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Making a Risk Management Plan for Your Business
It’s impossible to eliminate all business risk. Therefore, it’s essential for having a plan for its management. You’ll be developing one covering compliance, environmental, financial, operational and reputation risk management. These guidelines are for making a risk management plan for your business.
Developing Your Executive Summary
When you start the risk management plan with an executive summary, you’re breaking apart what it will be compromised of into easy to understand chunks. Even though this summary is the project’s high-level overview, the goal is describing the risk management plan’s approach and scope. In doing so, you’re informing all stakeholders regarding what to expect when they’re reviewing these plans so that they can set their expectations appropriately.
Who Are the Stakeholders and What Potential Problems Need Identifying?
During this phase of making the risk management plan, you’re going to need to have a team meeting. Every member of the team must be vocal regarding what they believe could be potential problems or risks. Stakeholders should also be involved in this meeting as well to help you collect ideas regarding what could become a potential risk. All who are participating should look at past projects, what went wrong, what is going wrong in current projects and what everyone hopes to achieve from what they learned from these experiences. During this session, you’ll be creating a sample risk management plan that begins to outline risk management standards and risk management strategies.
Evaluate the Potential Risks Identified
A myriad of internal and external sources can pose as risks including commercial, management and technical, for example. When you’re identifying what these potential risks are and have your list complete, the next step is organizing it according to importance and likelihood. Categorize each risk according to how it could impact your project. For example, does the risk threaten to throw off timelines or budgets? Using a risk breakdown structure is an effective way to help ensure all potential risks are effectively categorized and considered. Use of this risk management plan template keeps everything organized and paints a clear picture of everything you’re identifying.
Assign Ownership and Create Responses
It’s essential to ensure a team member is overseeing each potential risk. That way, they can jump into action should an issue occur. Those who are assigned a risk, as well as the project manager, should work as a team to develop responses before problems arise. That way, if there are issues, the person overseeing the risk can refer to the response that was predetermined.
Have a System for Monitoring
Having effective risk management companies plans includes having a system for monitoring. It’s not wise to develop a security risk management or compliance risk management plan, for example, without having a system for monitoring. What this means is there’s a system for monitoring in place to ensure risk doesn’t occur until the project is finished. In doing so, you’re ensuring no new risks will potentially surface. If one does, like during the IT risk management process, for example, your team will know how to react.
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7 Proven Business Turnaround Strategy Steps
- Business Turnaround
If you follow these 7 proven turnaround strategy steps, you don't have to worry about your financial future. In this article you will learn a step-by-step proven process that will turnaround your business, so you can survive the temporary short term "crises", regain your profitability, confidence, and save your businesses. This process works in any business, but was specially designed for a small business turnaround, and not based on some theory or turnaround methods used by big compani es.
Read this if you want to discover the best strategies, to turnaround your business in these uncertain times that will totally destroy so many others. The reason you have to follow a series of logical and step by step p roven turnaround strategy steps, is to lead to faster enhanced performance and a bigger chance for survival when in a crisis.
What is turnaround strategy?
B usiness turnaround strategy refers to the strategic processes needed to restore a current struggling business under distress, to its former financial health and viability. B usiness turnaround strategy is an informal management-led reversal process to prevent a financially struggling or poorly performing business from insolvency and liquidation by returning it back to profitability, and restructuring debt using an out-of-court debt negotiation process that’s outside the legal framework. There are two main “business turnaround strategy types” for small business. But this is not only for businesses that are in a crisis or in distress. The same turnaround strategy steps can be used to take a very successful business to the next level, or help an underperforming business to reach its full potential.
Remember: Earlier intervention can lead to a much better outcome for the business and provides your business with the best options. If you have any doubts, please contact us for a free strategy sessions " free strategy sessions" today. During "The Strategy Call", t here's no sales pitch or attempt to sell you anything, ever. T his call is about helping you, to talk about your unique business, and to brainstorming ideas and strategies to help you increase your sales and profit immediately.
The 7 Turnaround Strategies Steps for a Business In Crisis
Here is the step-by-step proven turnaround strategies for a business in crisis, so you can take back control and turnaround your business:
Discover your position and what caused the problems you are dealing with.
Making sure that everybody fully understands, commit and support the situation.
Prepare a realistic turnaround plan your creditors will support.
Stabilizing the business finance, maintain positive cash balance while creating a highly profitable core.
Increase Profitability - Focus on profits and cash flow - Not revenue.
Increase Sales - Without spending more on advertising
Implement your business turnaround strategy steps with precision and consistency.
Why follow a turnaround strategy, step by step.
Over the last few years so many business owners have come to me because they are really stressed out, scared and uncertain about their future.... and it is totally understandable. I know you’ve worked very hard for years to grow your business and now circumstances that you may have nothing to do with, is threatening not just your business but also your family’s well-being and financial future.
You must remember that you are not alone, many business owners find themselves in this mess each year. Many businesses will fail, but they don’t have to, Yes, most businesses can be saved, because most business owners have what it takes for a successful turnaround. In most cases where businesses failure seemed certain, a turnaround strategy can can help to transform the business to achieve sustainable recovery, and restore confidence and control.
Instead of being in a state of Panic, fear and uncertainty that will paralyze you, and cause you to think in circles, and sometimes unable you to recognize obvious and simple solutions that may be right in front of you. Following a series of logical step by step actions -- p roven turnaround strategy steps will lead to faster enhanced performance and a bigger chance for survival when in a crisis. Step-by-Step. If hard decisions and action are taken fast.
But one of the key success factors is to take action early, timing is essential and will provide greater opportunity to save the business.
"When you find yourself in a hole, stop digging."
- Will Rogers -
When things go bad and your business is in a crisis we normally we go through the stage where we start avoiding the situation and believe that with patience and time, somehow by holding on, the business will survive, the market will regain its confidence and the business will turn itself around. This illusion normally prevents us from performing the drastic surgery, so often required, to save the business crisis.
Then we start to come up with reasons, excuses & stories for why business results are external, and it’s someone else's fault. Many pass beyond this point without recognizing and responding to the crisis at hand. The indicators of business decline are continuously showing themselves, yet we believe that when their business is in trouble, a little “Quick Fix” will do the trick.
The first “Quick Fix” is normally to borrow yourself out of trouble, but you can’t, and you can certainly go broke trying to. You need to produce positive cash flow, from operations (not borrowed money) while systematically restructuring the business around a "profitable core."
In the following steps, you will learn how to turnaround your business and build a highly profitable and cash flow rich one, step by step.
Step 1: Discover You Current Situation
The first step in small business turnaround strategy, before you even start to fix and turnaround things in your business, is to d iscover your current situation. The "First Step Turnaround Checklist" was created with the intention to help business owners in analyzing their business position, and to be able to make the right choice regarding their business turnaround strategy . You need to discover what caused the problems you are dealing with in the first place. Here are the keys to a successful turnaround.
Your first step in a turnaround strategy, is to do "Sufficient analysis" - Analysis have to be done on every area of the business to identify the real cause of the problem. This is key to a success turnaround because you have to make decisions based on facts, so you can choose the right turnaround strategy. Your best chance for a successful business turnaround start with your ability to identify, measure, and evaluating the key performance indicators in different parts of your business.
What Is a Business Turnaround Analysis?
Business Turnaround analysis is the process used to identify and discover areas of opportunity and problems in the business, either strategic, operational or financial, that represents a weakness or vulnerability that, if not addressed soon, will lead to business failure.
The analysis process is the most important part of selecting the best business turnaround strategy, and deserves a significant amount of time and attention to ensure that the correct options are selected.
With Little Time, No Margin For Error... And Few Second Chances - the outcome of the business turnaround analysis will you be able to choose between the two main types of business turnaround strategies:
- The Strategic B usiness Turnaround (profit & cash flow improvement)
- The Business Rescue (financial restructuring and debt reduction)
Remember, if the business is insolvent you must act to maximize the creditor’s interests otherwise you may personally be held accountable. However, don’t panic, there are many options you can follow, but time plays a vital role.
A Viable Business – You need a business that has the potential for future growth, development and profitability. Is the product or service near the end of its life cycle? For example, is the business still in the “typewriter” market, how viable or competitive is your product in the market? Is there a market for your product/service?
If the answer is no, go back to the drawing board. Start over. Because no matter how great you think your product is, if no one needs it/wants it/buys it, you don’t have a business. Be completely objective and prepared to look at your business with new eyes, looking for new ways of doing business. turnaround strategy steps
While evaluating the business, it is important to identify essential and important issues for the business’s survival like internal strengths and weaknesses, as well as the business’s external threats and opportunities. (SWOT)
Determine solvency - Before you start implementing your business strategy successfully you need to determine the business solvency . These questions will give you a good idea of where your business stands at this point, and you may need to get some legal or professional advice with this one. It's important to know that you are legally required to present accounts to show a true and fair picture of the business, and if the business is insolvent you must act to maximize creditor’s interests. Here is a basic test that you can use to determine if the business is
The Balance sheet test: Do you owe more than you own as a business, or are the business’s assets exceeded by its liabilities? Do you or another partner owe more than you own personally? (It is important to know that it should include contingent or future liabilities.)
The Cash flow test: Can the business pay its debts when payments become due? If your business can't pay expenses, employees, creditors, or Income Tax for example, then the business could be insolvent.
If a creditor has obtained a Judgment against either the business, partnership, or an individual, this may demonstrate the businesses, individual or partnership may be insolvent, and the creditor may petition to issue bankruptcy proceedings.
If yes, to either of the above, then the business could be insolvent. However, don’t panic, look carefully at all issues and consider the rest of your options available to the business, i.e. Turnaround, liquidate, sell, and ...
Adequate Financing and Timing – Any business on the recovery path needs time. Success doesn’t happen overnight. It’s also critical that you are able to generate sufficient cash to survive in the short-term, while a turnaround strategy is being formulated.
Motivation – You must be motivated, have a passion for success, and will do whatever it takes to achieve your goals. In many cases, the owner has lost interest, desire, and drive due to the long period of financial pressure.
Execution of the turnaround plan Success is won or lost through execution of the turnaround plan. Many business owners get past the crisis, soothe their creditors, restore a positive cash flow, and then fail to execute the turnaround plan and subsequently the wheels come off the wagon. Don’t let this happen to you! Work your plan every minute of every day. And stay accountable to your plan.
Reason why businesses failing
Find out what caused the problems in the first place
With little or no margin for error, no time to waste, and few second chances, sufficient and accurate analysis have to be done swiftly and on every area of the business to identify the real cause of the problem. This is key to a success turnaround because you have to make decisions based on facts, so you can choose the right turnaround strategy.
The success of your turnaround strategy starts will depend on your ability to identify, measure, and evaluate your business key success factors in different parts of your business.
Every reason for business success, and business failure, except for a few external reasons like a sudden illness, legal challenges, natural disasters or unfavorable government policies can be found within these 6 areas:
- Marketing and Sales
- Product and Service
- Process and Systems
The real reason why most businesses fail is our ability to react to changing conditions, to implement the necessary changes and improvements in 6 critical areas of your business There are many reasons why most small businesses fail or finds itself with declining profits, sales, cash flow. But the largest single cause of most small business failures is a management failure.
