Turnaround

AN INTRODUCTION TO TURNAROUND

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.

There are three main questions that a business owner or director must ask themselves:

Is your business a candidate for a turnaround?

Is a turnaround feasible?

When is the turnaround complete?

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.

Turnaround priorities: 

Haemorrhaging must end. Positive cash flow must be restored and ongoing losses must be stopped.

Stabilisation must be achieved quickly. Nothing must stand in the way of actions required to achieve these objectives.

Any breathing space and time gained is vital. This is a limited reprieve and the momentum of changes must continue.

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.

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