Turnaround Strategies: Explained with examples and case study
A turnaround strategy is a plan for reorganizing and revitalizing a struggling business or organization. The following steps can help in developing a turnaround strategy:
- Identify the root cause of the problem: The first step in developing a turnaround strategy is identifying the underlying issues causing the business to struggle. This could be a decline in sales, poor management, a flawed business model, or external factors such as competition.
- Conduct a SWOT analysis: A SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) can help you to identify the strengths and weaknesses of your business, as well as any opportunities or threats that exist in the market.
- Develop a plan: Once you have identified the issues and conducted a SWOT analysis, you must develop a plan to address the problems. This plan should include specific actions and timelines for implementation.
- Communicate the plan: It is important to communicate the turnaround plan to all stakeholders, including employees, customers, suppliers, and investors. This will help to build support and commitment to the plan.
- Implement the plan: The success of a turnaround strategy depends on the effective implementation of the plan. This requires strong leadership and the support of all stakeholders.
- Monitor progress: Monitoring progress regularly and making adjustments as needed is important. This will help you stay on track and ensure the turnaround plan achieves its goals.
- Evaluate and adapt: Finally, it is important to evaluate the effectiveness of the turnaround strategy and make any necessary adaptations to ensure continued success. This may require ongoing market analysis, competition, and internal business operations.
Types of Turnaround strategies
Turnaround strategies are plans businesses implement to reverse a decline in performance and improve profitability. Several types of turnaround strategies can be used depending on the specific circumstances of the business:
- Cost reduction involves reducing costs through measures such as layoffs, outsourcing, reducing operating expenses, and improving efficiency.
- Revenue growth involves increasing revenue through product innovation, expanding the product line, increasing market share, and increasing sales.
- Asset restructuring involves restructuring the company’s assets, such as divesting underperforming businesses, selling off assets, and merging with other companies.
- Financial restructuring involves changing the company’s capital structure, such as issuing new debt or equity, refinancing existing debt, or renegotiating contracts with creditors.
- Management restructuring involves changing the company’s leadership, such as replacing the CEO or other key executives and bringing in new management talent.
- Turnaround through acquisition involves acquiring another company to improve profitability or enter new markets.
- Bankruptcy or liquidation: As a last resort, a company may file for bankruptcy or liquidate its assets to settle debts and obligations.
Each of these turnaround strategies has its advantages and disadvantages, and the choice of strategy depends on the specific situation and needs of the business.
Examples of Turnaround Strategies
- The cost-cutting strategy focuses on reducing expenses by cutting unnecessary costs, such as layoffs, reducing inventory, renegotiating contracts, and downsizing.
- A diversification strategy involves expanding the business into new markets or products to reduce dependence on a single product or market.
- The operational restructuring strategy aims to improve the efficiency of the business by streamlining processes, improving quality control, and optimizing the supply chain.
- Brand repositioning strategy involves repositioning the brand to appeal to a new target market or changing consumer preferences.
- A financial restructuring strategy involves restructuring the company’s finances by refinancing debt, raising capital, or selling assets to improve liquidity.
- Innovation strategy focuses on developing new products or services to stay ahead of competitors and meet changing customer needs.
- Marketing strategy aims to increase sales and market share by improving the company’s marketing efforts, such as advertising, promotions, and pricing.
- Partnership or acquisition strategy involves partnering with or acquiring another company to expand the business’s capabilities, market share, or product line.
Case Study on Turnaround Strategy
Here is a case study on a turnaround strategy implemented by McDonald’s in the late 2000s:
Background: McDonald’s is a fast-food restaurant chain founded in 1940. By the 1990s, the company had become a global icon with over 30,000 locations worldwide. However, by the mid-2000s, the company faced several challenges, including declining sales and negative publicity over its unhealthy menu.
Challenge: McDonald’s was struggling to attract customers as it faced increased competition from other fast-food chains and changed consumer preferences towards healthier options. The company’s menu needed to be updated, and its image had become associated with unhealthy food.
Solution: In 2003, Jim Skinner was appointed as the CEO of McDonald’s, and he implemented a turnaround strategy called “Plan to Win.” The strategy focused on improving the brand’s quality, service, cleanliness, and value (QSCV).
Skinner realized that the company had to evolve to meet the changing consumer preferences and introduced several initiatives to address the challenges.
