Successful Turnaround

For a successful turnaround, the management team must be able to confidently answer these questions at key milestones during the process:

Can we demonstrate that the core business is viable?
Can we manage and ‘motivate’ key stakeholders?
Does management have sufficient credibility?
Is our business’ reputation intact?
Can we obtain sufficient credit from suppliers?
Can we secure internal and/or external funding?
Is there sufficient cash flow funding?

Once it’s established the business can be rescued, a plan needs to be developed that allows enough time and financial resources to address the business’ fundamental problems by tackling the underlying causes of the failure.

A successful turnaround has seven essential elements:

Crisis management – Taking control; performing critical cash management; reducing assets; arranging short-term funding; starting cost-reduction measures.
New management – Changing CEO, and assessing and changing senior management where required. A change of management is needed because the CEO was steering the ship leading up to the failure. Changing management sends a strong message of confidence and change through the business and to external stakeholders.
Stakeholder communication — It’s important to engage all stakeholders in the process. Clear, consistent and predictable information and communication is needed to ensure stakeholders have confidence in the turnaround plan.
Strategic review — Revisiting the business strategy, and considering divestment, asset reduction, downsizing, outsourcing or investment.
Culture and operational changes – Making structural changes in the business; reshuffling, changing or reducing line/middle management; improving communication strategy.
Critical process improvement – Improving sales and marketing; making further cost reductions and efficiencies; focusing on the principles of Eliminate, Automate and Delegate.
Financial restructuring – Refinancing, reducing assets; making debt and equity changes.

And remember: prevention is always better than cure. When business owners come to us for help with saving their business or turning it around it’s often too late, and the only solution is Liquidation or Bankruptcy.

As a business owner, you need to invest in a great support team. And the captain of that team should be your accountant. And not an accountant you see only once a year to find out how much tax you have to pay. You need one who is your trusted advisor.

Why? Because they’ll be working closely with your management team on strategic decisions about: