The Strategic Early Warning Network or SEWN chose its name because of the recognized need for early intervention to increase the likelihood of a successful turnaround.
There are four stages of distress recognized in the turnaround world: Early, Middle, Late & End Stage. As the time line progresses the chance of success
In the earliest stages the signs can be nuanced. Competitive pressures, industry or supply chain restructuring or internal operational deficiencies are causing margin erosion, Sales volumes are dropping and cash-flow is at best holding its own. Perhaps the company is creeping towards tripping its loan covenants.
In the middle/Late stages Cash-flow becomes both a major management distraction as well as a restriction on opportunities. Revenue and/or margins have continued to decline. Vendors are pressuring due to late pay and loan covenants have been or are in danger of being broken.
In the end state working capital has all but dried up. Lines of Credit have been maxed out, trade credit is unavailable or on a C.O.D. basis, there is difficulty in meeting “must pay” expenses like utilities, taxes, debt service. Judgements, suits, liens or bank actions may be in progress. Basically, the wolves are knocking at your door.
As distress escalates you can see that the primary casualty is cash-flow and liquidity. Cash is the lifeblood of any business and it is always easier and wiser to recognize and attack the root problems early than to wait till the business has bled out.
If you suspect that your manufacturing firm is in one of the stages of distress please contact your Regional Director for a confidential, honest and frank conversation about how SEWN can provide FREE help.