Business Turnaround: Everything You Need To Know

A business turnaround can help you identify and correct what has led to your company's declining sales and profitability. It can even help boost employee morale and motivation, improve customer satisfaction, and increase shareholder value. This article provides an overview of the steps involved in turning around a failing business and how to do it successfully.

What Is A Turnaround?

A turnaround in business refers to a change from negative trends to positive growth. This change is not achieved through random processes. You must adhere to specific steps to successfully pull off a turnaround. You may also need some working capital to optimize your workflows and increase the profitability of your business.

What Is A Turnaround Strategy?

A turnaround strategy is a specific series of steps businesses carry out to reverse a series of negative trends currently impacting their ability to survive. Its general goal is to save the business and reverse the negative trends. That said, different industries and management teams follow different approaches. It is part of the larger concept of a retrenchment strategy.

#DidYouKnow Retrenchment strategies focus on eliminating the goods and services that are failing to bring profit.

The strategy may also involve withdrawing from markets where you are unlikely to succeed.

Types Of Turnaround Strategies

Cost-Efficiency Strategy

Many businesses focus on reducing costs and thereby increasing profitability. One of the key objectives of a turnaround is to identify what mistakes you made, if any. In other words, if you decided to invest in a failing marketing scheme, you would cut that project as part of your turnaround. You might also decide to cut inventory and R&D investment.

Asset Retrenchment Strategy

This approach focuses on:

• reducing costs
• making your business more efficient

Asset retrenchment aims to examine your current assets and dispose of assets that are not performing or are obsolete. This reduces the costs of managing and maintaining those assets and can bring in additional capital as you sell the assets.

Refocusing Strategy

This involves revising and adjusting your business on its core activities. This could mean focusing on an existing or new product line that is performing well and is creating a loyal customer base.

The Difference Between Turnaround And Restructuring

Simply put, businesses implement turnaround strategies to avoid business restructuring. Turnarounds happen before a business fails. Their goal is to save the company from collapse. A turnaround plan usually does not involve insolvency or voluntary administration. By contrast, restructuring occurs just before or after a business has already failed.  Instead of helping the business grow, it aims to keep it from insolvency. They often involve negotiating with creditors and debtors. The new management should try to rebuild the business enough to pay them.

#DidYouKnow Sometimes, restructuring also occurs after a business has become insolvent.

How To Turn Around A Failing Business: 5 Steps

Discover Your Current Situation

If your business was profitable and successful, something caused this downward turn. You need to find out what went wrong in the first place. A great place to start are:

• costly products
• failed projects

Then, look at your financial reports and ledgers to identify precisely where and why your company is not performing. We recommend writing a business turnaround analysis. To truly understand your situation, you must look at your business's strengths and weaknesses. Which departments are succeeding and which are failing? Implementing a turnaround will require a fairly massive overhaul of many critical processes. Try to find team members and management leaders who will be crucial in keeping everyone else on track as you proceed with your strategy.

#CaminoTip It's important to get everyone on the same page.

Prepare A Business Turnaround Strategy Plan

This plan will involve laying out several of the methodologies we have discussed. However, strategy and leadership are key here. If you cut any projects or processes costing your business money, you could:

• disrupt your profitable operations
• put your company in even more trouble

In this stage, looking for the dependencies connecting different departments and operations is crucial. You'll need to untangle these dependencies to cut costs and achieve higher profitability. Generally speaking, there are two reasons why businesses find themselves losing money:

1. The revenue is decreasing
2. Expenses are too high.

A good turnaround strategy focuses on both. Part of this turnaround strategy should also be a communication plan. To achieve your goals, you may require a certain number of layoffs. In small and medium-sized businesses, seeing your colleagues let go can create a sense of fear and instability. Communicating your goals and plans to your team members and employees will make everyone feel more confident.

Stabilize The Business Finances

Create and maintain a positive cash balance to stabilize your business finances immediately.

#DidYouKnow A positive cash balance or flow refers to the fact that more money is coming in than going out.

