What is a business turnaround?
A business turnaround is everyday management to rescue a declining company that has been performing badly for a long time and will fail without corrective action. A turnaround aims to stabilise the business and secure its future.
Turnarounds occur at the pre-insolvency stage and require a business to carry out informal actions.
Business turnarounds are hands on and require:
● Acknowledging problems in the business.
● Considering the changes needed to solve those problems.
● Developing and implementing a problem-solving strategy.
How do you turn around a business that is failing?
A business turnaround plan is the blueprint to saving a failing company. The plan needs seven key ingredients for the turnaround plan to work well:
1 Crisis stabilisation
3 Stakeholder support
4 Strategic focus
5 Organisational change
6 Critical process improvement
7 Financial restructuring
There are various strategies needed to make each of these ingredients work. For example, under crisis stabilisation, there are strategies such as taking control of the business, cash management, asset reduction, short-term financing and first-step cost reduction.
What are the key characteristics of a successful business turnaround plan?
For a business turnaround plan to be successful, it must have these characteristics:
● Address the fundamental problems in the business.
● Tackle the underlying causes of the problems, not the symptoms.
● Be broad enough in scope to acknowledge and resolve all the key issues.
An effective turnaround plan considers the big picture and not the individual problems in isolation. Make sure the plan does not get bogged down in too much detail. It’s much better to act fast rather than spend days working on an overly detailed plan.
That said, the plan won’t work if it’s not carried out efficiently. When executing your turnaround plan, make sure it is:
●Comprehensive: It needs to be both tactical and strategic.
●Non-linear: The timing of a successful turnaround process requires simultaneous rather than linear sequencing.
●Wide-ranging: Broad enough in scope to tackle soft and hard issues, and short- and long-term priorities.
How do you implement a business turnaround strategy?
At Byronvale Advisors, we break down the business turnaround process into four overlapping phases:
At this stage, perform a diagnostic review and then evaluate the turnaround options. Choose one option and get started on the immediate crisis actions. Establish a trusted turnaround team so they can develop a plan.
This phase involves executing and managing the actions required within the plan. There is usually a heavy focus on liquidity management, operational factors, cost control and stabilising sales.
Strategic change phase
This phase looks at areas that will strengthen the business in the long-term – revisiting standard operating procedures, looking at IT systems and processes, or considering products and markets to decide what changes the business needs for ongoing and long-term viability.
Growth and renewal phase
Once the business balance sheet has improved, the business can either grow again organically, via merger or acquisition, or both.
Each phase incorporates several of the ‘ingredients’ and turnaround strategies mentioned earlier.
How sophisticated and intrusive the turnaround implementation will be depends on the complexity of the issues, the size of the business, and how much help the directors want from the turnaround consultant. An engagement might last a few months or 2-3 years.
What should be the first step in the turnaround management process?
The first step in a business turnaround management process is a thorough business analysis. Do a diagnostic review of the entire business to assess the issues and then prioritise what to do to fix them. This diagnostic review is best done by an experienced turnaround consultant.
After this, company management and the turnaround consultant will agree on a strategy to address and remedy the issues.
Do you need one of our turnaround consultants to look at your business and advise you on a business turnaround? Call 1300 004 404 or email firstname.lastname@example.org.