Managing a Successful Business Turnaround
Most business owners are committed to managing a successful business, and revel in that success. Due to both internal and external forces however, periods of decline can occur at any time, in any business. Left unchecked, that decline could deteriorate to the point where steps need to be taken to avert insolvency or liquidation. When this is the case, a business owner may find that to continue managing a successful business, they must first manage a successful business turnaround.
What Does a Turnaround Mean in Business?
What is turnaround in business? As the term suggests, a business turnaround requires a change of direction for the economic viability of a business.
Some of the key indicators that your business may need a turnaround include negative cash flow, decreased market share, declining profitability, inefficient processes, and possibly loss of trust in leadership within the company and/or by the customer base. You may be experiencing one, many, or all of these signs. It could also be that changing market forces, legislation, or technological advances require your business to make changes to restore relevance and profitability in changing markets.
Steps are taken to restore a business that’s struggling to ensure a financial turnaround, by improving cash flow, restoring financial stability and effecting positive change. There may be quite rapid and drastic action required in order to stop the financial decline of the business, while working towards long-term sustainability in the future.
How to Manage Your Company’s Financial Turnaround
If your business is experiencing negative cash flow and is struggling to cover operational costs, it’s paramount that you understand how to successfully manage your company’s financial turnaround and business recovery.
There are key elements required for successful management of your business turnaround. These include:
- A period of preparation. At this time, you’re aware there’s a problem that needs to be corrected to restore financial viability and stability to your business. Seeking the assistance of an experienced turnaround specialist can be invaluable in preparing to change the fortunes of your company and steer your company away from the threat of insolvency or liquidation. This phase can include establishing a core team that will be responsible for leading the business turnaround. A business turnaround specialist can assist you in preparing for the internal changes required for your business’s financial turnaround.
- A period of assessment. Your business turnaround will require data and a rapid assessment of the business’s position. It’s important that you understand the inherent cause or multiple causes of your business downturn to ensure financial turnaround. From this assessment phase, your business turnaround team will develop a strategy for the company to implement. This enables you to focus your time, energy, and resources on addressing the root problem and optimising the likelihood of success as rapidly as possible.
- A period of implementing and impact. This is where the real disruption is felt, so it’s imperative that there is inclusion, transparency, and buy-in from all involved in the turnaround. There may be difficult conversations and drastic actions required, including streamlining processes, updating the business model, re-evaluating the budget, cutting operational costs (which could involve staff redundancies), renegotiating with creditors if required, and the possibility of parts of the business being closed or significantly restructured to restore financial viability.
- Achieving stability and sustainability. Once the effects of the turnaround strategy start to be felt and positive cash flow is restored, it’s important that the lessons learnt and momentum gained are not lost. The economic stability of the company is fundamental to ensuring long-term sustainability of the business once financial turnaround is achieved. Having a business turnaround expert leading the process can be invaluable in determining what aspects of the strategy were most effective in the financial turnaround, so those elements can be embedded in the long-term strategy, solvency planning and, ultimately, the future success of the company.
What Is a Successful Turnaround?
A successful business turnaround is one where financial viability of the company is restored, professional reputation and customer trust is maintained, and the stability of the company is re-established. Additionally, the processes and culture of the company reflect the lessons learnt through the financial turnaround, to ensure long-term viability and business success.
At Irwin & Company, we’re experts at helping businesses recover and achieve financial turnaround. If you’d like assistance in managing a successful business turnaround, contact Irwin & Company today for professional and tailored advice.