Business Turnaround: A Simple Guide With Steps

A simple guide to turning around the performance of your business

Running a business is far from simple and as a business grows, so does it’s break even point.

With a rising break-even point and expenses to pay each month, things can quickly turn against you.

In this situation, you may find yourself trying to come up with a business turnaround plan to get a grip on your business cashflow and plot a path back to profitability.

What is business turnaround?

Business turnaround is the process of assessing a business’s performance and planning to turn its performance around from being on track for failure to success.

Business turnaround involves deep-diving into current operations and performance and formulating a plan to improve performance.

What causes a business to require a turnaround?

When a business is no longer performing, it will result in a turnaround plan will be required to get things back on track.

There are an almost unlimited number of reasons that can cause that, but common ones are:

A failed business plan: A business plan is theoretical and should constantly evolve as things move. A poor business plan, or even a good one that has not been kept up to date can cause your financials to suffer.
A lack of a business plan: A poor business plan (or one that hasn’t accounted for market change) will cause problems, but many businesses, especially SMEs run without a robust business plan. This is an approach that makes it very difficult to spot the warning signs that things are going wrong.
Economic issues: When the economy suffers, you’ll need to increase your market share or you’ll shrink in line with the market.
Lack of investment: If you’re business is starved of investment, you’ll naturally fail to react to improvements amongst your competitors and the business can stagnate.
The market has changed: Markets are evolving faster than ever, with AI adoption a key topic in almost every industry. If you don’t react to change as it happens, you can easily get left behind.
Poor cost control: When running a business, cost control is an easy area to get wrong. If you’re overpaying on key services such as business finance or staff costs, you’ll soon run into problems.

Basics to consider while identifying the issues

While identifying the issues in the business and beginning the process of planning your turnaround, you should look to control any financial gap.

This will give you a steady ship and stop you from making panic lead decisions based on a constantly worsening position.

Even if you can’t immediately move back to break even, limiting your losses will help you to protect your financial resources.

Credit control is critical during this period

While your cashflow is tight, it’s important that you speed up your cash flow cycle to manage your cash at bank levels.

If you use invoice factoring, your provider will help you manage credit control.

If you use invoice discounting and are struggling with credit control, consider switching to debt factoring, or take bad debt protection to protect you against non-payment.

To read more, consider our guide to dealing with late payments.

Control your expenses initially

If making sure enough money is coming into the bank is step 1, then controlling the money out is the logical step 2.

Consider each expense that you have. Consider whether it is essential to either the operations or customer acquisition for your business. Both of these areas are a crucial base for turnaround, but everything else should be on the chopping block.

Anything that can be cancelled will allow you to protect your financial resources in the short-term and will give you the breathing space needed to make the right decisions for the longer-term.

Consider improving your working capital through the borrowing market

If you’re facing the prospect of running out of money, but the overall business prospects look ok with the right turnaround plan, consider raising working capital finance.

There are plenty of products that can be used, such as a business loan – either secured business loans or unsecured business loans can work.

Alternatively, a business revolving credit facility or extended business overdraft can help.

How to create a business turnaround plan

Here’s a step by step guide:

Consider your offering: Compare your offering to your competitors. Where are you stronger and where are you weaker? Focus your marketing efforts on your strengths and look to match your competitors on weaker areas. Don’t reinvent the wheel, just aim to match up.
Consider a future vision: With your new service offering, consider your future vision and how the new offering can match up to that.
Budget & create projections: Create a robust budget and projections to give you a benchmark to consider your relative success or failure against.
Stay focussed on financials: Don’t take your eye off the ball of credit control and cost control.