After 32 years in business, owning 40 of my own and helping many other businesses, I agree with the top business analysts that out of the top 6 key business drivers, poor Money Management is the number one reason why most small businesses fail or go bankrupt. You can quickly isolate the causes by looking at the top reasons in " 42 Major Reasons Why Most Small Business Fail "
Most will spend 90% of their time, money and resources on solving problems, and focusing on things you can't control or that has low value.
The first key to a business breakthrough, or successful business turnaround, will come from spend 90% of your time on finding the right solution, and defining the problem properly, and only spending 10% of your time, and money on fixing it.
Step 2: Everybody Understands The Situation
Get everybody on bord
Making sure that everybody fully understands, and is committed to supporting the current situation.
Bring together all employees and clearly define the problem, making sure that everybody fully understands the situation. Employees, managers, suppliers, banks, investors, unions, and anyone else who may influence your business should be involved, to some degree, in formulating the turnaround strategy. The involvement of all stakeholders in planning and implementing the strategy will generally increase their level of commitment to your business turnaround.
Explain the severity of the situation, emphasizing that without their commitment and loyalty, the business can fail. Employees need to ‘come to the party’ and be involved in the rebuilding of the business. When a company is in crisis mode, management and staff need to be in harmony and in step with the need of the company.
Team Support – Support from all key team members is necessary. Create a shared commitment to action between employees and owners/partners. When a business is in crisis mode the owner and staff need to be in harmony and in step with the needs of the business.
The right results come from the right people doing the right things at the right time in the right way for the right reasons." When all your team members are not committed to your business mission, vision, and values, they are also not committed to executing your goals. You not only need to show people what direction the company is headed in, but you need to get them to "buy into" this direction. Great success is almost always the result of great teams. An aligned team always out-performance an individual.
Commitment - Everybody should help pla y his/her part in saving the business, but this won’t help if the owner doesn’t lead by example. Commit to your new way of operating. It's easy to make plans to change, but it's another thing to actually carry out those plans. Success is a result of action based on planning. It’s quite obvious that things need to change, but the question is do you ‘have to’ change?
Different Actions - Recognize that getting different results requires a different course of action. If you simply keep doing the same things, you’ll get the same results. To expect anything different without changing the way you operate is insanity.
Step 3: Prepare a Business Turnaround Strategy Plan
How to create a realistic business turnaround plan
How do you write a turnaround strategy plan
The objective of writing a business turnaround plan is to prove to your creditors that you can stay in business while you turn things around.
A business turnaround plan is a document describing your core business, sales plan, staff reductions, and cost-saving actions. It includes a cash budget, and a set of monthly financial projections with objectives indicating how you intend to get out of your situation in measurable terms. Your turnaround plan serves as a roadmap to save your business, and to insure and convince partners, customers, employees, banks and suppliers to support you.
So, take your time and do it right. Be brutally honest in your assessment and clearly state how you got into this situation and how you will stay in business while you turn things around. This will help restore your credibility. You will need this to obtain concessions from your creditors.
To prove that you can stay in business while you turn things around, you need to do the number-crunching to ensure profitability? If not, go back and work your numbers. In any event, do your homework and figure out what you need to charge to make your profit target.
What Creditors Want to See
A good credit rating can make or break you personally. Likewise, it can make or break your business. Often small businesses run on personal credit lines. Keeping your and your business’s credit rating in good standing is important for operations, growth, and development. When lenders look at your business, they will consider the four C’s: Condition of business - Are your industry and your company profitable—or likely to stay profitable? How long have you been in business, and what has the condition of your business been? Character - What is your credit history, your experience in your company’s industry, your ability to manage a loan? Has your business taken a loan in the past? What has the payment history been? Have you defaulted on any loans? Capacity to repay - Is your projected income sufficient to make a profit, maintain healthy cash flow, and pay off the loan? Do you have sufficient sources of income? Collateral - Do you have enough assets or collateral to sell if necessary in order to repay the loan? Additionally, lenders want to see your business plan. It does not need to be your full-length business plan, but it should cover what your business does, what is your competitive advantage, what your projected earnings are, and when you intend to repay any loans.
Key To A Successful Business Turnaround Plan
The key to a successful business turnaround plan is s ufficient and accurate analysis and planning in every area of the business. One of the most important lessons I have learned in business over 30 years, was from Steven Walker, (CA) who taught me that all the information you need to make the right decisions regarding your business can be found in your numbers. It will provide you with financial anticipation and foresight to make the right daily decisions.
Want to know where to spend your advertising money, where is the most business coming from, what is your most valuable products and customers? Where is significant potential for growth and profitability? Listen to your numbers, they will guide you. Without these numbers, you will not be able to make accurate daily decisions.
It is vital to understand your financial information, set financial and sales targets, preparing a cash flow forecast. Set targets for each day, week, and month and measure everything – from cash flow, sales, and profit. This section explains what the effect of all these changes will be by presenting detailed forecasts in the form of short-term financial statements and projections.
The problem is, you’re not going to get the information you need from your year-end financial statements or your accounting system. And unfortunately, this is about all the numbers the average business owner has. That’s why the most business owners simply don’t know their important numbers.
Looking at your financial statements tells you what happened, but not why. It does not show us what would happen if you make incremental changes to current costs, prices, and revenues. It’s also extremely difficult and almost entirely useless for decision-making purposes because the minute you receive them the information is outdated and limited.
You can add a budget and a forecast to it, and you can see what was intended and how well you did. A big improvement and useful, but not sufficient. If only one element in your forecast change, everything change, and you have to do it all over again. These reports are lagging rather than leading indicators or measures.
The second problem is if you do not have the relevant information (numbers) regarding your business performance, you may not know when a situation requires corrective action. Making it impossible to identify problems on time, which is causing you to lose money that may lead to a situation where your business runs out of cash and are unable to pay the bills. In most cases, we can only respond to current situations, usually too late when the damage is already done.
So, you've got to add up some of your own numbers. You need to measure what really matters.
Measure What Really Matters
With little or no margin for error, and few second chances, s ufficient and accurate analysis have to be done swiftly and on every area of the business to identify the real cause of the problem. This is key to a success turnaround because you have to make decisions based on facts, so you can choose the right turnaround strategy, that will improve your ability to adapt and survive the crises.
The success of your business turnaround start with your ability to identify and analyze, simple but very important Leading and Lagging numbers in your business. These Leading and Lagging numbers, also known as indicators, business drivers, key success factors, KPI's and many more, are important (key) measurable values in a business that are used for measuring and evaluating the performance, and success in different parts of your business.
Lagging Indicators are an important (key) measurable value of an intended result or the goal that you want to achieve. For example, to increase your business growth, sales, profit, and income... Lagging measures, reports past results or events that already happened -the end result. For example, total sales for the month, total Net, or Gross profit for the month. These results have passed, and there is nothing you can do to change it. They are history.
Lead indicators or measures in business are the day-to-day activities that lead to the result of the "Lag Indicators"(The goal or objective you are trying to achieve). These Lead activities (Input) drive the performance and success of the "Lag Indicators" and predict future results.
To change any current results in your business, you have to focus on the Lead indicators or measures. They are the things you can control and influence that will lead to a different result.
Read the complete step-by-step process for identifying your business most important lead and lag numbers here: Leading vs Lagging Indicators Examples In Business
Knowing this will empower you to make the right daily decisions for the future. Measuring the leading key numbers will allow you to have Insight, the ability to understand why you have certain results (numbers) in your business. After that, you can start to ask various “What if questions, such as “What if we increase the income by 20%?" Or "What if we reduce cost wit 10%?” These changes probably will have numerous results, many of which might have never been anticipated. By asking a series of "what if" questions will give you the ability to have the foresight that will allow you to manage your business a 100 % better, Reduce risk, have confidence in your decisions and make you considerably more profitable and grow your business substantially
Determine Outcome and Goals For Your Turnaround Plan
This is the hardest part, and that’s to make the decision to become responsible for your own future. As long as you know where you are and where you’re going, it’s easy to get there. Set some goals for your business to have clarity where you’re going and why are you doing what you’re doing.
It’s important to measure your progress from where you start now, not against how far you have to go. Remember! Your past does not determine your future; only what you do now determine your future. Each action or strategy you implement or make happen boosts your profits and growth. By comparing your progress with the point at which you started out, you will be encouraged to continue.
Goals are achieved step by step and each step needs to be validated - otherwise, the goal may seem far away, and it may feel you are making little progress when really you are. Then compare your current reality and state of progress with the final vision.
Once the short-term cash survival evaluation is complete, you need to decide:
What issues need to be attended too immediately? For example, how can funds be generated immediately within the business?
What issues need to be attended to in the short term? For example, what possible short-term financing is required.
What issues will be attended to in the medium to long term? For example, look for new outlets and markets for the products/services on offer, or develop/improve new products/services.
What components of the business should remain the same? For example, all core profit-generating items to remain. No large projects are undertaken in the short-term.
Step 4: Stabilizing The Business Finances
Stabilize your business if it is in crisis, and maintain positive cash balance at all times is very important because you need to be making good decisions without being under pressure. The key to stabilizing your business is to immediately create and then maintain a positive cash balance at all times. There could be a number of reasons why a business is in trouble, but what’s important is to find out what caused the problems and dealing with it. Part of stabilizing the business is negotiating the restructuring of your debts and obligations to the level your cash flow will support - nothing more.
Negotiate The Restructuring Of Your Debts
Negotiate the restructuring of your debts and obligations to the level your cash flow will support - nothing more. Sort your creditors into two groups: Group A and Group B. Group
Group A creditors - are those you need to do business with in the future, like banks and critical suppliers.
Group B creditors - are those you can replace and don't need to survive. Usually, Group B creditors create the most noise.
Because you've done your homework and are operating with positive cash flow, you are now in a position to negotiate. Meet personally with each Group A creditor and sell them on your turnaround plan. Be factual and positive. Show them how they will be repaid from the cash that flows from your reorganized company. My experience is that most Group A creditors will go along with you.
Creditors often try to strengthen their position and compromise your long-term viability for the sake of recovering their money more quickly than your cash flow allows.
Politely tell them, "No." Remind creditors that it is only the cash flow from your reorganized business that can repay them.
Don't waste time with Group B creditors. Hire a debt negotiator to obtain a settlement for you and move on. These specialists are a unique group, and frankly, some are better than others.
Improve Cash Controls
In the difficult times ahead it is crucial to centralize the control of cash receipts and payments, make sure “everyone” knows that cash is tight, and you are taking personal control of cash flow. Don't buy anything that is not absolutely required. Remember survival is KEY, CASH IS KING for now. Profits will soon flow from very tight cash controls.
Improve Cash Generation
It’s critical that you are able to find adequate ‘bridging finance’, be it external such as the increasing of overdraft facilities, borrowing from a third party; or internal were dead stock and unneeded equipment are identified and sold, reducing of assets, improving accounts receivables or down payments for orders.
A key factor is creditor and lender support for the financing while the business is in a turnaround state.
Manage Payable's Better
The owner must develop a cash-generating system for the business. Cash is king. More businesses fail due to cash flow problems than anything else. The owner has to generate sufficient cash to survive in the short-term. This can be done with better Debtor collection policies, and processes to reduce the time collections take by handling slow payers better, reduce credit limits, and improving credit approval processes to reduce credit losses.
