suggestions

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