Why turnaround and business restructuring strategy is crucial for any failing business to help survive?

For those business units making huge losses, applying the most appropriate turnaround and business restructuring strategy will be a wise decision. It is rather an act undertaken to make the company to become profitable again. A healthy business firm can be wealthy.

Investigation of root issues of failure combined with creation of long term strategies is crucial to revitalize the company. Such strategies can be termed to be a revival measure to overcome issues pertaining to industrial sickness. This is rather a strategy to help convert loss making unit into a profitable one. Industrial units can be brought back to its original position as well as stabilize its performance.

In turnaround management, implementation does play a significant role. Strategy success depends upon top level management’s commitment.

For survival of any failing unit turnaround is crucial and is regarded to be sustained positive change brought in business performance to obtain the desired results. Also successful turnaround can be a complex process requiring sound business core and strong management team.

Turnaround does require strong and competent management leadership, support and trust of shareholders and company employees including capital.

Turnaround definition

As per Marketing Dictionary (P. H. Collin edited) Turnaround stands for making the company profitable once again.

Three phases are involved in turnaround management, namely:

  • Strategy implementation
  • Choosing suitable turnaround strategy
  • Diagnosis of the issue that company faces

Industrial sickness

This perhaps has become a global phenomenon. Few industrial units achieve sickness while others are born sick. The latter is one that has in the last accounting year as well as in current year has incurred lots of cash loss. They are prone to incur loss in coming years.

The unit is termed to be sick if its current ratio is found to be lesser than 2:1. Firms operating below break-even level are termed as sick industrial unit.

Industrial sickness is indicated by the following points:

  • Lack of planning
  • Wrong funds diversification
  • Failure in ploughing back profits within the business
  • Increased dependence upon debts
  • Decreasing profitability
  • Decreasing market share

Turnaround Features

  • Sick industrial units passing through financial and economic distress is applicable with turnaround strategies.
  • It involves restructuring including bringing back sick industrial units back to original position. It is aimed towards reversing declining performance trends of the unit.
  • Sick unit is perhaps not in a better position to make proper use of available resources. Turnaround tends to involve re-organizing of human, financial and physical resources by using available resources to the optimum.
  • Turnaround can be termed to be long term strategy. It is not simply possible to revive the sick unit overnight. There will be required proper implementation and planning to convert the loss making industrial unit to profit making one. This is however, a time consuming and lengthy process.
  • For each and every business, capital is stated to be the lifeblood. Turnaround needs money. There will be required adequate finance to implement restructuring plans. There will be necessary sufficient finance to undertake enhanced production as well as to eliminate business deficiencies.
  • Turnaround does require cooperation from all sections from the society like customers, employees, suppliers, financial institutions, shareholders, etc.
  • Both external consultants and internal experts do undertake turnaround. There will be required proper skill for undertaking turnaround strategies.

Successful turnaround strategy essentials

It is slated to be a complex action requiring support of different groups and planning like financial institutions, shareholders, customers, employees, etc.

Following are essentials to ensure successful turnaround strategy:

  • Proper planning & execution: On completion of evaluation, the next step to be taken is turnaround planning. Appropriate planning is made with respect to policies planned to be executed, time frame and resources. A reputed Corporate Turnaround Expert will be essential for changing the fortunes of the sick company.
  • Diagnosing the problem: It is considered to be the initial step taken in restructuring implementation procedure. For implementing turnaround strategy, there will be required diagnosing of sickness issue. The exact reason for failure of the business needs to be identified and frame plans to ensure revival process. Appropriate screening does help to trap major issues pertaining to industrial problem.
  • Funds availability: Key elements pertaining to any turnaround is stated to be financial restructuring. Huge wastages and low crop yield is due to lack of adequate funds. Lack in adequate funds helps the sick unit to revive and enjoy good health. This is made possible with the implementation of sound financial control and management.
  • Communication: This is undoubtedly the key factor to achieve success in the business. Rapid response is desired by Turnaround from financial institutions, shareholders, company management and employees. Prompt, clear and complete communication is essential to implement proper turnaround strategies.
  • Viability of business: If there are found better chances of revival, then turnaround is applicable for the business firm. At times, businesses might not witness bright future. However, the unit’s survival can be difficult during the long run.
  • Co-operation: This will be necessary from different business groups like shareholders, employees, investors, management, creditors, suppliers, etc. This requires mainly employee support with increase in their workload.

In such cases, it is not viable to implement turnaround strategy. Business viability, in short, is considered to be an essential need for good turnaround strategy.

Need to choose a good Turnaround Consultant

Turnaround consultants are considered to be experts assisting companies to come up with changes in the company rules to reduce costs, to increase profits and enhance cash flow. Mainly businesses make use of the services of well established turnaround consultants, whose task is to identify issues in the client’s business. The experienced and knowledgeable consultants do offer assistance to the company by evaluating and implementing different ways to create positive differences within the company immediately. The turnaround specialist within several months of hiring can make huge difference and ensures positive for the business. They are capable of enhancing better business practices, increase efficiencies and profits.

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