Improve Inventory Management
The Inventory represents an enormous capital investment for any business. The goal of inventory management is to create a balance between holding enough stock to optimize sales, while at the same time avoiding the costs and risks of overstocking. This is an important management function in any business, but particularly in manufacturing, wholesaling, and retailing. Profits tend to evaporate when inventory is not properly supervised, or when inventory levels and stock purchasing are not given sufficient thought. Good stock control and inventory management start with accurate records. You will need to know exactly what and how many stocks are being held, their value, and cost. Incorrect or out-of-date stock records spell disaster, and it's important to have an efficient, reliable, and accurate method of keeping records.
Step 5: Increase Profitability - Not Revenue
Focus On Profits and Cash flow - Not Revenue
After stabilizing your business, and maintaining a positive cash balance it's time to create a highly profitable and cash flow rich business model. "Profit is the future cost of staying in business".
Read the complete step-by-step process for: The World's Fastest way to increase profit
Improve Profit Margins
Profit margins will be increased by the reduction of variable costs, increasing margins and productivity. The only way to assure continued profits for any business is through constant analysis of what’s happening in that business. Whether you are selling products or services, it’s important to periodically study sales and cost figures relating to your business. In them, you will discover clues to what you must do to increase profits each year.
Sometimes it means cutting expenses or increasing the price of certain products or services and sometimes it can mean adding something else to your line and sometimes it means dropping a product or activity that’s clearly unprofitable. Focusing on one area alone may or may not generate more profits for you. However, focusing on several areas and monitoring your results can have a HUGE impact on your bottom line .
All businesses need to manage costs and expenses. The old saying "You have to spend money to make money" can be a dangerous one. Every business has its costs, but in a time of crisis, it’s vital to your company’s survival, that every business owner takes the time to distinguish between essential expenses and "nice to have" expenses.
Read the complete step-by-step process for: How To Reduce Cost In Business Safely: Step By Step !
Whatever the size of your business I can tell you this; you can always cut costs. No matter how many smart business people tell you they have already cut costs, you will always find more savings in their businesses. So don't forget to be tough on costs to save your business. Reduce all fixed costs by 10% - constantly audit all facets of your company and break down each area of your business and attack it individually.
Step 6: Increase Revenue - Without Spending More On Ads
Increase your revenue, you can read the full step-by-step process here: the world's fastest way to increase your sales..
Firstly, try to increase the amount of money every customer spends every time they buy from you. Remember that it takes five times as much effort and money to generate sales from new customers than from existing ones. Secondly, try to increase your conversion ratio . Let me explain. If you are currently converting 3 out of 10 leads into customers - your conversion ratio is 30%. But if you increase that number to 4 of 10 – your conversion ratio is 40%. If you can accomplish this, your revenues will increase by 33% Third, try to increase the frequency with which every customer purchase from you. This is all about customer service and delivering on your promise. Keeping them happy Your goal should be to create customers for life. You are better off investing in your current customers and generating new business from them than you are trying to find new clients. Now, after you have taken these steps first, you can begin to increase your leads (potential new customers) While it may seem obvious to start with Lead Generation and finding new clients first, it doesn't work. Increasing Inquiries, or Lead Generation, for many Business Owners, is the most common way of increasing sales. The reason for doing Lead Generation last is that marketing and advertising can be one of the most expensive ways to market your business. It can also be the most costly if you don’t have the right marketing strategy.
Improve Service Delivery
“The key measure of business success is customer satisfaction”.
" The true purpose of a business is to create and keep a customer"
Improve Service Delivery:
As hectic as things may get, do not forget the importance of customer service! Understand that it is the small things that create great results and makes a great impression on your customers. This includes everything you do; from the way, you greet your clients, to the quality of your product and service and availability of stock.
Consistency is the keyword that leads to repeat visits, increased spending, and word of mouth advertising. If your service exceeds people’s expectations consistently, they will stick with you and tell all their friends and family. If your service is poor they also tell all their friends and family.
Customer service is also a powerful way to set yourself apart from your competition. It’s one of the strengths a small business has, and by emphasizing customer service, you can compete with larger companies who may offer more variety, lower prices, and other perks you can't afford
A su ccessful business turnaround is won or lost through execution.
I've seen many business owners get past the immediate cash crisis and calm their creditors down, only to fail to execute their turnaround plans. They stop focusing on cash flow, lose their discipline of daily measurement, and turn instinctively back to sales (where the fun is).
The result is a predictable slide back to negative cash flow, missed payments…and the wheels come off the wagon. The owner loses all credibility and there is no recovery. To avoid this, stick to your plan and do all the tasks in your turnaround plan. Insist on personal and staff accountability. Success is won or lost through execution.
Step 7: How To Implement Your Turnaround Strategies Steps
For full details on each of the following 8 steps you can read the article: How To Implement Your Business Strategies: Step by Step
Success is won or lost through execution of the turnaround plan. Many business owners get past the crisis, soothe their creditors, restore a positive cash flow, and then fail to execute the turnaround plan, and subsequently they lose everything. Don’t let this happen to you! Work your plan every minute of every day. And stay accountable to your plan.
Step 1 – Evaluate business current reality
Step 2 – Determine outcome and goals
Step 3 – Decide on preferred solutions and actions
Step 4 – Take action
Step 5 – Monitor and Evaluate results
Step 6 – Refine your strategy and Re-measure.
Step 7 – Increase what's working, or discard what’s not
Step 8 - Rinse and Repea t
Your Next Step?
The assessment of the business at this stage is of critical importance. This is an in-dept’ look at both business and personal challenges, areas of untapped potential, sales, marketing, and financials. You need to look at the ‘whole picture’.
Sufficient analysis must be done to ensure that the correct options are selected. Once you have to figure out which parts are working, we help you to improve them and have you do much more of those things that work. We will also figure out which parts of your business aren't working so that we can fix them or get rid of them entirely - so that they will stop wrecking your business. Of course, once those poorly working parts are fixed - or gone - the whole business starts to perform amazingly.
Remember: The best business owners in history have faced downturns – those who reacted early to face the distress came out stronger. Those who faced the crisis alone usually failed.
Earlier intervention can lead to a much better outcome for the business and provides your business with the best options, so if you have any doubts, please contact us for a free strategy sessions today. " free crisis strategy sessions" During "The Strategy Call", t here's no sales pitch or attempt to sell you anything, ever. T his call is about helping you, to talk about your unique business, and to brainstorming ideas and strategies to help you increase your sales and profit immediately. T he First Solution Is Always Free, Just To Demonstrate That I Can Help You, By Actually Helping You ... For Free
If you would like the best immediate solution for your business you can go to The 40-Day Business Turnaround P rogram will take your business from a "Breakdown & chaos to a Breakthrough & control" in 40 days or less. Stop the urgent pressing cash flow problems that's forcing you into making bad decisions, and forcing you into digging yourself into a deeper financial hole. Let us help you t ransform your cash-demanding profit-seeking business back in to a highly profitable cash-flow rich business
Thanks for reading, I hope you found it valuable
More Related Resources
Signs and causes of financial distress in business, business turnaround: self-diagnostic questions for creating a perfect strategy, 230 business turnaround analysis questions, about the author hans.
Hans had 40 of his own businesses over the last 30 years and is famous for creating fast-growing businesses” He is an author, speaker, coach, and consultant and a specialist in business optimization and turnaround, helping smaller business owners eliminate business limitations, threats, and growth challenges in achieving their sales, profit, cash flow, and income goals with sniper precision.
20 big money mistakes business’s make in 2021, 6 ways to save & turnaround a failing business, ten keys to a successful business turnaround.
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Turnaround Management Every Day
- John O. Whitney
Turnarounds are superb management schools. Everything needs fixing. Nothing is sure except the need to recover. The learning experience is intense. Never again will the turnaround leader assume that customers always buy, vendors always ship, bankers always lend. But turnaround lessons aren’t limited to troubled companies. Turnaround opportunities exist everywhere—in retail stores, in product lines, […]
Turnarounds are superb management schools. Everything needs fixing. Nothing is sure except the need to recover. The learning experience is intense. Never again will the turnaround leader assume that customers always buy, vendors always ship, bankers always lend.
But turnaround lessons aren’t limited to troubled companies. Turnaround opportunities exist everywhere—in retail stores, in product lines, in corporate divisions and subsidiaries. In today’s world, you have to earn your right to compete every day, day after day. And the basics that help you do that are the same ones that turnaround managers use to bring failing companies back to life.
In a turnaround, the CEO needs information fast—about the company’s cash position and its prospects; about its customers, employees, and competitors; about its control systems and important constituencies. Only then can the decisions that give the company a fighting chance be made. Resources flow to the business units that can secure the company’s immediate survival and provide a foundation for profitable growth. The plug gets pulled on those that are draining profits or show poor promise.
Finally, the CEO has to devise a structure that will keep the reviving company nimble enough to compete. Turnaround practitioners almost always flatten their organization charts, often removing as many as three or four layers, to cut costs, streamline decision making, and improve mobility.
In taking these steps, turnaround managers don’t have the luxury of abundant time and resources. They get back to basics in a hurry. Luckier managers can do their learning before the fact and reduce the odds of ending up in trouble themselves.
The Cause, Cure, and Prevention of Turnarounds Are Closely Related
Turnarounds are no longer special cases but an all-too-familiar part of business life. In recent years, the corporate sick list has included names like Continental Bank, Bank of America, International Harvester, Braniff, People Express, Commodore, Atari, Control Data, Storage Technology, and Fotomat. Chrysler, A&P, and Wickes seem to have recovered, and others on the list are on the road back. But W.T. Grant and Korvette have disappeared, and other ailing companies have been merged, liquidated, or acquired. Even such blue chips as Kodak, AT&T, and IBM are keeping lights burning late as they attempt to preserve long-cherished values while streamlining to compete.
None of these companies are small, nor do they come from the oil, steel, or smokestack industries that have been in trouble. Rather, it seems that no one is safe. High-tech, low-tech, manufacturing, service, large, small—companies in every category are experiencing difficulty. A brief look at the business environment since World War II suggests why.
From 1948 through 1973, real GNP growth averaged 3.7 % . Unemployment was relatively low. Inflation was high if it reached 5 % , so it kept interest rates down. American business not only served a growing domestic market but also discovered Europe, Asia, and Latin America. Every year America was a net exporter, piling up a surplus of $ 157 billion. Not surprisingly, this country developed a body of business practice and literature that suited this environment.
The vertical organization with short spans of control and a powerful staff made sense in a stable business climate. Executives made decisions deliberately with the concurrence of the organization’s many layers. Long-term planning became a fetish. The number of dollars thrown off for reinvestment drove investment decisions. Long-term measures like discounted cash flow were developed. Payback was scoffed at or ignored. Companies rarely fired managers or employees—afraid to rock the richly laden boat, management made concessions to unions not only in pay rates but also in work rules. Low interest rates and the stable environment encouraged liberal use of debt. No one talked of negative leverage.
In this amiable environment, turnarounds were rare. Certainly, some managers employed heroic measures to screw up a sure thing. The Studebaker, the Henry J, and the Edsel went under as did consumer product companies that were too firmly rooted in the past. But on balance, turnaround management was seldom necessary.
