SAMPLE TURNAROUND PLAN

CHECKLIST

SAMPLE TURNAROUND

PLAN

Sample Turnaround Plan

The information shown on the following pages was taken from my book Be Your Own Turnaround Manager ( http://beyourownturnaroundmanager.com ). It is a sample "Crisis Management Plan" for a fictitious manufacturing company called Nuts & Bolts, Inc., which is in serious crisis. The plan is authored by the fictitious owner of the company, John Smith. The purpose of this sample document is to display what an initial plan might look when prepared for investors, bankers, suppliers, special customers, and the like.

This format is a very early form of communication between you—the crisis manager— and those people who need to know immediately what is going on with your business (and your crisis). It is not for distribution to anyone outside your organization that does not have a "need to know."

You may refer to this sample, as you develop your own plan, to get an idea of how simple this type of plan can be, but be very cautious about what and how much you say at this point, because your business is very tenuous and things can change drastically in the matter of an hour.

This preliminary report may seem somewhat sketchy, but right now you do not have time to prepare anything more complete. You will likely prepare a more detailed business plan once your crisis is under control.

(Title Page)

TURNAROUND PLAN

For

NUTS & BOLTS, INC.

John Smith, CEO/owner 1234 Main Street

Anytown, USA [email protected]

Nuts & Bolts, Inc. is a manufacturer of premium metal fasteners, and distributes their products both through distributors and directly to large OEM’s (original equipment manufacturers). Approximately 25% of our output goes to international customers, 45% directly to the aircraft industry, and the remainder is handled through distributors.

I am the sole owner of Nuts & Bolts, Inc. It was founded by me approximately 15 years ago and is incorporated with an “S Election.” The company has been profitable every year since it’s founding—until last year (recent financial statements are included in the Appendix and additional previous years are available upon request).

Unfortunately, after I turned the day-to-day management of the company over to others, I did not adequately monitor what was happening and our quality deteriorated to the point where we lost our two largest aircraft customers, and several other customers cut back on their purchases. Since returning to active control of Nuts & Bolts, Inc. I have contacted these (and other) customers and am confident that we will soon be able to rebuild our business and confidence with them. Fortunately, I believe we caught the problem early enough so we have not damaged our reputation with our customers. As a result, we believe our sales, although reduced at present, will hold constant while we improve our product quality and rebuild our customer base.

When I became aware of the serious nature of our problem I immediately instituted a cash flow watch to make certain our reduced cash flow was utilized as efficiently as possible. I now personally monitor all incoming cash and sign all outgoing checks. I will continue this program for the foreseeable future.

We have already taken steps to scale down the cost of our operation to fit the presently reduced sales revenue. I have included a general 90-day pro forma of anticipated operating results (cash -based), and although we will not be increasing cash balances, we are expecting to stop the cash drain. Also included is a listing of our organization before downsizing, and after. I am

eliminating several management positions in the downsizing, since I will be more actively involved in the business. Also, additional responsibility and authority will be passed down to operational levels.

Additional cost reductions in areas other than wages will occur, according to the attached

Forecasting Model, by forming our Turnaround Team of operational employees and having them make the necessary changes, under my general direction.

NUTS & BOLTS, INC.—CASH FORECASTING MODEL

—-90 DAY FORECAST—- WITHOUT WITH CHANGES CHANGES REVENUE

(cash in from all sources) $4,500,000 $4,500,000 COST OF REVENUE 3,500,000 3,475,000(1) (cash out for goods or

services plus production

labor & overhead)

GROSS CASH SURPLUS $1,000,000 $1,025,000 OVERHEAD:(2)

NON-PRODUCTION WAGES 360,000 245,000

ENGINEERING COSTS 200,000 185,000

(other than wages)

SALES & MARKETING COSTS 375,000 300,000

(other than wages)

ADMINISTRATIVE COSTS 265,000 245,000

(other than wages)

INTEREST 50,000 50,000 TOTAL OVERHEAD $1,250,000 $1,025,000

CASH SURPLUS (SHORT) ($250,000) $ 0 (3)

NOTES:

(1) "Cost of Revenue" is to be reduced through reductions in the labor force and production overhead. Since sales are down these people can be recalled later when sales pick up.

(2) "Overhead" shows changes set at what must be accomplished in order to stop the hemorrhaging.

(3) Cash target for this period is set at ($0)—the point at which "cash in" equals "cash out"—the “target number.”

This is the objective that Nuts & Bolts, Inc. will follow for the next 90 days. We have thoroughly analyzed the revenue and cost of revenue numbers and are highly confident we can meet these numbers.

We are now in the process of planning the details for reducing the non-production wages cost category, and will implement the following new organization within the next few days.

NUTS & BOLTS, INC.—CASH REDUCTION MODEL - WAGES

(Excluding production labor)

CURRENT REVISED ANNUAL ANNUAL POSITION WAGES WAGES

General Manager/CEO ………….... $150,000 ……….… Lay-off Administrative Asst. ...45,000 …………. 45,000

Engineering Manager ……….……….. 85,000 ...…….... Lay-off Engineer no. 1...….……... 50,000 ...……... 50,000 Engineer no. 2...….….…... 45,000 .…..…….. 45,000 Chief Financial Officer ……… 85,000 ..….…... 85,000 Accounting Secretary/Clerk..…...30,000 ..…...….... 30,000 Accounting no. 1...……... 45,000 .….…... 45,000 Accounting no. 2...……... 35,000 ...……... 35,000 Accounts Payable...….……... 30,000 ..….…... 40,000 Sales Manager...…...…... 85,000 ....…... Lay-off Sales Secretary...…..……... 30,000 ...…... 30,000 Salesperson no. 1...….….…... 70,000 .……... 60,000 Salesperson no. 2...……….…... 60,000 ...……... Lay-off Salesperson no. 3...…...…... 50,000 ..……... 43,000 Human Resources...…...…... 60,000 ...…... 60,000 Receptionist...…...…... 25,000 .…..…... 30,000 Purchasing ……….…….. 50,000 ……...….. 50,000 Production Manager………. 60,000 ……….… Lay-off Supervisor no. 1 ………45,000 …………. Lay-off Supervisor no. 2 (1st Shift) ………45,000 .………… 45,000 Supervisor (2nd Shift)……… 45,000 ………… 45,000 Scheduler no. 1………..…..……. 35,000 ………… 35,000 Scheduler no. 2……….. 35,000 ………… 35,000 Warehouse Manager……… 45,000 …….…... 45,000 Quality Control Engineer………. 50,000.………… 50,000 Maintenance Mgr./Safety………. 50,000 …….…… 50,000 Severance Pay (unused vacation, etc.)...0...27,000

TOTAL $1,440,000 $980,000

build the sales back up. We will then move forward with our growth plan. At that time we will restructure the entire sales team and add new capabilities.

We are in the process of rearranging the remaining positions in all areas and will have a more complete assignment list in the next report. We do not anticipate any further personnel

reductions from those shown in this plan.

After personnel changes are made, I will be forming a “turnaround team” of selected remaining employees. It will be the objective of this team, under my general guidance, to determine exactly how we will achieve the indicated savings in the remaining categories of expense.

This is an exciting time in the course of Nuts & Bolts, Inc., and I am looking forward with confidence to embarking on this turnaround program.

APPENDIX

(This section of your Crisis Management Plan should include a copy of the latest actual P&L financial statements of your business. It should cover the last year, plus all available current months so everyone can see the downturn. Or, if you have time, you can prepare a comparative summary of prior months to more easily see the downturn.)