Irwin & Company,
As once-stable businesses are struggling to maintain profitability in these uncertain times, the expertise of a special type of professional is in high demand. Rising competition, cyclical financial markets and economic volatility have all combined to create a climate where businesses can no longer take economic stability for granted.
Because of unstable economic conditions, unpredictable market forces, and often-unhelpful political policies, more and more businesses are looking at the unwelcome prospect of insolvency and then liquidation. This isn’t a position to be taken lightly. Jobs are at stake, reputations are on the line, livelihoods are under threat, and entire industries can suffer.
Given these turbulent times, it’s turnaround professionals that have seen their skills put to frequent use across a wide range of business sectors in the United Kingdom. Turnarounds offer failing businesses the chance for a rapid, yet drastic change in structure, which can lead to a reverse in fortunes that could ultimately save the company from liquidation.
Turnarounds aren’t easy and they can be brutal on employees, but with a professional turnaround team such as Irwin Insolvency, your beloved business could come back from the brink and survive long into the future.
A business turnaround is a rapid transformation that aims to shake up businesses and lead to a reverse in financial fortunes. A business turnaround needs to happen fast and it needs to happen effectively. Unfortunately, business turnarounds don’t always work unless they happen under the right circumstances and are led by the right people, with the right attitude and expertise.
A business turnaround can prove to be effective at saving a business that’s heading towards liquidation. It can help to save assets and finances while building a stable foundation that can lead to success again in the future. Negatively though, a turnaround could lead to job losses and restructuring, as it aims to save the core of a business and often has to dispose of the fringes.
That can ultimately mean that many sacrifices need to be made, and parts of the company will not only be shaken up but could be cut altogether. For this reason, business owners will often bring in a professional turnaround team who are able to make these somewhat brutal decisions become a reality.
When considering if their business is a suitable candidate for a rapid turnaround, there are three main questions that a business owner or director must ask themselves:
In theory, turnarounds should not be necessary, but in reality they often are. In most companies, turnaround actions commence once the directors have accepted two basic facts. Firstly, that the company is in real danger, and secondly that the problem is serious and small incremental improvements will not solve it.
Turnarounds are primarily based on disciplined and systematic application of planning, controlling, organising and motivating functions, taking calculated risks, planning contingencies, much independent thought and steady hard work. There is no magic solution. This means doing what has to be done, when it has to be done. Turnarounds are not big on formality but big on business discipline where time is always of the essence.
Turnarounds can be harsh on staff and parts of the business that are deemed to be unnecessary. But if it’s a choice between liquidation of a company and the preservation of its core assets, then a tough choice has to be undertaken.
At the end of the day, implementing a turnaround is a tough decision to make with tough consequences for many employees, but it might be the only way to save a business from complete failure.
Before a turnaround is implemented, a business owner or director needs to consider the implications of what they are setting out to achieve. Turnaround professionals are able to lay down a rapid and effective plan that will be put into action quickly. To do this, they will identify the major priorities that the turnaround needs to target or that it needs to achieve.
Most businesses that are facing a turnaround do so because they are about to enter liquidation, which means that the business is no longer able to pay off its debts. There’s a negative cash flow and more money is owed than is flowing back into the company accounts.
The turnaround aims to halt that and to achieve some level of stability, to then hopefully avoid liquidation. In most scenarios, a turnaround will aim to prioritise the following actions:
Additionally, during the critical stages of turnaround, there is no time for formal studies before certain drastic actions are taken. Decisions guiding these actions must be based on a quick and penetrating analysis. In turnarounds, business owners authorise drastic, unpopular and unpleasant actions, such as laying off employees or closing down some facilities. If things continue on their present course, business owners stand to lose equity. There is no time to move at the usual evolutionary pace.
Because things need to happen fast and efficiently, business owners need to quickly seek professional advice and implement actions that have been proven to be successful in previous, similar scenarios, and that have saved other companies in the past. This is where the experience and knowledge of a professional turnaround team comes into its own.
Let’s take a more detailed look at how to assess if your company is suitable for a turnaround and whether that turnaround could be successful.
Business owners, directors and turnaround consultants need to come together and make a quick, yet fundamental decision. They need to rapidly decide if the business is a candidate for a turnaround before any plans can be put into action.
To make this decision, a quick assessment of a company’s assets alongside any available profit and loss charts and accounting reports needs to be undertaken. A turnaround will only work if the business has yet to have entered into formal insolvency proceedings and is yet to be liquidated.
Business owners and turnaround professionals can make a decision based on past experiences with similar businesses in similar financial scenarios. They may also need to take into account the current economic climate, as external market forces can be just as important as internal changes. The earlier a turnaround can be put into action, the more effective the results are going to be, so this is a decision that needs to be made quickly.
If it has been decided that a failing business will make for a good turnaround candidate, then the next step is to decide if the turnaround is going to be feasible on a practical level.
If a turnaround has a chance of producing good results and turning a negative cash flow into a breakeven or positive cash flow, then the business needs to start making the necessary changes to bring about a successful turnaround.
This is the stage when tough decisions often start being made by the turnaround professionals and company directors in order to see the necessary results and create a positive upswing in the company accounts.
The goal of the turnaround is to fix cash-flow problems in order to avoid insolvency. To achieve this, there are multiple routes that can be taken. Accounts need to be put in order and money coming in and out better analysed and forecast. Areas that are deemed unnecessary to the business might have to be cut or closed down, and that means staff might start to find themselves being made redundant.
Money owed to the company needs to be chased, departments might need to be restructured, and expenses will need to be cut down to an absolute minimum. Deals might be made with creditors that are owed money by the company or loans might be taken out to cover financial holes in the short term. Change is vital at this stage, for the turnaround to be a success.
A turnaround can be deemed a success when a company has put its finances back in order and pulled itself out of the red zone. This can mean that the threat of immediate insolvency or liquidation has passed, and money coming in is soon going to equal the money going out or surpass it.
But a successful turnaround in the short term might not entail a successful long-term turnaround. In fact, a turnaround might not be absolutely complete for several years to come. At this important stage in the turnaround process, it’s integral that the business continues to make positive changes for the company’s long-term benefit. Keeping the momentum going and continually progressing out of the red and further into the green is the only way forward.
Once stability has been achieved, the business can take a deeper more thorough look at its structure, finances and sources of revenue. New areas for improvement, cuts, and eventually growth need to be identified and plans put into action.
Company policies, values and targets need to be assessed and evaluated. Sweeping changes may need to be instigated across the board to ensure the long-term viability of the business. At the end of the day, there’s no reason to make a drastic turnaround if the business is simply going to keep falling back into a negative cash-flow situation time and time again. After the company has been saved, the turnaround then needs to focus on creating a sustainable business model and a company structure that allows for that to become a reality.
As with any complex business decisions, always seek independent financial and legal advice from an insolvency practitioner that has experience working with successful business turnarounds. Their advice, experience and expertise will prove to be invaluable through trying times.
Irwin Insolvency has an experienced team of professionals who are adept at offering consultations and advice for struggling businesses. Our personalised, tailor-made business services are just a phone call away.
We have experience working with and helping companies across a wide range of industries in the United Kingdom. We’ve instigated successful turnarounds in multiple sectors, leading to rapid transformations and positive long-term outcomes for the businesses involved.
We can offer a consultation service and advise on the best possible turnaround procedures for the fastest possible turnarounds. As licensed insolvency practitioners, we also deal with corporate recovery and liquidation, if the worst-case scenario needs to be implemented.
Let us help you save your business!
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