Then during the early 1970s, trouble appeared. Economists, political analysts, and social scientists can debate the causes. The effects were palpable: the rate of environmental change accelerated and competition intensified.
We all remember what happened to oil prices after the Arab boycott in 1973. The prime rate was just as unstable. It reached 20 % in 1981 then fell to 8 % in 1986. Real growth in GNP slowed way down, averaging only 2.3 % from 1973 through 1985. In 1985, the U.S. net export deficit was $ 79 billion, equal to just half of the combined trade surpluses in the 1948–1973 period. America’s once-corpulent overseas customers have become lean; the ingrates have had the temerity to invade U.S. markets, which has invoked cries of protectionism and pleas for level playing fields.
The rate of technological change compounds these pressures. New items that substitute for once unassailable products have come to market. The film business of Kodak, for example, has been directly attacked by Fuji, Konica, and 3M and has been side-swiped by VCRs and video cameras that don’t require film and that divert money once spent on cameras. In addition, home computers, compact discs, audio component racks, and other toys divert dollars previously available for photography.
Accelerated change and intensified competition like this make the managers of the 1980s look inept compared with their 1950s and 1960s counterparts. Yet today’s managers are better educated, better informed, and harder working than their predecessors. Their failure may be more clearly understood—if not exonerated—in the context of their legacy. Past practice and traditional business education prepared them, like generals, to fight the last war, not the present one—much less the next.
As a result, when the prime rate soared, energy costs skyrocketed, and the Japanese, West Germans, and Koreans added their considerable skills to those of hungry domestic competitors, many leaders of respected companies found they could no longer cope. Their legacy had failed them, and their ponderous organizations could not readily adapt. Try as they might, they could not mobilize to compete.
Nothing Matters More Than Cash
One thing traditional managers find hard to grasp is the central role of cash. Nothing is more important to a successful turnaround than cash. And cash management should be just as important to leaders in more stable situations since rapid changes in the business environment can, in only months, erode a comfortable cash position—and unceremoniously dump an otherwise untroubled company into near bankruptcy.
Unfortunately, a surprising number of companies do not make cash projections except when required to do so during negotiations for credit lines. Other companies grind out regular cash projections that are little more than extrapolations of trends. Then their CEOs, usually intent on more exciting issues, glance at the summary reports and assume that cash is adequate.
Turnaround leaders, however, know that cash is more important to their longevity than their management contracts. (Banks do not like surprises.) They scrutinize the assumptions undergirding each line item in the cash projection. And they ask tough questions that get their financial officers talking to division and function heads. Are purchase orders being cut or contracts signed that aren’t reflected in the operations or capital budget? Are sales on plan? Has the marketing department decided on a receivables-dating program to stimulate sales? What’s the financial condition of our big customers? Are they taking their discounts?
The cash projection sums up everything happening in a company. But financial managers cannot properly summarize what they don’t know. So they have to devise a system for gathering all the pertinent information. The CEO should reinforce this task by holding regular staff reviews of the company’s cash forecast, thus dramatizing the importance of furnishing accurate, timely information to the department preparing the cash budget.
The goal, of course, is a realistic cash budget. Some companies prepare worst case and best case budgets to augment their realistic projections, but this leads to sloppiness in the budget process. Company managers should, instead, make their very best estimates then use microcomputer spreadsheets, which can present the information in easy-to-digest graphics, to manipulate all the variables that affect cash. (For example, by lowering receivables in increments of 5 % or 10 % while raising payables correspondingly, managers can generate a range of gloomy scenarios rather than one worst case.)
This approach to budgeting acknowledges that projections are always off somehow. But it requires managers to think carefully about their inputs and lets them examine a greater number of what-if and what-else scenarios than the best case—worst case method allows.
To illustrate, look what happened when a small publishing company decided to add to inventory rather than cut back. Sales slumped and the publisher’s customers slowed their payments. At the same time, its vendors refused to ship unless payables were brought current. The company foundered and almost failed. Had company managers based their decision on the spreadsheet manipulations I just described, they would have been able to plan for a range of scenarios, including the one that occurred.
Wring Cash Out of Receivables, Payables, and Inventory—Then Keep Them Wrung Out
In addition to imposing stringent controls on capital and operating expenditures, the turnaround specialist nearly always squeezes large amounts of cash from accounts receivable, inventory, and accounts payable, thus reducing reliance on banks, which may be under such pressure themselves that they no longer make reliable partners. Reliable or not, banks and other sources of debt can’t be used casually. Debt nearly always pulls the trigger on a troubled company and its management. In many instances, however, stringent balance-sheet management can reduce debt.
Ironically, the balance sheets of a surprisingly large number of troubled companies show adequate working capital—but it’s tied up in inventory and receivables. Converting these assets to cash requires close attention to inventory-decision rules, payables and receivables policies, and the impact on working capital of operating expenses and capital expenditures. To illustrate what that entails, let’s look briefly at accounts receivable management.
From time to time, the CEO should ask for an accounts receivable run, then pick four or five entries, including some from current categories as well as some that are long past due, and personally walk their paper trail. In other words, he or she should learn as much as possible about the history of the orders from the time they were received until they were shipped, billed, and collected or dunned as the case may be. When questions arise or more information is needed during this process, the executive should not accept an incomplete answer or the promise of a report. He or she should patiently but firmly insist on getting the information immediately. If the information is not readily available, the response, “I’ll wait right here” tends to turn it up much faster than would normally be expected.
In addition to reducing the company’s dependence on debt, hands-on receivables control pays an unexpected dividend: it gives senior managers a particularly useful view of the company’s customers. Specifically, which customers are paying and why. In countless turnarounds, energetic, hands-on managers have sped collections. They have also found egregious shipping and billing errors while uncovering product quality problems and bureaucratic rules that are convenient for the company’s employees but create ill will among customers.
The volatility of their world drives successful turnaround managers as close to the source of information as they can get—as often as they can get there. Leaders of stable companies may need fewer face-to-face encounters, but the principle remains. It’s always better to discover and solve problems before they wreck the enterprise.
Unfortunately, the gap between perceiving the value of hands-on management and acting on it causes far too many companies to stray into turnaround condition. Lip service is easy. Performance is hard. So while nodding assent to these recommendations (and the ones that follow), thoughtful readers should reflect on what is actually going on in their own companies. Is the legacy of a stable past still driving the enterprise, or are the challenges of the turbulent present truly redirecting its actions?
Intelligence from the Source Is a Lot More Useful Than Laundered Reports
Armed with reliable information about the company’s cash position, turnaround managers seek out other information sources. These include the ones usually cited: customers (consumers and the trade), employees, competitors, and vendors. They also include bankers, the investment community, government agencies or regulators, and the media.
Obviously, the most useful information usually comes from the source. Sitting in a customer’s office and hearing about three late shipments, five defective units, and invoices that don’t match purchase orders has a sobering and salutary effect on senior managers. Information gained this way adds pungency to otherwise sterile statistical reports about quality control and distribution service levels.
Of course, no experienced manager will generalize from one unpleasant encounter. But in turnarounds, the intelligence gained from several such encounters is far more useful than reports that have been both laundered and delayed as they moved through channels to the corner office. Moreover, the wise manager will turn that direct encounter into a valuable resource. Having fixed or at least improved the problem, he or she will report to the customer directly and, at the same time, begin building bridges to other kinds of information: What’s really going on in the market? What should I know about my competitors? Are new products or technologies making my product line obsolete?
The value of such personal bridges quickly became apparent to the CEO of a troubled $ 50 million consumer products company who made all his senior officers, himself included, take part in a 30-day sales blitz. In so doing, he learned that a $ 2 million OEM customer, thought to be safe, was so unhappy with the company’s work, it was considering withdrawing its business. Worse, the CEO had been counting on that customer’s continued support to keep a plant open. Fortunately, his timely call helped him save the customer and sparked a critical assessment of his consumer goods operations.
Turnaround managers build similar information bridges to some of their companies’ important vendors. Because these vendors serve competitors and other customers, they may be attuned to trends or important shifts in the marketplace. They may also provide detailed information on pricing, discount schedules, and other terms of sale. Additionally, they can supply fresh insights about the strengths and weaknesses of the company and its personnel. In this respect, vendors will often trust the president with information they would not give to others. Pleased with the opportunity to build some bridges themselves, they can be valuable resources in the future as well as right away.
The principle at work here can be usefully applied to all the constituencies on which a company’s health depends. I’ll discuss two—employees and bankers.
Employees and middle managers are make-or-break factors in any strategy. Leaders in traditional organizations are expected to get most of their information about these important human resources through the chain of command and the personnel office. Both are important sources, but both tend to filter out the kind of information that’s required to compete in a fast-moving, hard-hitting environment. For example, morale, pride of accomplishment, eagerness to succeed, creativity, energy levels, commitment to the organization’s goals—all these must be seen, heard, and felt at the scene, not gleaned from personnel records or middle managers who may not know (and probably would not admit) that their employees are just putting in time.
Moreover, managers who signal their interest by asking good questions and listening to the answers often discover unsuspected problems as well as suggestions for solutions. One-on-one encounters may spark insights that can lead to new product ideas or marketing programs. These direct contacts may also point to potential new managers who have been submerged by the chain of command or hidden by an insensitive or hostile supervisor. An additional bonus can come in the form of improved morale and greater enthusiasm for the company’s goals.
The best strategy in the world is bankrupt if it cannot be executed. The risks of crossing organizational lines to get reliable information about your people are far less than mounting a corporate overhaul with ill-suited or poorly motivated employees.
Banks are another important player in today’s business environment. In some instances, nervousness about questionable loan portfolios has caused banks to destabilize their customers. Their carelessness, poor judgment, and bad luck compound borrowers’ problems that in more hospitable environments might have been seen and treated as aberrations. In today’s environment, however, even the company that stumbles only slightly may not get the time and understanding to work out its problems if its friendly banker has just experienced an unfriendly examination.
Balance sheets are perishable, especially in times of rapid change. An aborted marketing program, an ill-advised capital expenditure, a lost lawsuit, loss or bankruptcy of an important customer, strikes, product recalls—any of these can wipe out cash and throw a formerly healthy enterprise into violation of its loan covenants. If assets are recoverable, the banker may pull the plug, force the sale of assets, or, at the least, require management changes.
All turnaround CEOs know the importance of close relationships with lending officers and their bosses, even bank presidents when possible. The banking relationship is far too important to be left to the chief financial officer, whether the company is troubled or not. This caveat applies to any company with appreciable debt. CEOs should know how they stand and should meet with their bankers regularly. Taking banks for granted is dangerous business, as one manufacturing CEO learned when 15 years of borrowing ended abruptly because the bank’s new management was worried about its questionable energy loans and so clamped down on all its marginal accounts.
In the preceding examples, I have argued the merits of spanning, going around, or otherwise subverting normal chains of command and channels of communication. Successful turnaround managers nearly always do this, especially in the turnaround’s early stages. The question is: To what extent is this practice appropriate for managers of healthy companies?
It has disadvantages. Jumping channels can diffuse authority and diminish a feeling of responsibility among line managers, thereby hampering effective delegation. It can give employees mixed signals or false hopes and generate distorted information because everyone has an ax to grind. It takes an enormous amount of senior managers’ time. And it can produce in them a preoccupation with the present to the detriment of the future.
