When it comes to turnaround strategies for your business, you must respond to turmoil and financial issues quickly. Many businesses fail because no-one asked for help or took strategic action.
Here are the three steps to implementing a successful turnaround engagement.
Step 1: Analyse the situation
Before you can even think about saving your business, you need to work out whether it can be saved. Once you’ve worked out the chances of it surviving, you can start identifying appropriate strategies and developing a preliminary action plan.
Is your business facing immediate and irreversible failure? Is it experiencing losses that aren’t immediately threatening? Or is it just gradually declining?
Every successful turnaround has three fundamental requirements:
- A viable core business
- Financial resources that are both adequate and available (i.e. cash)
- Enough organisational resources (i.e. assets or cash flow)
If your business has all three, you have something to save. But if it doesn’t, then Liquidation is your only option.
Step 2: Implement the plan
Now that you know exactly what you’re dealing with, it’s time to develop and implement a turnaround plan for your business. Your plan may include steps such as:
- Determining the current labour requirement, and rationalising your workforce where needed
- Closing underperforming business units, and focusing on the organisation’s core business operation
- Changing your management team and its structure
- Eliminating unprofitable lines of business wherever possible
- Identifying any surplus assets, and determining whether they can be realised relatively quickly
- Eliminating unnecessary capital expenditure
- Improving the Accounts Receivable collection process
- Focusing on your business’ cash flow
- Communicating honestly with financiers and creditors
- Continuing to focus on customer service
- Asking for help from advisors
Step 3: Move forward
If your business’ turnaround engagements are successful, then you need to immediately focus on:
- profitability and return on equity
- enhancing the economic value of your business.
The key to a successful turnaround is to take action early and get the appropriate advice from an advisor. And quickly, before the situation spirals out of control—and out of your control.
Want to know more about corporate insolvency or specific insolvency services in Australia? Then get in touch with the team at Rapsey Griffiths for a free and confidential consultation.