Friday, September 01, 2006

So what does it take first to turnaround a business?

Some twenty years ago I inherited a division in trouble. It was a frozen food business which my predecessor had pushed my corporation to buy. As its boss, he kept on expanding the number of products it sold, and the geography in which it sold them. As I saw back then, you cannot sell your way to profitability if your costs are out of control. The first thing to do is to control your costs. This business had become spread too thinly, so withdrawing and cutting costs was the first prerequisite to turning around the business. This is not easy of course, and having had to do it several times since, I recognize that experience is important.

Once you have successfully cut costs, and redefined the business model so that it is possible to make money, you can start to think about growth. Business expansion can only come after all else is stable and you are not sure that you are simply going to put yourself back where you were when you inherited the business.

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