What Is Business Turnaround?
Business Turnaround is a set of actions taken by the directors of a company, usually when the business is facing financial pressures and typically with the assistance of turnaround professionals such as IRT Advisory, to:
- firstly, identify under-performance within the business by reference to key performance indicators; then
- investigate and determine the causes of the identified poor performance; and lastly
- implement a plan to modify the financial and operational aspects of the company to address the identified weaknesses.
TAKE THE FIRST STEP TO IMPROVING
THE PERFORMANCE OF YOUR BUSINESS
Examples of the actions directors can take include:
- reducing or eliminating unprofitable product lines;
- disposal of non-core assets to reduce debt;
- outsourcing non-core operations to external suppliers with greater efficiencies or lower costs;
- automating labour-intensive functions;
- negotiating improved trading terms with suppliers and landlords;
- proactively reining in the trade debtor book;
- replacing under-performing executive personnel;
- updating outdated IT systems and operating procedures; and
- implementing a culture of excellence within the organisation.
This list is not exhaustive.
A turnaround strategy may be implemented in conjunction with a formal restructuring of the balance sheet, if the company is burdened with legacy debt arising from a period of adverse trading or a significant one-off adverse event that resulted in an unsustainable debt build up.
It’s important to note that where a company’s balance sheet is burdened with unmanageable debt and the company seeks to formally compromise that debt down to a more sustainable level, the support of the company’s creditors is vital to the success of the plan.
A turnaround strategy often involves substantial cultural change within an organisation. It is very important that company management (with the assistance of engaged turnaround professionals) manages this process carefully by seeking buy-in from key personnel and taking the people in the organisation with them on the journey. Communication and honesty are key to this process.