- Menu Innovation: McDonald’s introduced healthier menu items like salads, fruits, and yogurt to cater to health-conscious customers. They also revamped their existing menu items by improving the quality of ingredients and removing trans fats.
- Operational Efficiency: The company implemented a system called “Made for You,” which allowed customers to customize their orders, ensuring they received freshly prepared food—this reduced waste and improved efficiency, which allowed McDonald’s to serve food faster and more accurately.
- Marketing and Branding: McDonald’s launched several marketing campaigns to change its image from a fast-food chain that only served burgers and fries to a brand that provided various healthy options. They also started using digital media platforms to connect with their customers.
Results: The “Plan to Win” strategy successfully turned around the fortunes of McDonald’s. The company’s sales increased, and it regained market share from its competitors. In 2007, McDonald’s reported its highest-ever quarterly profits, and its stock price increased by over 50%.
McDonald’s has continued to innovate and adapt to changing consumer preferences, and today they are one of the largest fast-food chains globally, with over 38,000 locations in more than 100 countries.
Conclusion: McDonald’s turnaround strategy was successful because it focused on improving the quality, service, cleanliness, and value of the brand. By innovating its menu, improving operational efficiency, and investing in marketing and branding, McDonald’s was able to attract more customers and regain market share from its competitors.
The “Plan to Win” strategy is an excellent example of how a turnaround strategy can help companies facing challenges to reinvent themselves and stay relevant in a rapidly changing market.
Related Posts
Barnlund’s transactional model of communication with Example
Multidomestic strategy: Explained with Examples
Coopetition: Definition and Examples
UX Design & Research Strategy: Explained With Examples
Types of Cognitive Biases with Examples
Behavioral Strategy: Explained with Types & Examples
Types of Pricing Strategies: Explained with Examples
Organic Vs. Inorganic Growth Strategy
Write a comment cancel reply.
Save my name, email, and website in this browser for the next time I comment.
Type above and press Enter to search. Press Esc to cancel.
Featured Content
BCG’s New Tech Build and Design Unit
Digital Transformation
Business Resilience
- © 2023 Boston Consulting Group
- Terms of Use
Business Turnaround
Public-company lifespans are shrinking. Today, the chances of any given company ceasing to exist in its current form over the next five years are one in three. Fifty years ago, they were one in twenty. Our turnaround management consulting services help companies avoid an early exit by leading them through a business turnaround.
Companies grappling with a strategic crisis operate under immense pressure and face enormous disruption. If they ignore the warning signs, such as declining profitability or market share, the strategic crisis can morph into a profit crisis—with plummeting profits and stagnating or falling sales—that can force them to burn through cash reserves.
Only a business turnaround can help such a company stave off the next phase of decline: a liquidity crisis.
How BCG Helps Clients with Turnaround Management
BCG, through its Special Situations unit, helps companies orchestrate an effective business turnaround when all signs point to the need for fast, focused action and when companies are grappling with an urgent need to change amid great disruption. We deliver immediate impact to each client’s bottom line, cash flow, and top-line growth—all while concentrating on what the client must do to sustain successful change far into the future.
Key elements of our business turnaround approach
Total shareholder return lens We focus turnaround projects on TSR--not just operational fixes.
Topline growth and strategy are part of every program We emphasize our clients’ top-line growth and strategy execution over tactical cost-reduction.
Rigorous methodology for rapid, sustainable impact We capture value faster, typically in 12-18 months, and provide dedicated senior leadership for the duration of the transformation.
Highly experienced transformation and turnaround professionals Our team includes former CEOs, industry practitioners, and advisors with a strong track record of turnaround journeys delivered.
Working shoulder-to-shoulder We have a full-time, on-site presence within your organization, work closely with company leaders, and build skills within the management team.
Commitment to clients We measure our success by progress made and outcomes achieved, and by our clients’ satisfaction.
What Makes BCG’s Turnaround Management Approach Unique
BCG’s singular approach to turnaround management pays big dividends for our clients seeking to implement a business turnaround program and has been an important factor in us being named a market leader in the industry by independent research firm ALM Intelligence . We help our clients shape and accelerate their transformation program holistically. We start by initiating a response to performance issues, then swiftly define a transformation plan and mobilize the organization behind it. Finally, we execute improvement initiatives to deliver on the company’s strategic agenda.
