Achieving a Successful Business Turnaround

Business turnaround is about reversing a business’s decline, restoring it to stability and then re-growing its value. But business turnarounds are about healing the sick, not attempting to raise the dead.

So, to achieve a turnaround, you will generally need to have the following seven things present:

  1. A viable business: Some core business that has future potential growth and profitability around which the business can be rebuilt.
  2. Time: Real turnarounds take time and if they are not started early enough, they will either fail or require protection through an appropriate insolvency procedure.
  3. Cash: Turnarounds need money, often there are costs associated with the initial restructuring  and then to finance the future regrowth of the business, and this money must be found either from within the business (‘bootstrapping’), or from outside by way of new investment or refinancing.
  4. Vision: A clear goal to which the business is to be directed, to provide both a target and motivation.
  5. Management: Who have both the will to achieve the turnaround (it’s your plan and vision) and also the skills (functional and situational) to make it happen, or access to external resources who can provide these skills when required.
  6. Stakeholder support: Management cannot do it all by themselves. They also need to take suppliers, customers, staff, bankers, shareholders, and other stakeholders with them.
  7. Confidence in the process: The stakeholders need to see how management (who will be regarded as having got us into this mess) are going to get us out again, and this has to entail a structured approach in dealing with the problem.

Turnarounds tend to divide into three key phases and while each phase needs to consider finance, people and marketing issues, there is definitely a shift in priorities over time from finance to marketing.

The first phase is normally crisis management, focused on short-term survival and restructuring down to a viable core concentrating on solving the immediate financial crisis. During this period, you may need to reduce employee numbers but it is important to keep key staff committed and businesses often also slim down their portfolio of products and markets to only those that are clearly profitable.

The second phase is one of stabilization and preparation for the relaunch of the business. This involves putting both appropriate financing arrangements to support increased trading levels, and the right management team who can push the marketing and delivery of growth products.

The third phase is then regrowth based on achieving long-term sustainable competitive advantage. To do so involves managing the business’s working capital cycle to support the business as it grows and recruiting and retaining the right people to drive growth of turnover and profits.

Louis Partenza is a business turnaround consultant and partner of Activate Group Inc, based in Miami, Florida. His firm works with companies to deliver transformational management and business processes to their executive leadership. To learn more about business turnaround consulting through AGI, please visit activategroupinc.com, contact Lou at (305) 722-7215 or email him.

Business Coach, Business Execution