What do you do when the company is underperforming?
Timing is crucial. The early you seek help, the better are your chances of recovering.
Atradius’ report on global corporate insolvencies for 2019 and 2020 forecasts insolvencies in the developed markets will rise globally about 4% around the globe in 2020. North America, particularly, will conjure up the highest rate of business failures.
As the global economy stands on the brink of momentum loss, turnaround business strategists can help you cross the bridge. Their strategies are useful not only when the business is in trouble but also when you might need general profit improvement.
Is it ever too late to get turnaround strategists on-board?
Well, no. However, the early you extend the hand for help, the higher will be your chances of getting out of the pit.
Turnaround strategists bring with them years of industry experience and skills purpose-built for crisis management. They will be instrumental in:
- Averting dangers of insolvency;
- Measuring corporate finance health of bringing a lion’s focus seeking its prey;
- Insolvency and restructuring;
- Project management;
- Financial modeling;
- Stakeholder relationship and negotiation; and
- Lateral thinking for crisis-oriented business strategy framework.
Stress test: How do you know your business is stretched too thin?
Often so it happens that as management tries to wax the revenues, impact on profits get sidelined (or become visible when it’s too late). When revenues rise despite profits, it’s a clarion call for the need for the right systems and controls to be put in place.
Management, while mavens in their industry, may fall a bit short in depths required to restructure these aspects of achieving financial and operational agility. That’s when you need business strategists or turnaround strategists to step in.
Key signs that should ring a bell for senior management that they are in trouble (or are getting there):
- When the need for working capital exceeds revenue growth (aka rising production costs).
- When growth margins and profits are declining.
- When there is a general industry downturn.
- When industry consolidation is leaving you behind.
- When competitors are risking your existence.
- When facing creditor or debtor aging issues.
- When refinancing or raising finance seems bleak.
- When buying sales at the expense of margins.
- When a major customer walks away.
- When facing integration issues with a merger.
- When there is high staff turnover, particularly appalling in the case of management personnel.
- When in-between an actual (or potential) bank contract breach.
What can a turnaround business strategist do for you?
They will assess your business plan, review your health, and determine causes for underperformance (they could be anyone or multiple of the factors listed above).
Once they do that, a turnaround strategist will develop a comprehensive turnaround business strategy framework and may come up with a 100-day plan detailing the initiatives proposed to improve performance in a timely manner.
They will focus on improving your cash flow, negotiating with stakeholders, and stabilizing & optimizing operation.
3 keys to turning a leaf for troubled businesses
Turnaround strategists will work around three main elements to get organizations out of the miry clay – financial and operational restructuring, and stakeholder management. Examining each of them.
- Financial restructuring
Cash flow is the lifeline of a business. It is not unusual for turnaround strategists to adopt a business strategy framework that involves digging into their extensive network to bring to light new financing options (debt or equity or debt-equity swaps and so on). They may improve working capital by releasing tied up accounts, payable inventory, and accounts, etc.
Spare capital then can be used to pay a debt, fund expenditures, invest in other initiatives.
- Operational restructuring
Operational management involves achieving credible management, may it be by making replacements to bolster operations. A new CFO, Supply Chain Manager or HR may be recruited. A staff retention strategy may be implemented.
- Stakeholder management
Loss of confidence of stakeholders severely affects business performance, especially so in the times when one has been accumulating strained assets. Turnaround business strategists work on smoothening the ties and manage key stakeholders, keeping them moving in the right direction.
Preventing your business from sinking deeper and deeper requires holding on to the wooden plank of turnaround strategies. These specialists can skedaddle you from the crisis and keep you afloat.