Crisis Definition

An online search for "crisis definition" provides millions of pages in response. It seems everyone has their own idea of what a crisis is. However, it is important to distinguish the difference between a real crisis in your business and just some bad times. If you have a real crisis on your hands, you will be making some very drastic changes to your business that you normally would not make if you just had some temporary problems to solve.

So, be careful when you are trying to define any problems you are experiencing in your business--don't jump the gun and do something drastic that causes even more problems.

To simplify this issue of crisis definition, I have combined parts of various definitions and came up with what I consider the definition of a crisis in your business:

A state of affairs in a business wherein the leadership (owner, CEO, or Board of Directors) must take urgent and unprecedented action to try to save the business from failure--with the distinct possibility of a highly undesirable outcome. The companion term that comes to mind is "emergency intervention."

Now, how do you apply this definition to your own situation? To help you with this task, I have designed a checklist titled Is My Business in Crisis? This checklist provides multiple questions that carry a weighted value as to the potential for contributing to a crisis. You can also eliminate and/or add additional questions to best suit your particular business and situation. Just be sure to properly weight each additional question using the existing ones as a guide. You can download a copy of the Is My Business in Crisis? report here.

Go through the checklist and answer those questions that apply to your particular business to see if you do indeed have a real crisis to manage. This exercise will provide a crisis definition for your specific business.

If your situation does not meet the crisis definition presented above--don't approach your problems as though you had a crisis. Simply tackle your problems individually and correct them one at a time. This website can provide some guidance in this process.

If you do meet the crisis definition from the checklist, read the rest of the reports in this section to get some ideas on how to solve your crisis and turn your business around.

What is a Turnaround?

The term "turnaround" is thrown around the business world rather indiscriminately these days, and I disagree with many of my peers on the use of the term. To most writers, pundits, and business gurus, "turnaround" is the term used to define a change in business performance from “poor” to “good”—I call this good management. I like to reserve the term “turnaround” for the business that is on the brink of disaster—probably facing the specter of bankruptcy—then through emergency intervention the business is “turned around” to follow a pattern of success from that point forward.

Caveat!
Can all businesses in crisis be saved? The quick answer to this question is NO! There are a few criteria that must be in place before you can embark on your turnaround program and expect a successful result.

Here are the conditions that must be in place before you can expect to have a successful turnaround:

Your business should have a solid reputation with customers, suppliers, bankers, and the like in your business community. There must not have been any deliberate on-going illegal or unethical business practices being carried out.

Your tax withholding obligations should not be so far in arrears that government intervention is imminent.

Your business needs to have a viable product or service to sell.

Your business must have some form of regular revenue—no matter how small. This can come from sales revenue or investors, but there needs to be something to "prime the pump."

If you have employees, you need to ascertain if they are loyal and committed to helping you through your crisis and turnaround.

Your financial institution needs to commit to helping you through your crisis. This does not mean they should loan you more money, but you do need to convince them that you can solve your crisis and eventually pay back any loans outstanding.

Well, there you have a crisis definition and a turnaround definition—as they will be used throughout the reports in this section. I have also included a few conditions that should be present before you tackle a solution to your crisis. These should not be taken lightly, as they can mean the difference between success and a waste of precious resources trying to accomplish something that may not be worthwhile.

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The next issue you must face is; who will lead the turnaround? It may not necessarily by you, the business owner. I recommend you next read the report titled "Turnaround Manager" which discusses some issues you will need to address before you try to solve your crisis. To access the Turnaround Manager report, click here.

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SBI!