This list of disadvantages suggests, at the least, that direct information gathering requires care and sensitivity. It does not suggest its disuse. Information is power, and the lack of it is helplessness and despair: “If I had only known soon enough.” “If I could have been certain.” What-might-have-beens like these have littered the landscape with executives and companies who would otherwise still be employed.
As the rate of change accelerates and competition intensifies, the need for timely, reliable information will escalate, yet today’s traditional business organizations cannot give senior decision makers the information they need. Company norms, compensation practices, management processes, and organizational structures obstruct information; they don’t expedite it. Sometimes, of course, there is good reason for these systems: the senior management of a large organization cannot and should not know every detail of the company’s operations; managers must use analyses and summaries prepared by others.
My point, however, remains. Senior managers cannot depend solely on previously digested data. They need reality checks. A company under attack cannot afford management by exception, particularly when exceptions are reported late and inaccurately. Matching management summaries with information from the source is the best insurance policy against disaster and the most reliable scout for the future.
Every Management Layer You Can Strip Away Makes You More Responsive
Contrary to popular notions, long-range business plans can harm rather than help companies—even healthy ones. Because such plans ossify a company’s structure and management processes, they are unsuited to a volatile environment. Certainly, they are inappropriate in a turnaround situation where the extant business plan must give way immediately to simpler, more flexible directives: a “marching song,” or dramatic program, that can focus the company’s survival efforts, and a strategic credo, or simply stated sense of mission, that pulls the enterprise along without prescribing its every action or course correction.
I do not intend to minimize the importance of a carefully developed strategy that matches opportunities with the company’s resources and reflects management’s priorities. Rather, I want to draw a distinction between strategy and plans. A strategy directs an organization’s allocations and operating practices. Operating plans will reflect the strategy, and, in turnarounds, they will be short and to the point. They will prescribe who is to do what by when.
Time frames will also be short, especially in the early stages of the comeback. Whereas bankers may insist on annual plans and budgets, the organization will be using daily, weekly, monthly, and quarterly targets for feedback. What’s vital is that the company’s managers can sense when something isn’t working, then have the guts and determination to change course, to find something that will work. Even more important, they must recognize when something shows greater promise than expected and be able to shift resources to that project.
Successful reorganizations cut costs, open up information flows, and increase mobility. These improvements come from changes in both the organization’s structure and its management processes. Structure is represented by the organization chart; process reflects the organization’s policies, practices, and values.
During the crisis stage, the turnaround leader changes process without changing structure. Subverting the chain of command and bridging communication channels nourishes a kind of chaos that is useful while the leader is learning firsthand about the organization, its people, and its other constituencies.
Although this controlled chaos is effective for a surprisingly long period, ultimately the structure must be realigned to capture and preserve the vitality of crisis management while ending the corrosive stress of disorder. This is usually accomplished by flattening the organization chart and installing an active, hands-on management process.
Cost reduction is the customary justification for flattening the organization chart. But other benefits are even greater. A flat organization presents fewer impediments to the flow of information, reduces the filtering effect of hierarchy, and opens opportunities for a dialogue between senior managers and those close to operations and market information. The shortened chain of command also facilitates mobilization, especially when teams or task forces are used to support key initiatives or changes in direction.
Management processes after a reorganization will likewise reflect the hands-on style of turnaround leadership. For example, strategy will be discussed and sharpened not only in regularly scheduled reviews but also in impromptu encounters as senior managers get out and talk to the people who manufacture products, book sales, ship orders, make collections, and count beans. Strategy will also be an implicit concern during budget and operations reviews—themselves more rigorous, sometimes exhausting, command performances for functional and line managers. These reviews will focus on numbers and specific plan objectives, but, equally important, they will focus on the story behind the numbers and trigger animated examination of priorities.
To give more people an opportunity for input as well as feedback, bottom-up budgeting will be installed. And teams, task forces, and special-purpose committees with cross-organizational membership will be used not only to accomplish specific tasks but also to legitimize communication channels other than those prescribed by the chain of command.
As desirable as these outcomes are, however, an effective reorganization is not easily or quickly accomplished. Until a company has assessed its resources, capabilities, and opportunities and has then decided its direction, it will be ill advised to decide on the structure that will take it there. And even then, the ground for a reorganization must be carefully prepared. Specifically, reorganization will require:
Understanding the work being done.
Evaluating whether the work is necessary to achieve the company’s objectives.
Redefining the work to eliminate, simplify, modify, and combine tasks.
Determining reporting relationships to eliminate as many positions and management layers as possible while retaining appropriate control.
Designing a measurement system that supports the company’s goals and the new organization structure.
Senior managers should carry out these tasks themselves, relying on the personnel department for data but not for judgments or recommendations. Outside consultants can provide objectivity, but if senior managers are not fully involved in the arguments and discussions that lead to the final decisions, they will not fully understand the new organization or its requirements. Consequently, activities that have been removed will creep back in. Costs that have been cut will reappear. Better communications and quicker mobilization will not endure. Further, if the new structure does not facilitate the organization’s work or reflect its strategy, confusion and lowered morale will almost certainly ensue.
In the process of understanding and evaluating the organization’s work, senior managers will have to unbundle every job to find out what is really going on. As in other areas, initial insights may come from written material, but the really useful information will emerge from discussions with the people who actually do the work. Then, buttressed by this information, managers can begin to redefine the work, combining, simplifying, or modifying tasks. This exercise will help in decisions about what, how much, and who to cut. Only then should the managers begin the traditional reorganization activity of deciding who reports to whom.
To discipline the process of assigning reporting relationships, the first new organization chart should be zero-based, with every cluster of activities reporting directly to the CEO. To reduce the obvious absurdity of this design, one management layer can then be introduced and reporting relationships assigned. In all but the very small companies, a third chart with another management layer will replace the second one. Any additional layers, while often supportable, should be hard fought and stoutly debated. Although no hard and fast rules exist, it is not unreasonable for the CEO to have 10, 12, or more direct reporting relationships and for each lieutenant to have at least an equal number.
The Management Practices That Can Cure a Troubled Company Could Have Kept it Well
At the outset I asserted that turnarounds are superb management schools and suggested that the management fundamentals for turnarounds and stable companies differ only in emphasis and execution. So far we’ve looked at similarities; now I should note two differences.
Crisis management is usually required in the early stages of a turnaround, and on occasion any organization may find a dose of such management salutary. But used unnecessarily, too often, or too long, this technique creates fear and confusion and can harm morale. For that reason, the leader of a healthy company will use it judiciously and the turnaround leader will replace it with formal management practices and organization structures as soon as possible.
The second difference is prescribed by the resources the CEO can command. The turnaround condition nearly always implies limited resources, which, in turn, limit management’s functions to reacting rather than leading. In those happy instances when a company has ample resources, its leader should employ those resources as forcefully as possible, within the bounds of good business judgment and acceptable risk. The company should act as a leader, not a follower. Its horizons should reach further and it should stay the course longer than its weaker competitors. It should also use its strength to find breakthrough opportunities that will ensure its continued leadership.
What a company actually does in the marketplace is separate from what it does to get there, however. The leader’s best insurance for continued leadership is to employ methods from the successful turnaround: a finely tuned sensitivity to opportunities and problems in the business environment; comprehensive surveillance of the competition; daily attention to cash and operations details; and a streamlined organization in close contact with its work force, suppliers, and customers.
- JW John O. Whitney is a professor of management and the executive director of the Deming Center for Quality Management at Columbia University’s School of Business in New York City. He has been the CEO of several turnaround companies and is the author of The Trust Factor (McGraw-Hill, 1993), reprinted in 1995 as The Economics of Trust .
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Top 10 Business Turnaround Plan & Strategy Templates with Samples and Examples
The phenomenal book, Zero To One , that PayPal founder Peter Thiel has co-authored, asks a fundamental question that no one in civilized human history has managed to answer: Is success in business a result of talent and skill or just pure luck?
As you mull this over, it will help to remember that even the most successful businesses have failed at some point. Apple’s ascent to prominence in the technology industry is the most well-known example of turnaround success .
‘ Apple went into a decade-long downward spiral after CEO Steve Jobs left the company in 1985 and lower-priced products from competitors, like Microsoft Windows, took over the personal computer market. For 12 years its innovation, popularity, and sales continued to plummet, almost reaching bankruptcy until Jobs rejoined the company in 1997. The company was able to turn itself around with a successful rebrand and new technology. Now, Apple is one of the most well-known and valuable companies in the world, raking in almost $300 billion in revenue each year’.
There are countless other success stories of businesses that have navigated the crisis with a strong turnaround plan and made it to shore. If handled properly, reaching rock bottom might be the first stepping stone a business needs to start climbing its way back to the top.
What is Business Turnaround Strategy?
The tactical actions necessary to restore the viability and stability of a business undergoing financial distress is referred to as a business turnaround strategy.
It is imperative to have a turnaround strategy in place to try to foster business continuity, manage to stay afloat in extraordinary circumstances, and prepare for any collateral damage.
This blog provides a deep insight into Business Turnaround Plans and Strategies to help you to stay on top of distressing, even hopeless situations, and still make the correct decision. We, at SlideTeam, have combined deep knowledge with a tried-and-trusted method to get the right evaluation of any company’s situation.
The blog also offers a list of best-in-class Top 10 Business Turnaround Plan & Strategy Templates to give you a foresight of the current framework, help you ask difficult questions and take a realistic view of available options. These top-notch templates have been curated and compiled after extensive research of clients from all over the world through situations that could be uncannily similar to scenarios you might be facing.
With the help of these ready-to-use templates, you can implement a sustainable turnaround plan, accomplish specific objectives, and benefit from the transformation of your business with an understanding of the advantages and risks of a significant turnaround.
Check out our blog on Digital Transformation to help in bringing the digital evolution drive into your business and help it reach greater heights.
Rough seas ahead? The time has come to seize the initiative, regain equilibrium, and plot a course based on long-term goals with SlideTeam’s Business Turnaround Plan PPT Templates.
Template 1: Business Turnaround Plan PPT
Stabilize your cash, viability, and liquidity positions with strategic processes to transform your business. Use our PPT Template to determine turnaround strategies such as a change in management, and financial reconstruction. The PowerPoint Presentation helps you ask the right questions: Is there really a money crisis? How can things calm down? Is there a chance of refinancing or turnaround? What are the best options currently available to the business? This ready-to-use deck helps you probe the current concerns faced by your firm that lead to a corporate failure, analysis of ownership patterns of shareholders, and the firm’s debt-equity ratio. These premium sets of slides are an informative tool to conduct department-wise employee training to help them understand the company's turnaround plans and strategies.
Template 2: Business Turnaround Plan Template
Get the resources you need to evaluate and ascertain your company's financial health and efficiency via this PowerPoint Presentation. Transformations and future growth can be difficult, but with the right plans, you can improve your company's efficiency, adaptability, and competitiveness. This fantastic design is perfect for expert discussions, team meetings, and stakeholder gatherings. This well-designed template is best suited for SWOT analysis and to create an excellent turnaround plan.
