Seven steps for turning your business around
One business insolvency is not the same as another, so turning your business around will require an individual approach and a particular focus. But even though every business turnaround situation is unique, there are some steps that are relevant most situations:
1. Identify the problems
Gather as much information as possible about all aspects of the business – management accounts, sales, financial arrangements, internal controls, customer service, etc – and identify the problems and their causes. Do this as soon as you notice any warning signs that the business is struggling.
2. Make a plan
Having identified the problems and what is causing them, decide what needs to change to achieve a successful business turnaround – then develop a plan that sets out the necessary actions, the timeframes involved, and the expected financial results. As you implement the required changes, you’ll be able to measure your results against this plan. It may also be useful to show to employees and possible investors.
3. Communicate with employees
Meet with managers and key members of staff to explain what is happening and outline the changes that are necessary to remedy the situation. Ask for questions and comments and be as positive as possible in response. These people are vital to the success of your plans, so it is essential to get their commitment and support.
Once your managers and key personnel are on board, meet with the rest of your employees or their union reps if you are planning to make redundancies. Do this as soon as possible – uncertainty and rumours about business bankruptcy can have a devastating effect on morale. If people are going to lose their jobs, they need to know about it to deal with it, and your remaining staff need to know what part they will play in the new plans.
4. Talk to the bank, your customers and your suppliers
Talk to the bank and anyone else who has a financial investment in your business. Advise them of your plans for business turnaround and arrange to meet face to face to discuss the proposed actions. Ask for assurances of the bank’s continued support for the business and consider seeking increased support.
Talk to your customers. You may need to reassure major customers about your plans, emphasising that the business turnaround will improve the service they receive. If the business has failed due to poor customer service and satisfaction, explain how your business turnaround plan includes measures to improve customer service and efficiency.
Talk to your suppliers. They have the power to jeopardise your plans for recovery, so it’s essential to reassure them that the turnaround plan is viable. Ideally, meet face to face to outline the changes you’ll be making and the support you have from investors.
5. Conserve cash
Look at ways to improve your credit management. If possible, renegotiate extended payment terms with your suppliers. Consider selling any of the business’ unused assets, for example, unused buildings, plant and office equipment and unnecessary stock. Consider factoring to deal with sales debt. Look at the possibility of renting out spare office space. And if it can’t be avoided, consider making redundancies.
At the same time, overheads should be cut back to what is necessary to ensure the business runs efficiently.
6. Put new systems into place
If you continue doing things the way you did them in the past, you’ll get the same results. Your business turnaround plan should include a complete review of systems and procedures. Make sure your staff understand the importance of these changes and are able to play a positive part in putting the changes into action.
7. Monitor the results
Measure your results on an ongoing basis. If things aren’t working out as planned, take corrective action right away. Identify the most important aspects of the business – those that will determine whether your turnaround succeeds or fails – and check their status every day. Make a habit of reporting positive trends to your employees, customers and suppliers as well as the bank and other investors.
And remember, once you’ve re-established financial control of your business, the valuable experience gained during the turnaround process should be put to ongoing use.
It makes sense to get professional support
If managing this level of change is outside your experience, or if your feelings threaten to get in the way of making hard business decisions, professional advice can be invaluable in moving the business forward.
Touch Financial offers a free consultation that will help you clarify the kind of support you might need – we’ll listen to your situation and needs, then introduce you to someone who can provide the right support for your business, be it a lender, an insolvency practitioner or an SME business administration service.
To find out more, contact one of our expert advisers now. And look forward to some positive changes.
Also in this section
- The role of a business administrator
- Warning signs your business could be in trouble
- What to do if your business is in financial trouble
- What are your options?
- How to avoid insolvency
- Protect yourself in the event of insolvency
- Do’s and don’ts for directors
- Seven steps for turning your business around
- Is your business insolvent?
- A quick guide to insolvency
