Turnaround firms see brighter fortunes " at least, for them

Business turnaround specialists, folks who get busy when times get tight, aren't yet seeing the uptick in traffic that would accompany a widespread economic slowdown in northern Nevada.

But Michael Anderson of Reno's Eclipse Corporate Development, who's also a board member of the 40-member Nevada Turnaround Association, says the turnaround business is about to turn around.

"Times have been good enough that turnaround practitioners have been practicing in other specialties," Anderson says. "But people are beginning to hurt."

Along with consultants who take roles ranging from sidelines coach to interim chief executive officer, the turnaround group's members includes professionals such as accountants and lawyers who specialize in Chapter 11 workouts.

Members of the group suspect that some companies in the region that are likely to need life support already show signs of trouble.

One warning sign, says turnaround consultant William Borges of Reno, is three consecutive months of falling revenues. Profitability, he notes, can be propped up with cost-cutting, but revenues are more difficult to fudge.

But although specialists say it's far easier to turn around a faltering company at the early signs of trouble, they typically don't get the call until the situation is dire.

"Nobody wants to admit they have led a company to the edge of the precipice," says Anderson. "You have to get past the pride and the ego."

That's particularly difficult for individual entrepreneurs or leaders of family-owned companies, Borges says. Mid-sized companies, particularly those with sophisticated boards that include outside directors, are more likely to demand that management bring in help.

At its simplest, the turnaround specialist's job is two-fold. First, stop the bleeding. Second, resolve the problems that got the company into trouble.

While draconian cost-cutting is the fastest way to restore a company's profitability, Anderson says a big knife seldom works best over the long-term.

"It isn't just a money thing," he says. "What is needed is a holistic approach to make sure everything is fine-tuned."

And that, turnaround specialists say, means that effective engagements don't necessarily specify a precise bottom-line number to determine when the workout is complete. Instead, specialists often will specify targeted financial ratios, which gives the consultant and the company some room to cut unprofitable product lines in the drive to restore the company to equilibrium.

How long does it take? Six months is about average, Anderson says, although much depends on the willingness of top-level executives to listen to outsiders and implement change.