Template 3: Agenda of Business Turnaround Plan PPT Layout
Your business must concentrate on the key stakeholders and act in the creditors' best interests in order to implement effective turnaround recovery strategies. Use this Business Agenda PPT Template to outline the purpose and process of getting back on track. This slide will help you establish effective communication with stakeholders. Use the PowerPoint Presentation to brainstorm and strategize the new path to the company's success. This template will set the motion for the coming months and help you navigate the crisis. Download, modify, and present the framework for further efforts.
Template 4: Different Stages of Business Turnaround Plan PPT
Use this PPT Template to understand how turnaround management works. This template is a vital tool to assess insolvency, liquidation, and strategic objectives. This professional slide includes five stages of the Business Turnaround Plan: Management Change, Evaluation, Emergency, Stabilization, and Return-to-Normal Growth. Employ the slide to learn a step-by-step proven process that will turn around your business, so you can survive the temporary short-term "crises", regain your profitability, boost confidence, and save your business.
Template 5: Determining Turnaround Restructuring Path PPT Infographics
A turnaround aims to save a company and keeps it from going out of business. This pre-built PPT Template offers a thorough setup that enables businesses to analyze their financial position over time to decide when to implement turnaround strategies. A turnaround restructuring path is included in this infographic to appeal to viewers. Use the PowerPoint presentation to get a clear, succinct report on crisis management. Check on the ineffective business strategies with this download.
Template 6: Four Phases of Business Turnaround and Financial Restructuring PPT
A turnaround is disruptive, like any significant transition, but it has advantages. A well-executed restructuring event can ultimately contribute to future growth and revitalize a company. Use this PPT Template to increase sales and profitability while avoiding insolvency. It has sections on managing cash as well as ones that offer fast data analysis, opportunities, and rewards for managing cash. Employ the template to conduct hard-nosed review and revision of financial, operational, and managerial strategies. Start working on a preemptive restructuring model with this download.
Template 7: Implementing Turnaround Plan Timeline PPT
Use this pre-made PPT Template to emphasize the strategic processes, the requirement for adequate financing, and timing. It is essential to reassure stakeholders that the turnaround is on track in order to defend their prior investments and maintain their ongoing support for the company. This slide provides details on a turnaround plan's implementation, including its strategies, governance, etc. Employ the PowerPoint Presentation to present a visual timeline for revitalizing your business. Use it as a discussion and navigation tool when putting the turnaround plan into action.
Template 8: Business Turnaround Structuring Plan for Performance Analysis Template
A business's financial health declines as a result of mismanagement or ineffective business strategies. To gain a competitive edge, use this PowerPoint Presentation to comprehend your company's situation. This template includes well-researched turnaround restructuring plan content that can be modified to fit the needs of your business. The PPT includes six stages, including rehabilitation plan, related party coordination, turnaround plan execution, and turnaround plan monitoring, as well as three essential turnaround strategy components. Follow these logical, step-by-step proven turnaround strategy steps to improve performance and increase your chance of surviving a crisis.
Template 9: Business Turnaround Plan for Pandemic and Crisis Management PPT
Many companies were on the verge of liquidation with the onset of the pandemic. It became difficult to maintain viability and financial health. Therefore, it is crucial that companies act quickly to address problems and are proactive in assessing their risk and vulnerability from both an operational and financial standpoint. Use this well-structured PPT Template to chalk out a pandemic or crisis management plan for business continuity. It includes five stages along with key focus areas, health impact, scenario planning, cut costs, stakeholder management, financial and liquidity impact. Become well-equipped to support the management and assist in the financial restructuring with this download.
Template 10: Strategic Business Turnaround Plan with Value Enhance Capabilities PPT Slide
The two most common methods for determining insolvency are cash flow and balance sheet tests. Use this PPT Template to assess the company's financial health and create a restructuring strategy for future growth. This slide offers advice on how to enhance wireless, cut operating costs, increase manufacturing productivity, and put a new ERP (Enterprise resource planning) system in place. Use the template to expand your company's capabilities.
Everything needs fixing
Turnarounds signify a return to stability and profitability following an extended period of financial hardship, poor business decisions, or poor management. A company may take strategic measures to maintain the viability of its businesses and avoid potential insolvency or liquidation. It is not necessary to wait until things get too bad before beginning a turnaround strategy. In fact, starting the process sooner rather than later is preferable. Use SlideTeam’s PPT Templates to create effective management strategies that will aid your business to recover and resume its upward performance trends.
PS: Check out our blog on Business Strategies for the Post-Covid Era to begin your post-pandemic recovery journey and enter into the next normal - a normal that looks nothing like the ordinary!
FAQs ON BUSINESS TURNAROUND STRATEGY
How to conduct a business turnaround.
A business turnaround occurs when it pivots around financially after a slump in performance. Turnarounds signify a return to stability and profitability following an extended period of financial hardship, poor business decisions, or poor management. If your business is struggling, then your number one goal is to get to a point where your business is stabilized. As soon as you get to this stage, you can begin considering opportunities for growth. A strategy is established to swiftly triage and stabilize the business.
The steps to business turnaround:
A). An initial rapid assessment of the current status of a business is crucial in considering the time that is available and the key factors that would enable a turnaround strategy to be developed and implemented. This will entail creating accurate cash and trading projections and taking into account how well the current funding structure works.
B). Create a turnaround strategy that addresses the problems the company is currently experiencing and supports enhancements to operational performance and financial stability.
C). Implement the turnaround along with running the business’s day-to-day.
What are the main types of turnaround strategies?
A turnaround strategy involves restructuring or turning the company's current strategy on its head.
A). Restructuring and Leadership Change
Changing the company's current leadership structure is the first step in restructuring and improving the company's overall health. This will necessitate the implementation of temporary structures or adjustments to the current organizational structure and hierarchy of the company.
B). Cost Reduction
The majority of businesses use a cost-cutting or cost-efficiency strategy to control spending, lower expenses, and boost margins. Cost cutting directly affects profitability and aids the business in getting back on track. The company's cash flow will be stabilized and gradually improved as a result of the cost cutting strategy.
C). Redeployment of Assets
After implementing their cost-cutting turnaround strategy, businesses redistribute their assets. They can sell off assets that have reached the end of their useful lifecycle and are now regularly incurring repair and maintenance costs at a loss. They can make investments in brand-new assets to either replace or enhance the existing ones. By doing this, it may be possible to increase daily productivity.
Check out Enterprise Asset Management PPT Template to track and manage your business tools.
D). Change in the Focus Area and Repositioning
Altering the company's focus area or market and leaving some unprofitable areas is another turnaround strategy. It needs to recognize its best qualities and concentrate on those areas. This would give the business a competitive edge. In order to get the most out of these endeavors, it should set aside more money for marketing its flagship products and targeted markets.
What are the tips for a business turnaround?
Building a turnaround strategy needs skills and expertise.
Here are some pointers to help you carry out a successful turnaround:
A). Communicate in an effective and open manner with the leadership team, stakeholders, creditors, and employees. Developing goals and implementing strategy can be easier when everyone understands the situation and their role in its solution.
B). Businesses can stay relevant in developing industries by abandoning or moving away from projects that aren't bringing in money. A successful business turnaround requires adaptability, lightning-fast reflexes, and in-depth, unbiased analysis. It's acceptable to stop and start again.
C). During turnarounds, businesses are vulnerable, so it's critical to spot and stop any negative trends before they become a problem. Leadership teams for early intervention must be flexible and open about processes or developments that need improvement.
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Five Stages to Managing Successful Turnarounds
The process of turning around a troubled entity is complex, due to multiple key stakeholders, usually including lenders, creditors, investors, owners and employees. All have different agendas.
In my work, I address the turnaround process as if all constituents are in favor of proceeding to the end, when a restructured entity emerges. Nothing about a turnaround is simple, but that approach at least clarifies the forward movement.
Above all, focus on the management team. Businesses fail because of mismanagement. According to a study conducted by the Association of Insolvency and Restructuring Advisors , only 9 percent of failures are due to influences beyond management’s control.
Mismanagement is most often seen in more than one of these multiple areas:
- autocratic style
- ineffective personnel management
- vague goals
- lack of new customers
- inadequate strategic analysis
- mismanaged growth.
So, as Will Rogers said, “If you find yourself in a hole, stop digging.”
That’s good advice for business owners and the senior management responsible for leading a company.
Turnaround specialists are often an excellent choice. They bring a new set of eyes and new strategies for managing and advising in troubled situations. These experts are either practitioners or consultants.
Turnaround practitioners take management and decision-making control as the chief executive officer or chief restructuring officer.
Turnaround consultants , on the other hand, advise management, perhaps the same management that failed before.
The key is to build enterprises that future buyers want to invest in. That’s what a turnaround plan created and implemented by turnaround professionals does.
Stages in the Turnaround Process
Stage 1: change the leadership team.
It is important to select a CEO who can successfully lead the turnaround. This individual must have a proven track record and the ability to assemble a management team that can implement the change management strategies to turn the company around.
This individual most often comes from outside the company and brings a special set of skills to deal with crisis, reorganization, and change. She will stabilize the situation, implement plans to transform the company, and then hire her replacement.
It is essential to eliminate obstructionists who may hamper the turnaround management process. This could require replacing some or all of top management. This will undoubtedly mean also replacing some of the board members who did not keep a watchful eye.
Stage 2: Situation Analysis
Your objective is to determine the severity of the situation by answering these questions:
- Is the business viable?
- Can it survive?
- Should it be saved?
- Is there sufficient working capital to fuel the turnaround?
This analysis should culminate in formulating a preliminary action plan that shows what is wrong, what potential solutions exist, key strategies to turn the entity in a positive direction, and a cash flow forecast (at least 13 weeks) to understand cash usage.
Important steps at this stage of the turnaround situation: Identify what product and business segments are most profitable, particularly at the gross margin level, and eliminate weak and nonperformers. Make certain that all functional areas (sales, production) are working to support the goals of their counterparts.
Stage 3: Emergency Action
At this point in a crisis management situation, you have to gain control of the situation, particularly cash, and establish breakeven. Centralize cash management to ensure control. If you stop cash bleed, you enable the entity to survive.
Time is your enemy. For a successful business turnaround, you must protect asset value by demonstrating viability and showing that the business is in transition.
Look for quick wins that allow you to raise cash immediately:
- Review the balance sheet for internal sources of liquidity such as collecting accounts receivable, and renegotiating payments against accounts payable.
- Sell unprofitable business units, real estate, and unutilized assets. Secure asset-based loans if needed.
- Restructure debt to balance the amount of interest payments with a level a company can afford.
- Lay off employees quickly and fairly. It is much better to cut deeply all at once, than to make small cuts repeatedly. Remaining employees can focus on work if they have (relative) job security.
Stage 4: Business Restructuring
At this stage, your focus should change from cash flow crisis to profitability. Fix the capital structure and renegotiate the long and short term debt.
The goal is to create profitability through remaining operations. Stress product line pricing and profitability. Restructure the business for increased profitability and return on assets and investments.
Incentive-based management will drive employees to get involved smartly. Create teams of employees to identify and rework inefficiencies and promote profitability.
There are only two ways to increase sales. Sell existing product to new customers. Sell new products to existing customers. Do both if you want growth.
Stage 5: Return to Normal
Now it’s time to institutionalize the changes in corporate culture to emphasize profitability, ROI, and return on assets employed.
Seek opportunities for profitable growth.
Build on competitive strengths.