Take strict control over the cash flow and ensure that nothing is being purchased that is not absolutely necessary for the survival and growth of the business. Also, focus on improving your management of accounts payables. Find ways to increase your cash flow in the short term and put off paying as much as you can. Streamline your inventory management and avoid overstocking whenever possible. Finally, businesses in crisis often need bridging finance, which helps bridge the gap between their current difficulties and the future. At Camino Financial, we offer business loans that could help you stabilize your business finances and implement your turnaround strategy. Complete an application to see if you prequalify. Apply for a business loan today

Increase Profitability

The first and perhaps most obvious tactic is to increase your sales. Consistently provide great value to your customers and focus on keeping them happy. People only stop buying from you when you stop selling. Find new ways to upsell your existing clients by offering them new services and products that have high-profit margins. The Pareto Law in business states the following: 20% of your clients will give you 80% of your billing; therefore, 80% will give you 20%. Keep this law in mind.

Increasing profitability means focusing only on the specific customers and clients that are actually profitable.

You can also raise your prices. Many business owners find raising prices stressful, especially during financial difficulties. But it is important to ensure that you get a fair profit margin.

Increase Revenue (Without Spending More On Ads)

Pave the road to growth with increased revenue. However, spending more money on advertising and marketing is not always the best way to go. You need to take another look at your current marketing campaigns and optimize them to do more with less. For example, consider focusing on content marketing and SEO. You can build a following of people you can convert into customers. How? By creating blog posts and articles on your site with factual information. Also, consider going into partnerships with other businesses. You are not alone. By working with other companies, you can refer to each other's services and increase your revenue. Email and influencer marketing campaigns are also low-cost alternatives. They can help get your products and services in front of new audiences.

Tips For A Business Turnaround

Your business turnaround plan should always:

Analyze The Current Situation

Research and understand:

• past performance
• financials
• customer feedback
• industry trends

This will help you better understand what actions are necessary to turn the business around.

Develop A Plan for Change

Identify areas for improvement. Then, create an actionable plan that outlines how to:

• make changes
• improve operations

The plan should include objectives, strategies, and timelines.

Identify Cost-Saving Areas

Look at ways to reduce costs while maintaining quality standards to increase profits.

Increase Sales

Focus on marketing efforts to generate more leads and sales opportunities. This can help offset costs and drive revenue growth. Invest in digital marketing strategies such as SEO and PPC campaigns.

Improve Customer Service

Ensure that you offer excellent customer service consistently. Invest in training programs for employees to handle customer issues more effectively. Don't forget your existing customers.

Monitor Progress Regularly

Keep track of progress over time by setting milestones indicating whether turnaround efforts are working.

#DidYouKnow The goal of turnaround consulting services is to:     Identify the potential problems weighing down the company.     Implement effective strategies for improvement.     Create more profitable operations that can stand the test of time.

What Does A Business Turnaround Look Like?

A successful business turnaround should:

• involve an assessment of the current state
• identify problem areas
• create an improvement plan
• implement that plan

This often includes:

• changing financial operations
• restructuring the organization
• improving customer service and marketing efforts
• making necessary investments in equipment or personnel

Remembering that the goal is to get the business back on track and create long-term success is key.

Example Of A Turnaround Strategy

In 1996, Apple was a failing technology company losing on multiple fronts. They had fired their star innovator and co-founder Steve Jobs and were losing profitability rapidly. If any company ever needed a turnaround, it was Apple. The company re-hired Jobs in 1997, and he immediately set about building and implementing a turnaround strategy. First, he set about cutting cost-generating products such as the Newton. He also tapped into additional capital by aligning with former rival Microsoft. Then, in 1998 they launched a new product, the iMac. The iMac sold incredibly well with a powerful marketing campaign and innovative design. By 1998 Apple returned to profitability. Today, the company is worth around $2.38 trillion. This example shows how several different strategies can be simultaneously implemented to successfully rescue a struggling company and take it to new heights.

Where To Get The Capital Needed To Implement A Turnaround Strategy

You may need capital to implement your turnaround strategy's goals. If you think a loan can help you implement your turnaround plan, you've come to the right place. At Camino Financial, we have already helped many entrepreneurs just like you. Our small business loans are affordable and designed to help you achieve your goals. Jumpstart your business with the funding you need today. Apply for a business loan today