Thesis work paper Is the firm worth saving?

The difficult question of whether or not to turnaround a software company greatly depends upon the value of the firm’s products and its intellectual capital. When there are few fixed assets, the valuation methods to assess Altman’s (Altman, 1993) argument must move beyond operational turnaround methods to the underlying strategy itself. As such, most turnarounds of software companies will involved at least a strategic turnaround because as Davidson (Davidson, 2001) argues, the firm’s products may simply not be suitable for it’s markets regardless of the intellectual capital of the firm. Like any firm, having highly skilled workers is not enough. Rather there must be a concentration on whether there is a market for the product and if not, then that particular product should be dropped. Therefore software turnarounds will be nearly always a combination of both strategic as well as operational turnarounds.
However Davidson (Davidson, 2001) warns that all good software companies must have a turnaround plan set up ahead of time.
He proclaims
“success requires a certain ruthlessness – willingness to define hurdles early on in the game that will determine whether you should proceed. Only be defining these hurdles, these criteria, can you avoid the problems of foregoing income…Remember that killing off a commercial idea quickly gives you the opportunity of tackling another.”
This assessment supports Khandwalla’s (Khandwalla, 2001, 1072) assertion that successful companies have turnaround plans and the necessary resources to implement these plans mapped out ahead of time.