Improve customer service and relationships.
Build continuous management and employee training and development programs to raise the caliber of your human capital.
This could be time for financial restructuring that results in more reasonable rates for long-term-financing now that the company is stable and on a growth path.
The odds of success increase dramatically if a turnaround plan including these stages is implemented and followed.
About the Author
John Collard is Chairman of Annapolis, Maryland-based Strategic Management Partners, Inc. (410-263-9100, www.StrategicMgtPartners.com), a turnaround management firm specializing in interim executive CEO leadership, asset and investment recovery, corporate renewal governance, and investing in underperforming distressed troubled companies. He is a Certified Turnaround Professional, Certified International Turnaround Manager, Past Chairman of the Turnaround Management Association, serves on public and private boards of directors, is a frequent author, speaker, and advisor to companies, institutional and private equity investors, and governments. He was inducted into the Turnaround Management, Restructuring, Distressed Investing Industry Hall of Fame.
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Building a Turnaround Strategy: Objectives, Goals & Initiatives
How to build a turnaround strategy and bring your business back from the brink. A full list of the objectives, goals and initiatives to include in your plan ↩️
If your business is struggling or in trouble you’ll need to start thinking about the best strategy to turn it around. But what does a turnaround strategy look like in terms of strategic objectives, goals and initiatives? And what other considerations are there when you are fighting for survival?
Of course, every situation is different but let’s look at some ideas that may help you to think through priorities in a structured way, and help you build your plan to get the business back on track.
The image above shows typical topics or activities that are at least under discussion as part of a turnaround and most of these things will likely become strategic objectives, goals, initiative and tasks.
Getting Financially Stable
How much cash do you have at the bank? How much committed revenue do you have coming in over the next three months and what are your outgoings? How much new investment could you raise?
Despite being under pressure now, if you’ve got the right vision and a solid turnaround strategy you could raise investment and arguably should try to. Perhaps your Financial Stability strategic objective, goals and initiatives look something like this. Note good practice around the activities – measurable activities, timebound and with clear accountability:
You should also have a think about how often you or members of the team need to review your cash position. It’s not unusual in a turnaround situation to have to manage cash in and cash out on a daily basis, with the CEO/MD meeting the CFO/FD every day to understand what’s coming in and which payments out to prioritize.
Reducing Portfolio of Activities
Arguably one of the most critically important activities in a turnaround strategy, or any strategy for that matter, is deciding where to focus. Continuing or stopping products, services, markets, locations etc is a critical thing to get right.
There’s a simple but powerful tool to use here called Start Stop Continue. This is illustrated in detail here, take a look.
As shown, you should CONTINUE things that are generally good for the business – healthy, profitable, not too challenging, stable to growing. That’s generally the easy bit. The difficult bit, and our focus here, is what to STOP and its quite common for businesses to get into trouble because they do not do this. They get bogged down with too much “stuff” that keeps everyone busy but doesn’t deliver results and isn’t going anywhere. So be brave, read the above, and get the knife out. Because stopping low value activities creates the space and oxygen in the business that allows you to focus on the things that are going to help you turn the business around – the things you need to START doing.
- Low revenue and profit – any activity that has these characteristics – there’s no point continuing this stuff. STOP.
- Low growth – if you are spending time/effort/resources on something that isn’t growing, then neither will you. STOP.
- In decline longer term – get off the bus now. STOP.
- Resource intensive for you – being busy may feel good but if something uses up a disproportionate amount of energy for little return then STOP.
- Difficult in some way – quit while you can. STOP.
- Any toxicity for your business – these can be real killers. A toxic customer > people get demotivated and leave > you can’t rehire etc. Stop these vicious circles – it could be a product, a market, a geography, a service, a client, a customer segment. STOP!
- Highly competitive – if competitive rivalry is too high to grow or make a profit then there is nothing bad in analyzing that properly and getting out. STOP.
- No USP, you can’t defend yourself – if you can’t compete with a strong USP then it may be time to STOP.
Whilst this may be painful and mean difficult decisions, it is worth it. Going through this process can be the most transformative thing for your business. You will be left with fewer activities, of higher value and quality, higher potential and be able to really focus on driving results and being successful rather than feeling like the business is on the back foot all of the time.
Strategic Objectives, goals and initiatives could be:
Disposing of Assets
One of the benefits of going through Start, Stop, Continue is that the assets from the things you stop doing may have some value to someone else. You can sell these assets to someone else in the marketplace, to raise some money to fund your turnaround.
- Unwanted products – these could be stocks of materials or goods that are no longer required. Who would value them?
- Intellectual property – assets here could be designs, trademarks, patents, proprietary software, data/databases, certain documented insight, content, anything that you have the copyright for. Who would value these things?
Unwanted client contracts – do you have ongoing contracts with clients that can be novated over to other providers who do the same thing or would see taking on the contracts as a growth opportunity? It’s good to find a home for customers or even partners.
Securing Your Most Important Customers
Of course, there will be customers that you need to look after. If your business is in trouble, then there’s a very good chance that your customers will know about it. One reason will be that if your competition is aware of your situation – staff leaving and applying for jobs with stories of woe – then its highly likely that your biggest customers will be aware.
It’s therefore critical to communicate and re-contract with the customers that are the most important to you moving forward. Logic says these are your largest, your most profitable, strategically valuable and strategically relevant customers. You need a solid communication plan for your clients to get the right message across clearly at the right time to the right people.
What could this part of a turnaround strategy look like in terms of strategic objectives, goals and initiatives?
Revamping Your Sales & Marketing
This is a broad set of activities so we will not exhaustively cover everything here. The turnaround strategy should drive the sales strategy and the sales strategy drive the marketing strategy. The approach and tempo with sales and marketing must deliver a sharp refocus, provide new, clear value propositions for new client personas, appropriate messaging, financial targets and incentives that stack up for company and teams alike. Have a think about some of the points raised below and what else you need to do.
Refocusing the Team
People; arguably the toughest or potentially most emotionally fraught area to deal with in a turnaround situation. It’s likely some people will be lost. If you are stopping certain activities / products / customer segments / geographies / offices and even stopping certain teams then of course this could regrettably mean losing some people.
The survivors will have lost colleagues and, in some cases, good friends. Survivor guilt, a loss of trust and/or morale at a time when you need laser sharp focus, high energy and good morale to drive new activities and push forward. This is tough and requires excellent leadership.
Communication is absolutely critical at times like this. It cannot be stressed enough - you cannot over communicate. For this area then let’s consider a well-tested change leadership approach Kotter’s 8 Steps to get you thinking.
Honing Your Operations
Operational considerations in a turnaround strategy typically fall into three pots. Everything needs to go into one of the pots:
- What are you going to keep in house?
- What can go outside and be provided as a service?
- What can be digitized to provide better scaling or cost effectiveness?
An additional consideration here is around decision making. If you’ve got two months’ worth of cash in the bank then rapid decision making will be key to survival, so who is going to be involved in making decisions and how those decision will be made is a good thing to understand quickly and early. Perhaps, like cash management, decision making during a turnaround situation becomes a daily session.
Summary of How to Turnaround
Recognize why things have become distressed - this can inform your turnaround strategy more than you realize. Check out our article on three of the most common reasons.
Use Tools to understand your options and way forward – be objective, be structured, use data. Take time to figure out what to do and where to focus. Read our guide to the best tools to build your turnaround strategy .
Build out appropriate strategic objectives and goals – be structured in your approach when planning what to do. 5-6 Strategic Objectives supported by some Goals and Initiatives. Communicate this to the team - be visual when communicating this. No one gets inspired by a spreadsheet.
Don’t waste time on the unimportant - speed and accountability are critical. You don’t have time to waste, everything needs to speed up, make decisions quickly. And in terms of accountability it’s essential that everyone is crystal clear on who is responsible for what. You don’t have the time to take a few weeks for two managers to figure out who is accountable for what.
Communicate to all stakeholders regularly – communicate, communicate, communicate to employees, customers, suppliers, partners, investors. You’ll be surprised at the help and engagement you can get and that could be the difference between success and failure.
Good luck – go and turn that corner!
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Business Turnaround Strategies | Executive Recruiters
- Best Practices
Business Turnaround Strategies
- Best Practices , C-Suite CEO COO CHRO
Amid an increasingly uncertain commercial landscape, many companies find their business threatened or on the brink of failure. Various factors may be at play here, from a rapidly evolving market to poor performance or a failing business model, but they all carry the same bottom line for companies – change or die.
Businesses in this position may call on a handful of strategies to rescue their position and stimulate success or minimize market losses – and turnaround strategies are a common option. Today, we’ll discuss what business turnaround strategies mean, why they’re important, common types, and the critical phases of a successful turnaround plan.
What is a Business Turnaround Strategy?
A business turnaround strategy is a plan that helps a struggling business return to profitability. It is a strategic process that identifies where and why a business is failing and restores the business to its former viability.
But business turnaround strategies are not for only failing or financially distressed companies. An organization may lay and execute a turnaround plan to take an already successful business to its next level or unleash the full potential of an underperforming business. Therefore, the goal of a turnaround plan is to transform a company’s position from one of loss or underperformance to profitability.
Business turnaround strategies come in all shapes and forms. Some might aim to induce stability through debt restructuring. Others might tackle surging overheads and bloated operations through cost cutting. Turnaround strategies may also employ business or digital transformation strategies to promote efficiency, boost productivity, or foster a beneficial change of leadership.
Why Pursue a Business Turnaround Strategy?
As mentioned above, companies will typically consider a turnaround strategy when facing the prospect of failure or when serious inefficiencies prevent expected growth. Other situations where a turnaround plan may be beneficial include:
- Declining return on capital employed
- Dwindling gross profits and net margin
- Falling streams of revenue and profit
- Increasingly unbearable costs and losses
- Slump in market share
- Persistently low or declining performance measures
This list is non-exclusive though. As the Harvard Business Review notes , the turnaround imperative stems from the need to remain competitive. Businesses that earn the right to compete are those that constantly assess their operations, cull inefficiencies, and prioritize sound business practices.
Consequently, “turnaround opportunities exist everywhere”, and savvy business owners are always on the lookout.
5 Smart Steps to Turn Around a Business
If your company’s performance or finances are at a level lower than you would like, implementing a turnaround plan can help you stimulate positive change, enhance cash flow and restore financial stability. The following are the core steps you would take to design and implement a turnaround strategy.
1. Conduct turnaround analysis
Before you begin to draw up or implement a turnaround plan, it’s critical to first assess the situation. This assessment will include performing an in-depth investigation of your business and its performance. You will critically evaluate various core aspects of the business, from your balance sheet to profit, business model and cash flow. This process is called a business turnaround analysis.
Conducting a business turnaround analysis will help you understand the complete situation of your business. It provides a platform to correctly diagnose your company and identify opportunities for improvement. Some areas you could evaluate to help identify turnaround opportunities include:
- Cash flow and reserves
- Management skills and fit
- Product and market fit
- Marketing and sales
- Internal processes
As you conduct this evaluation, it is crucial to be committed to isolating legitimate causes and understanding their effects. If your business is already struggling, you likely cannot afford an incomplete or inaccurate analysis that wastes precious time and resources. Take the time to get this one right – call on expert help if necessary.
