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Turnaround tactics: 'don't just peel the onion.' (Irfan Salim's management style helps Software Publishing Corp. regain road to profitability) (Interview)

When Irfan Salim took office last September as president and chief operating officer of Software Publishing Corp., he inherited a classic turnaround problem: how to rescue a bottom line that was collapsing under the pressure of shrinking revenues and price wars in SPC's core presentations and database markets. The company isn't home free yet, but Salim's tactics seem to be working: In the last quarter of 1992, SPC managed to boost operating profits by almost a third (from 13% to 17%), despite a revenue decline from $41 to $37 million. We recently spoke with Salim about his approach:

Irfan, what have you found is the biggest issue when a high-growth company like SPC suddenly hits a wall and stops growing? "The hardest problem is dealing with feelings of denial and self-doubt throughout the company. For a long time in this industry, if you didn't grow 40% a year, you felt inadequate. Intellectually, everyone knew that kind of growth couldn't go on forever. But it's always easier to postpone thinking about solutions until it's almost too late. That makes the adjustment to zero growth even more difficult to handle."

So how do you start to get costs under control?

"You don't just peel the onion, cutting a few percentage points from everyone's budget. You have to start with a zero-based budget for everything, which means you question the company's priorities, the bureaucracy, the founder's pet projects--the whole works. It also helps to choose some religion about the kind of company you are. In some cases, you might want to ride the price curve down and become a pure consumer business. Or you could decide to become a high value-added company. If you don't choose one religion and follow it wholeheartedly, you won't have the resources to succeed with more than one strategy."

But aren't you still left with a high degree of uncertainty about making forecasts and plans?

"The top line is the key, not cost numbers in a budget. So you start by understanding very well the top-line dependencies--competition, prices, demand, things like that. And when you plan what the top line numbers will probably be, you first of all ought to identify the bits where you have good data. We had hard and fast numbers about DOS versus Windows sales, but we weren't as clear about the dynamics of why people buy suites and bundles. So we knew where our forecasts could get in trouble.

"For planning purposes, the forecast ought to represent a pessimistic outlook, with costs set at that level. At the same time, there's a danger in setting expectations too low. Your sales goals have to be more ambitious, without getting so far apart from the pessimistic forecast that nobody believes your goals. A 5% to 10% difference is probably within a reasonable boundary."
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Soft-Letter
Article Type:Interview
Date:Mar 5, 1993
Words:468
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