Buying A Business To Turnaround 4: Making A Turnaround Work

As a practicing turnaround business consultant, the core of my work is business rescue and central to any successful acquisition of a business to turnaround will be the need to make the turnaround work once the deal is done.
At its simplest, turnaround is about reversing the decline curve and by doing so restoring stability to the business and regrowing its value and there are generally four tasks to be undertaken in any turnaround:
1 spotting the problems that need to be fixed;
2 surviving the crisis, as depending on how far down the decline curve the business has gone, there is usually the need to resolve some form of financial crisis so as to give time to carry out the turnaround;
3 putting together a plan, as having stabilised the business a turnaround strategy is required that sets out how the business is to be restored to health;
4 and making it happen, as to really make a difference, the plan and all the changes that this means in how the business is run have to be turned into reality.
The turnaround curve then divides into a number of distinct phases.
The early days of any turnaround are generally an exercise in crisis management and are focused on stabilising the financial position of the business. This involves taking firm control of the cash by taking charge of the chequebooks and installing strong cash controls and cashflow forecasting. The emphasis is then on getting as much cash in as possible by improving control of the debtor book and collections, reducing unnecessary stock levels and disposing of surplus equipment; whilst also strictly controlling the cash going out by reaching agreements with suppliers as to payment terms and shutting or radically restructuring areas of the business which are losing cash.
Once the bleeding has been stopped, sound foundations need to be laid for the subsequent successful regrowth of the company. This often involves a period of ‘stabilisation’ during which time the areas that are to be developed are identified and the necessary investment in people, operating efficiencies, new products, marketing and so on are arranged as well as putting in place the necessary finance.
The final phase where all the pain becomes really worthwhile is in the regrowth of the business and its value in accordance with the plan.
The difficulties of undertaking a turnaround should not be underestimated and they demand a particular mix of skills, experience and operating style. People who are good at managing the radical change needed during a turnaround often make extremely poor long-term managers whilst very good managers for ongoing or growing businesses will struggle significantly with the chaos and difficulty of the early stages of a turnaround.
If you are looking to find a business to turnaround you should therefore think very seriously whether you have the skills to achieve the turnaround required. Have you:
– the experience of dealing with overcoming a cash crisis?
– the experience of dealing with the insolvency issues around a business in difficulty?
– had to manage extensive redundancy Management Consulting Salary programmes in order to cut costs?
– the confidence to lead staff during such difficult transition?
– had to deal with the business support arms of the banks and their approach to managing their risk position?
If not, you may need to obtain help from a turnaround practitioner (or ‘company doctor’) who is familiar with this type of crisis situation and who possess the specific experience and skills needed to deal with it. Company Small Consulting Firms Chicago doctors are generally highly experienced in the specific situational skills and circumstances involved in turning a distressed business around and ideally should be accredited through the Institute for Turnaround.
They can therefore provide help with:
– analysis of the position where they can provide an experienced eye to look over how deep is the crisis, assess the options and make an informed judgement as to whether the business is saveable;
– being willing and able to act as a crisis manager who can deal with issues with the urgency and sometimes ruthlessness that they require coping with challenges and difficulties in a professional way;
– providing a body of specialist knowledge of commercial and insolvency issues such as wrongful trading and redundancy law to be able to both manage the risks; and
– managing the interests of key stakeholders such as banks so that they will support the business through its difficulties.
The help provided by a company doctor is generally therefore extremely ‘hands on’ in nature. These are not professional advisers like the insolvency practitioner or the lawyer who, however close the relationship, will always remain outside advisers. Company doctors are the doers who become part of your business as directors to take charge and drive through change for the time needed to make the plan happen. They often work alone but can usually also supply associates who are specialist interim managers able to deal with particular functional aspects of the business (such as a temporary finance director or an production director) as may be required to turn the business’s performance around.

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