2. Prepare a turnaround plan
Once you’ve identified areas where a turnaround will offer value, you can move next to designing a strategy. As we’ve explained, a turnaround plan should provide an action sheet that details how you intend to restore profitability. It is a roadmap that describes how you save your business.
There are various types of turnaround plans, depending on what business area you intend to tackle.
- Debt reorganization : Most struggling businesses face mounting liabilities, which is why a debt turnaround is common. This plan will present, to your shareholders and creditors, how you intend to redeem failing loans and restore your credibility.
- Cost efficiency : For companies facing bloated operations, a cost efficiency plan identifies how the business proposes to become leaner, whether through staff reductions, sales plans, or other cost-saving actions.
- Change of leadership : Where it seems necessary to inject a new vision and energy into senior management, a change of leadership plan can help.
- Asset retrenchment : If you’re seeing too many non-performing assets, it’s worth considering how you might dispose of obsolete assets to grow your cash reserves or invest in new ventures.
As you lay out your plans, it’s critical to be prudent and honest with your numbers. Creditors and shareholders want to see achievable financials and a clear pathway back to profitability. Secure buy-in from your business stakeholders – staff, middle managers, and senior leadership – as they’ll be vital to success.
3. Stabilize your finances
If your business is in crisis, the first item on your plan must be to stabilize finances and preserve a positive cash balance. This is critical as you need to be able to make decisions without the pressure of a negative cash balance.
There may be several reasons why your finances are in trouble. The following are some ways you might deal with this issue.
- Restructure your debts : The goal here is simple – to restructure your debts to a level your current cash flow can support.
- Implement cash controls : While pursuing your turnaround, maintain strict cash controls. Abstain from unnecessary purchases or expenses.
- Boost cash generation : Finding cash may be difficult at this time, but there are options you can consider. For instance, securing additional credit lines or selling dead stock at a discount could help.
- Practice better inventory management : Good inventory management practices can keep your cash from being tied up in stock you can’t sell.
4. Boost profitability
With a stabilized business, you have the perfect foundation for your company’s rebound. Your next focus should be on improving profitability. Importantly, the goal here isn’t to expand revenue – that will come later. Instead, prioritize cash flow and a positive cash balance to truly put your business back on the path of good health.
There are two key factors to boosting profitability: improved profit margins and reduced costs. While it can be hard to grow profit margins, as higher margins may likely propel higher prices and alienated customers, there are numerous opportunities for action here.
You could consider a multi-pronged approach that includes reviewing expense structures, increasing prices for some products, introducing new sales items or entirely dropping some items. Whatever you decide, ensure you’re flexible and dynamic about your approach. Routinely survey your business and market to adjust tactics or pounce on prospects when they arise.
As for cost-cutting, you’ll quickly find that there are always avenues to cut costs. Undertake a rigorous initial evaluation of your cost structure, identify what’s not necessary and take it out. Also, imbibe the habit of periodically auditing your costs to ensure you’re operating leanly and efficiently.
5. Increase revenue
Lastly, aim to expand your revenue. For many businesses, targeting current customers for cross-sell or upsell prospects is an easy way to quickly boost revenue. Scrutinize your existing customer base, determine where selling opportunities exist, and take advantage. You’ll save on the cost of prospecting and converting new leads, while immediately boosting your income.
Another way you can coax more revenue out of existing customers and leads is by increasing your conversion ratio. This involves finding ways to get a higher number of prospects in your pipeline to convert into customers. Likewise, you can increase purchase frequency, which is how often current customers return to you for a product or service.
When you’ve utilized avenues to cross-sell or upsell existing clientele, you can then accelerate lead generation and conversion.
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Turnaround Recovery Strategies
A set of measures that companies use to address a decline in performance
What are Turnaround Recovery Strategies?
Turnaround recovery strategies are a range of measures that companies employ to recover from a period of a performance decline. The range of measures is important since they mark an upturn phase of a company after a period of significant negativity.
The concept of turnaround strategies is also applicable in a country or a region’s economy following a period of stagnation or recession . Similarly, the concept can be used to refer to a fundamental adjustment in an individual’s strategy during a financial crisis.
- Turnaround recovery strategies are a set of measures that companies use to address a decline in performance.
- Companies use turnaround recovery strategies to mark an upturn period after a significant period of negativity.
- Some of the common turnaround recovery strategies used by companies include a change of leadership, focus on core business activities, and asset retrenchment.
Understanding Turnaround Recovery Strategies
Companies suffer a decline in their annual reported earnings from time to time. Several factors can cause a downturn in a business, including new competition entering the market, high costs, inadequate financial controls, unforeseen demand shift, poor management, and over-management.
Companies focus on different change processes to bring about an improvement in performance. The presence of warning signs of a financial downturn prompts executives to think of turnaround recovery strategies before the crisis escalates. Managers first adopt low-risk measures, and if the risk worsens, they become progressively more radical.
The period of decline and recovery in performance is called the turnaround and is measured based on net income . In each turnaround phase, companies identify management actions and decisions, as well as other factors that impact profit before devising appropriate actions. Various elements are involved in the strategies.
Types of Turnaround Recovery Strategies
1. cost efficiency strategies.
Most companies implement turnaround recovery strategies in the pursuit of cost efficiencies. Cost efficiencies entail a varied range of actions aimed at producing quick wins for a company. The measures may improve a company’s cash flow or stabilize its finances before coming up with more complex strategies.
Cost efficiency strategies are often implemented first in any recovery strategy. Companies prefer turnaround recovery strategies that achieve cost efficiencies because they are easy to implement, require little capital, and their effects are almost immediate. Cost-oriented turnaround strategies include reducing research and development (R&D) , stretching accounts payable, eliminating pay increases, reducing accounts receivable, cutting inventory, investment diversification, and reducing marketing activities.
The measures can be accompanied by reduced pressure from debt repayments through financial restructuring. However, such an action carries some risk. Companies that solely rely on cost-cutting as a turnaround recovery strategy risk face increased staff turnover because of the reduced employee morale . Cost efficiency strategies can also damage the resources necessary to maintain a company’s core focus.
2. Asset retrenchment strategies
Companies that face performance decline usually pursue asset retrenchment actions after a cost-efficiency drive. Under the strategy, companies evaluate underperforming areas to eliminate them or make them more efficient.
The usefulness of retrenching assets as a turnaround recovery strategy depends on a company’s ability to generate cash flow. For example, a company may dispose of its old assets to generate cash or invest in new ones.
3. Focus on a company’s core activities
Companies also resort to focus on their core activities as a turnaround recovery strategy. Under the increased focus, companies identify markets, customers, and products that can potentially generate high profits, and adopt the measures as the main focus of the firm activities.
For example, a company may re-focus on loyal or less price-sensitive customer segments or product lines best known to it. It may develop a clear competitive strategy through focus.
4. Change of leadership
Companies often replace incumbent CEOs as a turnaround recovery strategy. During turnaround situations, most companies appoint new chief executives from outside the company as a way of injecting a new way of thinking into the top management.
It is inspired by the idea that CEOs bear the responsibility for a company’s negative position, and their replacement serves as a signal of change. CEO replacement can always be accompanied by an overhaul of the top management team to avoid repetition. As a result, a new senior management team can enable a company to focus on new strategies to lead the turnaround.
Real-World Examples of Turnaround Recovery Strategies
The declining sales and profits of the iconic motorcycle manufacturer, Harley-Davidson, during the 2008 mortgage crisis were met with turnaround recovery strategies that aimed to attain cost-efficiency.
Harley-Davidson cut its production costs to protect its brand’s image by balancing supply and demand. The subsequent consolidation of production operations led to massive job losses. In the same vein, the motorcycle manufacturer transferred its distribution of parts and accessories to a third-party provider.
Also, the subprime mortgage crisis of 2007/2008 led to the collapse of some of the leading banks in the United States. The federal government later responded with a series of turnaround recovery strategies. It imposed a tightened lending environment for auto sales.
General Motors (GM) declared bankruptcy, leading to the delisting of its stock from the NYSE. However, the bailout and package funds helped the company restore its business activities.
CFI offers the Commercial Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful:
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Asset Based Lending | Business Financing
8 Turnaround Tactics You Should Know
Business Financing Resources
Companies can find themselves in trouble for a variety of reasons. Some involve internal challenges like the failure of a major project, poor sales, ineffective financial controls, lack of data for good decision-making. Other reasons can be external, like natural disasters, change in regulations, or economic recessions.
No matter why a company becomes distressed, the basic elements of a turnaround strategy remain the same. If you’re involved with a troubled company, here are 8 turnaround tactics you should know.
1. Focus on Cash First
Nothing will destroy a company faster than an inability to pay its bills. Get back to the basics. Focus on how to regain steady cash flow over the next three months and give yourself breathing space to do what else needs to be done.
2. Find an Alternative Lender
Companies in need of a turnaround may not be able to access traditional bank financing, with its strict set of financial parameters. An asset-based lender, for example, can be more flexible in providing assistance because they use physical assets as collateral. If your company owns valuable equipment, inventory or accounts receivable, an asset-based lender can work with you on a plan to move out of crisis.
3. Use All Your Resources to Analyze the Problems
Don’t assume you know what the problems are. Get input from your stakeholders. You may be surprised at what you can learn from meeting with employees individually. Ask about company culture, communication, management and day-to-day processes. Also talk to your customers about any issues they have with service, products or your brand. Ask questions of vendors and suppliers, too.
4. Use All Your Resources to Find Solutions
Once again, get input from a variety of sources, especially those with business and finance experience. Your board should be a resource for industry and risk-management knowledge. Financial sponsors are generally well-versed in turnarounds and will develop strategic options. If you are working with an expert lending team, especially one experienced in dealing with companies in transition, they can be a valuable resource for funding solutions.
5. Be Transparent
If you try to hide problems from employees, suppliers, investors, lenders or customers, they will not be supportive when they finally find out…which they will. The best approach is to craft a simple, straightforward and truthful “change story” that will get your inside people behind the changes that will need to be made and show your other stakeholders that change for the better is coming.
6. Define Your Plan
You will probably need bold actions in multiple directions to get your company back on track. Some proven approaches include increasing revenue, releasing assets that are performing poorly, lowering costs, making strategic purchases, managing inventory more effectively, restructuring teams and automating manual processes. But what you do and how you do it will depend on your individual circumstances.
7. Build Traction With Quick Wins
Starting with goals that can be accomplished quickly will help get everyone on board with the plan and reassure all your stakeholders. An independent asset-based lender can close quickly on the credit facility you’ll need to stabilize cash flow and ensure your immediate bills are paid. This is a very positive first step.
Companies that don’t continue to innovate over time don’t survive. A transitional period is a perfect time to think outside the box, because it’s a time when people are willing to try things they might otherwise not consider. Improve company culture, make operational changes, add or change products, fix your branding approach…now is the time. An innovative asset-based lender can maximize your liquidity, enabling you to invest in opportunities that can bring your company to a new level of success.
Gibraltar’s client-centric approach to creative, responsive financing solutions has supported viable growth for businesses in transition in a variety of industries. If you are a company considering a commercial loan or a private equity sponsor seeking turnaround financing for a sponsored portfolio business, talk to a member of Gibraltar’s expert sales team to learn how asset-based financing and our extensive experience can help.
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