CEO/owner's personality is the key difference between success and failure for troubled businesses

Vantage Performance has an 88% success rate in rescuing troubled businesses*. Vantage's Michael Fingland believes a CEO or owner's personality can have a huge influence on business survival - and with a leaner Christmas period predicted, warns businesses to seek help early.

November 19, 2013  - THE personality of a CEO or SME owner has a huge impact on whether that business succeeds or fails in tough times, according to one of Australia's leading business improvement specialists, Michael Fingland.

Since 2005 national firm Vantage Performance has worked with hundreds of SMEs and large companies to improve their performance and sustainability. This includes taking on more than 80 businesses in stress - of those, Vantage has rescued 71 businesses at a success rate of 88%*, helping save 3,400 jobs in the process.

* Success is defined as improving net profit and cash flow during the period of engagement and the company is still trading at least 18 months after the engagement has ended.

These businesses, mostly in the $5 million to $150 million turnover range, are from industries including manufacturing/engineering, mining services, construction, agriculture and retail.

Mr Fingland, the managing director of Vantage Performance, said what sets successful businesses apart from those that go under are how soon they seek external help (many leave it too late), and how receptive they are to specialist assistance.

He said this largely came down to the personality of the CEO or owner(s).

"It is very personality-driven - it's so much more a part of success or failure than other factors such as what industry you are in, or what state the business is based in," Mr Fingland said.

Why do troubled businesses seek help too late?

Of the 12% of clients Vantage has worked with who could not be rescued, the overwhelming reason was that they asked for help too late.

A recent survey by Vantage Performance of the bankers, lawyers and accountants who refer troubled clients found clients don't seek help early due to:

1)         Self belief - a genuine but often misguided and over-confident belief in their own    ability to fix the problem (top response of 73% of survey participants)

2)         Pride and ego (68%)

3)         Denial and delusion (68%)

Other issues, such as the cost of consultants, fear for their reputation if they call for external help and a general lack of awareness that such help exists, were much smaller factors than the three personality issues outlined above.

"CEO personality can be a huge factor, for better or for worse. If deluded self-belief and ego come into it, they often mess around trying to fix the problem themselves and their bank eventually forces them to take action - by then they’ve lost six to 12 months of time and the company is in much worse shape financially," Mr Fingland said.

"You hire experts to head up your sales team, operations and HR, so why do CEOs feel they can handle a crisis themselves without calling in experts who deal with this every day?

"On the positive side, a CEO who seeks specialist help early, communicates clearly with his or her people and stakeholders, and is willing to take the hard decisions, is much more likely to maintain the support of their stakeholders and stabilise their business."

Vantage Performance works with many fast growth companies facing cash flow issues because they don't have the systems, capital and right people in place to deal with their rapid growth.

"For example, a mining services company we are working with called us in because they had grown from $2million turnover to $40million in less than three years, and they were struggling to handle the phenomenal growth," Mr Fingland said.

Warning as Christmas approaches

"With the economy still struggling and expectations of a less than stellar Christmas period, if a business is underperforming, is it equipped to deal with further shocks to the system?," Mr Fingland said.

"The best thing directors can do is not leave it too late to get help," he said.

Recent business rescues

Project Feather - A manufacturing business with $110m annual turnover (one of four divisions of a listed group) recorded a $10m loss. Following a strategic and operational review, one of our directors was seconded to the business as Interim General Manager to drive a restructuring program. Result: a $1m profit achieved, allowing the board to sell the division.
Project Lightning - A mining services business with $20m annual turnover was experiencing significant cash flow issues due to rapid growth, declining margins and a large bad debt. They had outgrown their finance facilities. We implemented working capital initiatives, managed key stakeholders, sourced a financial controller and enabled management to focus on the core business. Result: 50% increase in revenue and profit increase from $1.2m to $5.2m.
Project Civil - A civil construction business had grown rapidly from $3m to $15m annually over two years and was experiencing critical working capital, people management and job profitability issues, resulting in a $2m loss. We implemented working capital initiatives to stabilise the business, recruited 3 critical management roles, seconded one of our executives as interim financial controller and helped negotiate a twofold increase in their banking facilities. The business is on track to record revenue of $36m for FY14 (140% increase on FY12) and a profit of $2.6m versus a loss of $2m.

Vantage Performance is a leader in sustainable business improvement. Clients typically achieve a 13 to18 times return on fees. See www.vantageperformance.com.au or our blog www.businessstrategyblog.com.au