Six steps to a successful business turnaround: Client case study
We were recently appointed as a temporary administrator of a club facing financial difficulty by The Independent Liquor and Gaming Authority.
What followed is a good demonstration that successful business turnarounds can and do happen – provided the right people go about matters in the right way…
Summary of the business’ problems
Following an investigation by the Office of Liquor, Gaming and Racing (OLGR), the Authority received correspondence from its Director of Compliance and Enforcement requesting that it exercise its powers because the governing body of the club had ceased to be effective.
The club was experiencing financial difficulty as well as management issues. The report provided a summary of its observations which are paraphrased below:
- Lack of, and in some cases, no internal controls
- Questionable whether monthly board meetings are being held
- Financial accounts not finalised
- No budget or business plans referenced in minutes
- Management accounts not up to date
- Current liability position unknown
- Issues with management of the club
- Assets not effectively safeguarded
- The club’s solvency position needed establishing
- The cash at bank position had declined rapidly, requiring investigation
- Investigation required to establish when the last AGM was held and when the last election for the directors was held
- ClubsNSW Best Practice not being observed in relation to the conduct of board meetings
- Numerous issues noted in documentation regarding club operations and management, requiring immediate attention
- Business plans and key performance indicators needed developing if established that the club can trade on
- Non-compliance with the Registered Club Act, Registered Club Regulations and Corporations Act observed and documented.
The club was clearly in operational and financial distress, it was unknown whether it could be saved or not.
Six steps to a successful business turnaround
The steps we implemented to ensure a successful business turnaround were as follows:
1. Stakeholder management
- Developed a stakeholder matrix to understand what each stakeholder’s objectives were for the engagement (for example: club members, indigenous community/members, local police, OLGA, ATO, suppliers, employees and Board members).
- Identification of influencers within stakeholder categories/groups, who could assist with persuading and negotiating with stakeholders.
- Developed a framework of stakeholder reporting based on required format, frequency and distribution method of information for each stakeholder category.
- Continued to update and monitor stakeholders throughout the turnaround process.
2. Crisis management
- Took control of the club and held meeting with members and management to establish this.
- Cash management – immediately implemented internal controls and approval processes for cash, purchasing, stock/inventory, and record keeping.
- Completed a 13-week cashflow.
- Arranged compliance with ATO statutory obligations.
- Commenced solvency review – balance and cash flow tests and valuations obtained. Investigated and reconstructed the club’s true financial position and trading performance.
- Negotiated repayment arrangement with major creditors.
- Completed cost reduction review and implementation.
- Engaged external consultant for comprehensive audit of the existing compliance program at the Club to identify and address any instances where the program is non-compliant with legislative requirements under the provisions of the relevant Acts.
- Evaluated current management and board weaknesses and strengths.
3. New Leadership
- Called for and received expressions of interest for board members of the club.
- Arranged a ‘Future Director Information Session’ facilitated by the ClubsNSW Learning and Development Team to be delivered to current and potential board members.
- Arranged for new manager to attend a managers’ training course entitled “Board Governance, the Company Secretary and the General Manager” conducted by the Club Managers’ Association Australia.
4. Strategic Focus
- Refocused the club’s core business.
- Assets reduction investigation which led to the identification of unutilised assets of the club in the form of water entitlements.
- Conducted an analysis of water usage requirements and sold surplus water entitlements to strengthen the club’s working capital requirement.
- Explored the possibility of an amalgamation and commenced EOI process to determine interest.
- Commenced community reengagement for club’s facilities.
- Engaged bookkeeper and auditors to complete budgets, financials, and audited accounts.
- Convened and held AGM and new board election formalised.
5. Organisational changes and critical process improvement
- Established new management function, responsibilities and reporting.
- Continued improvement in communication channels for consistency, integrity and clarity of process.
- Continued to improve community engagement with meetings, newsletters and notice board updates.
- Tested and monitored new internal control system.
- Rectified non-compliance issues.
- Transitioned control of club back to management and the new board and monitored this process.
6. Transition to new management
- Club was handed back to the new board and management to continue to transform the club and we resigned as temporary administrator.
The above engagement took approximately five months and resulted in a successful business turnaround, benefiting both the club and the local community.
The key to the survival and turnaround of any struggling business is to seek expert advice early on. Contact us here if you would like to discuss your business’ financial or operational circumstances.