In the life of any company, some external force beyond its control - recession, bad weather, inflation or new competition - will inevitably appear on the scene. Yet most companies don't prepare for such eventualities, and may end up as troubled companies. To avoid the consequences of laxness, act the way a troubled company is forced to act:
Implement contingency plans now. Don't wait until an executive quits or a top customer doesn't renew its order. Plan for these, and have the backup on hand. Have periodic outside checkups. Turn to outside management consultants for continual reassessments of strengths and weaknesses and focusing of corporate goals.
Build a strong board of directors. Troubled companies always put outside experts on their boards. Healthy companies should already have them in place. Control growth. Prioritise and focus attention on most profitable areas. Shift management responsibilities. Don't wait until sales turn sluggish. Rotate managers, putting new people in charge.
Recruit executives from outside the company and industry. Companies become too introspective. They need cross-fertilisation of ideas. Live within budgets. Assume a zero-based budget concept. This means justifying everything in a budget. Not just annual incremental expenditures. Maintain a strong approval and internal audit system. Don't assume all departments are living within their budgets. Chances are they aren't.
Adhere to a strong capital structure. Stay, for example, on the conservative side of the debt/equity ratio.
