ABC FinanceBusiness KnowledgeBusiness Turnaround

Business Turnaround: A Simple Guide With Steps

If your business is struggling and you’re facing the prospects of reduced profit, poor business cash flow or even if you’re beginning to think about closing the business, this guide is for you.

To break the cycle and change the trajectory of your business, you’ll need a strong business turnaround strategy.

What is business turnaround?

Business turnaround is the process of deep diving into your business operations, assessing where you are and then formulating a plan to improve its fortunes. The idea is that the new strategy will get the company back on the path to growth and financial success.

Business turnaround can take 2 forms, the first being to reduce costs and try to steady the financial ship. The second is to increase sales, improve turnover and steer a path through to growing the business over time.

What causes a business to need a turnaround strategy?

There are numerous reasons why a business may need to be turned around, but ultimately the key issue will be that the business is no longer performing. Let’s take a look at the triggers that can cause that situation:

  • The market or economy is poor – for example, the pandemic caused major issues for many companies.
  • A poor business plan – No matter how good market conditions are, if the current business plan has failed to deliver, then change is needed.
  • Market evolution – If the market has changed and you’ve been left behind, a turnaround plan may be needed.
  • Lack of investment – If you have neglected to invest in technology, marketing and client care then the risk of decline in your business performance is going to increase over time.
  • Poor cost control – If your cost control is poor, for example overpaying on key services such as business finance, business insurance and business energy, profit margins and cash flow will be impacted.

Whatever the cause, you must identify where things have been going wrong and look to address it. Let’s take a look at how to best do that.

How to identify the causes for poor performance

Understanding why the business has performed poorly is the first step to fixing the problem, so it’s important that you start there.

Analyse your business’s current position and build from there.

Firstly, it’s important that you understand your cash flow, how the business operates and where you can save money to steady the ship in the short term.

Compare your current outgoings and look to reduce them. Review your business insurance policies, business electricity and business gas providers and any debt that you may have.

If you have an invoice finance facility, review it as a new deal may allow you to release more money and improve your cash flow. The same goes for any asset finance or business loans.

Get tight on your credit control

Check on any unpaid invoices and begin to chase. Your cash position is crucial to giving you the time and breathing space to resolve the issue.

If you use invoice factoring, your provider will help you to manage credit control. If you use invoice discounting and are struggling with credit control, consider switching to factoring, or take bad debt protection.

How to create a business turnaround plan

Once you’ve analysed the current situation and broken down your business’s financial health, cash flow position, credit control and operational costs, you can start to plan for the future.

The next step is to identify your core strengths – what you do well and where things could be improved. How does this compare to your competitors? You’ll need to compare favourably, so consider reshaping your offer if needed.

Then outline a clear vision for the future, setting realistic and achievable goals and how you can get there. Fully cost your vision, and identify the realistic timescale and cost to get there. Then consider what step one of that journey is and take it immediately.

If you haven’t already done so, get on top of your cost control. You should be saving money on business utilities, insurance and financing costs, so stay on top of these. Cut non-essential spending that doesn’t move you closer to achieving your clear, fully costed vision.

Protect your cash flow, so look to speed up payment terms with customers and seek longer payment terms from suppliers. This can totally transform your business cash flow in just a few weeks.

Next, you should have a good handle on the plan, the initial steps and a list of things you’ve already done to move things forward. Now engage with stakeholders, including your team and explain exactly what you’re doing and how they stand to benefit. You need alignment and buy-in from everyone, so take them on the journey with you.

Read more – 10 Simple Ways To Solve Business Cash Flow Problems.

What are the next steps?

If you’ve taken the steps above, you’re business turnaround plan is already in action and things should begin to improve.

Your next task is to monitor things and make adjustments as needed. To do this, you’ll need to understand what inputs fuel your output. Delve into your business to understand this and produce a set of key performance indicators (KPIs) to monitor things.

This will give you a simple way to keep track of your progress and identify the need for change early.

Don’t be afraid to change the plan if things aren’t working as planned, just make sure that you’re learning from why the original plan didn’t work and tweaking based on your newfound knowledge.

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