Work it through: Turning a Business Round
Diagnosis before initiatives. Find out whether each sale makes money, where the losses build up and what is throttling output, then point the whole organisation at the few fixes that matter. A week of honest arithmetic saves a year of energetic guesswork.
Seven steps, in the order the playbook gives them. Your work stays in this browser until you save it to a file.
Your ducks
Start with what the people believe, what the paperwork says and what actually happens. The issues where your ducks disagree are the ones to carry into the homework.
You have not filled in the ducks sheet yet.
The homework
What has to be found before any of the four frameworks is worth running. Put a name and a date against each one, and tick it when you have it in your hands.
The ducks
For Unit Economics
For Pareto Analysis
For Theory of Constraints
For Hoshin Kanri
Step 1 of 4: Unit Economics
Start with the arithmetic nobody wants to do. Trace one sale, one customer, all the way through: what it earns, what it truly costs, what it contributes. If the unit loses money, everything downstream is decoration, because scale will only multiply the loss. I have seen businesses celebrate top-line growth while every order quietly took cash out of the till. Contribution per unit, cost to acquire a customer, value a customer returns. Three numbers, honestly calculated, and the shape of the turnaround starts to appear.
Watch forDistrust blended averages; a healthy overall ratio can hide one channel or one product doing all the damage.
Inputs
Result
- Contribution per customer / month
- £37
- Expected lifetime
- 11.1 months
- Lifetime value (LTV)
- £411.11
- LTV to CAC
- 2.8:1
- CAC payback
- 3.9 months
Step 2 of 4: Pareto Analysis
Once you know the business bleeds, find out where it bleeds most. Losses, defects, complaints, unprofitable customers: they concentrate, usually far more than anyone expects. Rank the causes by cost, cumulate the percentages, and look at the curve. A steep curve is good news in disguise, because it means a handful of causes carry most of the pain, and a stretched team can concentrate on those few. In a turnaround, focus is the scarcest resource you have.
Watch forCheck whether you have ranked by count or by cost, because the thing that happens most often is frequently a minor line in the losses.
| Category | Count | Cost (£) | Share | Cumulative |
|---|
Step 3 of 4: Theory of Constraints
Now find the bottleneck. Every system has one point that sets its total output, and in a struggling business it is usually announcing itself: work piling up in front of one stage while other stages sit idle. An hour recovered at the constraint lifts the whole business. An hour saved anywhere else is, as Goldratt put it, a mirage. This matters here because your improvement budget is tiny and your time is short, so every pound and every hour must go where the whole system feels it.
Watch forBeware managers defending local efficiency; a well-run constrained system deliberately leaves some resources idle, and that will feel wrong to people trained to keep everyone busy.
0 of 5 steps filled · 0 of 4 inputs in hand
What comes out, and how to read it
A diagnosis of the system's binding constraint, a sequenced plan to exploit, subordinate to and finally elevate it, a scheduling logic (drum-buffer-rope) built around it, and decision measures, throughput, inventory and operating expense, that value actions by their effect on the whole system rather than on local efficiencies.
- Judge every proposed action by its effect at the constraint. Improvements elsewhere may be genuinely worthless for throughput, however satisfying locally.
- Expect the paradox: a well-run TOC system shows idle time on most resources. That idleness is the price of flow, and the instinct to eliminate it is how systems clog.
- Read the money through throughput accounting: throughput (sales minus truly variable cost), inventory and operating expense. Products are ranked by throughput per constraint-hour; conventional unit costs actively mislead at the constraint.
- Treat the fifth step as the most important and least practised. If the same 'bottleneck' has been named for years while the factory around it has changed, inertia has set in.
Step 4 of 4: Hoshin Kanri
Diagnosis without deployment is a report. By this point you know what each unit earns, where the losses concentrate and what constrains throughput. Hoshin Kanri turns that into three to five breakthrough objectives with named owners at every level, negotiated downwards through catchball so the people delivering the numbers have actually agreed they are possible. The saying no matters more than the choosing. A turnaround dies of too many priorities faster than it dies of any single problem.
Watch forIf no target moved during catchball, nobody negotiated; you have compliance, and compliance quietly delivers nothing.
0 of 6 steps filled · 0 of 5 inputs in hand
What comes out, and how to read it
A linked set of deployment plans, typically X-matrices, connecting breakthrough objectives to annual targets, improvement priorities and named owners at each level, plus a running review record showing progress, countermeasures and what the annual reflection changed.
- Read the linkage first: every team-level improvement priority should trace to a breakthrough objective, and every breakthrough should have live means beneath it. Orphans at either end mean deployment has failed somewhere.
- Judge catchball by how much targets moved during deployment. If every number survived the cascade untouched, negotiation did not happen.
- In reviews, weight the means over the metrics. A green number with no working countermeasure history is less trustworthy than a red one with honest analysis attached.
The review date
Set the date you will come back and ask whether it worked. Put it in your diary; this site will not remind you.
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