With the second corona wave sweeping the country, more and more businesses are finding themselves at risk. However, a continuity problem does not have to mean the end of the business. JBR helps companies that need to restructure to survive. Managing Partner Ronald van Rijn of JBR Consultancy and Bart Kroon of JBR Interim Executives talk about the profession of company doctor.
People - and especially entrepreneurs - often cherish the idea that they have everything under control. That the reality is different became painfully clear to many this year. "The success of a business stands or falls with external and internal environmental factors," says Ronald van Rijn. "For a variety of reasons, companies can find themselves in financial difficulty. Increasing competition or sudden drops in demand, all these factors can lead to a lack of liquidity and mounting losses. In this era of Covid-19, the problems usually arise from external factors."
You have no control over these external factors, but that does not mean you are powerless. It is essential to have the courage to look in time at the things that do lie within your sphere of influence.
"The first step is to jointly recognize that there is a possible continuity problem," Van Rijn explains. "It is then important to quickly look for the cause and extent of the problem. In addition, we must gain insight into the activities that could be the cork for offering the company a future perspective. Rearranging the company and changing its focus often offers a possible solution to prevent discontinuity."
When outlining a possible future perspective corona currently creates extra uncertainty. Van Rijn: "In this period it is important to determine the impact of Covid-19 and to take into account different scenarios."
Once the diagnosis has been made, the rescue plan can begin. Improving cash-generating capacity is almost always the first priority, explains Bart Kroon: "Improving cash flow improves the organisation's prospects in all aspects: short and long-term financial independence, agility, reliability, investment capacity, profitability, stability and resilience. In situations of 'distress', only a structural improvement of the cash-generating capacity makes structural refinancing possible."
He explains that restoring cash generating capacity is often a combination of discipline, smart and consistent working capital management, creativity in contract management and maximum utilisation of funding relationships: "Think, for example, of steering and collecting debt more tightly, shortening billing intervals and renegotiating debt and terms with funders."
"My personal experience is that in a restructuring setting, much more is possible than is thought possible by stakeholders during 'normal business operations'," Kroon points out. "The role of the restructuring management is crucial in this regard; decisiveness, tenacity, creativity and the ability to be able to strike a new deal with different stakeholders."
Once the cash flow is in order, it is possible to look at the longer term. It is essential to consider the sustainability of the business model. "Business models become jaded over time, and special circumstances can make business models ineffective in the short term," explains Kroon. "In a restructuring, the key is to focus on the essence of a company's value creation, recalibrate it and transform it to that recalibrated model."
This may involve looking at a wide range of factors - from revenue, fee, margin and cost price to customer orientations, product-market combinations, distribution models and more. That can also mean saying goodbye to those activities, values, assets and relationships that have no or limited value in the future. "Just like in the garage at your home; over time, a cacophony of stuff accumulates that you'd better say goodbye to," says Kroon, who immediately acknowledges that this is not easy: "Saying goodbye, in terms of divesting, selling, liquidating or closing is often a difficult process."
Partly because such difficult decisions have to be taken during a restructuring process, Van Rijn and Kroon believe it is essential to bring the right specialists on board. "Thanks to our many years of experience with these restructuring issues, we can quickly grasp the situation," says Van Rijn. "The profession can easily be compared to that of a doctor. The more often you have operated, the quicker you recognize special situations. You can work more efficiently and with a high degree of success."
"It's often very emotional, because the necessary choices affect people and businesses."
"The role of the Chief Restructuring Officer is that of director and the decision maker," adds Kroon. "Ultimately he/she sets the direction, the pace and also takes responsibility for the sacrifices that have to be made for long-term continuity. Where possible/necessary, you include stakeholders in such a transformation but sometimes there is no room for that, then being able to 'read the stakeholder context well' is an important skill. Long-term continuity is here a virtual principal. Not an easy role, but a very rewarding one by the way."
Van Rijn emphasises that not everyone is suited to this role: "After all, not everyone can become a trauma doctor or work in a trauma team. It's make or break! We often work under time pressure, especially at the start. These are not non-committal assignments, they matter. It is often very emotional, because the necessary choices affect people and businesses."
The consultancy practice ofJBR focuses on the entire restructuring process - from quick scan, to strategic analysis and advice. Once this restructuring is behind us, the company can usually continue under its own steam, but sometimes there is still a need for a temporary executive. Even then JBR can help, from its Interim Executives practice.
"JBR Interim Executives has a permanent team with seasoned interim directors," Van Rijn says. "They support each other through shadow management and knowledge sharing. An interim director helps to implement changes to ensure continuity. He or she brings clarity, calm and stability. Determines priorities and mobilizes all forces to get the company back on track inside."
Finally, Van Rijn once again draws a comparison with medicine: "If a doctor first picks up a textbook, you can doubt his competence! This also applies to our team. We have a lot of experience which enables us to oversee the situation quickly and to intervene. The goal is the continuity of the company."