To ensure rigor and discipline throughout the transformation process, we set up and run an activist transformation management office that plays three critical roles: driving implementation of the improvement initiatives, enabling the change, and ensuring that the program delivers the intended impact.
BCG on Transformation LinkedIn Showcase
Follow the BCG on Transformation LinkedIn for a collection of timely insights on enhancing performance trajectory and accelerating growth.
Meet Our Turnaround Consulting Team
Our turnaround consultants have vast experience leading clients through successful business turnarounds. Meet some of our experts on the topic.
Managing Director & Senior Partner; Global Leader, BCG Transform Practice
Managing Director & Partner
Managing Director & Senior Partner
Our Business Turnaround Work with Clients
It appears your browser does not support JavaScript or you have it disabled. BCG.com will work better for you if you enable JavaScript or switch to a JavaScript supported browser.
ABM Industries Supercharges Stock Performance with Transformational Change
CEO Scott Salmirs explains why the company needed a partner with expertise in strategy, process, and execution. As a result of this collaboration, ABM’s stock value jumped 38% , putting it among the top performers on the New York Stock Exchange.
Lessons on Transformation from Element Fleet Management
A world-leading fleet-management company partnered with BCG to generate unprecedented new value for employees, clients, and shareholders. Discover the four practices the partners applied to achieve successful transformation.
Turning Around a Global Jewelry Giant
BCG worked shoulder-to-shoulder with leading jewelry company Pandora to launch a transformation program that reignited passion for the brand and helped Pandora get closer than ever to its customers.
Learn More About Business Turnarounds
Execution excellence in large-scale change.
Three-quarters of all large-scale transformations fail to deliver the planned results. BCG’s Christian Gruß explains how transformation programs can both deliver rapid impact and enable the organization to sustain the impact.
Stefan Ermisch on the Outstanding Turnaround of a Public Bank
HSH Nordbank´s CEO, Stefan Ermisch, discusses one of the greatest turnarounds in the history of German banking.
Explore Related Services
Restructuring.
Change Management
Business Transformation
Change Your Trajectory: Monthly insights on business transformation.
Business Turnaround Plan PDF – FREE DOWNLOAD
Welcome to the business turnaround blog! I want to bring you the best business turnaround content. If you’ve Googled, ‘Business Turnaround Plan PDF’ then you’re in the right place. That’s a very specific phrase so I’ve created this very specific post. I believe that whichever stage you’re at, business success comes down to 2 principles – ‘Clarity is King, Simplicity is Queen’. I’ve used these principles to turn around 3 multimillion-pound businesses. That’s why I’ve created this FREE Business Turnaround Plan.
Click the image below to download a copy of my business turnaround plan pdf.
[SLIDESHARE] Business Turnaround Plan
Want to view the business turnaround plan as a Power Point? No problem! View it below!
Similar Posts
How To Find The Root Cause of A Problem – 5 Why’s
If you’re looking for a business turnaround strategy that will help you stop fighting fires, then this is it. In…
Business Turnaround Strategy – Knowing The Business Triangle
So you’re probably reading this because your business is in some difficulty and you’re looking for a business turnaround strategy….
The Key To Business Turnaround Success – Business Turnaround Matrix
I’m so excited to release this post! In this article, you are going to discover that all my years of…
How To Get Your Shit Together (Fighting Overwhelm) – Business Fixer Podcast 007
In This Episode You Will Discover About The Business Fixer Podcast Hosted by Haroon Rashid, the Business Fixer Podcast is…
Business Turnaround Strategy Steps 2021
If you’re reading this post, it’s probably because you’ve Googled something like, ‘business turnaround strategy’ or ‘business turnaround strategy steps’. At the…
What Should I Focus On In A Business Turnaround?
Hands up if you’ve ever been overwhelmed whilst trying to turn around a failing department or business. (If you didn’t…
Leave a Reply Cancel reply
Your email address will not be published. Required fields are marked *
Save my name, email, and website in this browser for the next time I comment.
Privacy Overview
- You are here:
- Home »
- Blog »
- Business Turnaround »
7 Proven Business Turnaround Strategy Steps
- Business Turnaround
If you follow these 7 proven turnaround strategy steps, you don't have to worry about your financial future. In this article you will learn a step-by-step proven process that will turnaround your business, so you can survive the temporary short term "crises", regain your profitability, confidence, and save your businesses. This process works in any business, but was specially designed for a small business turnaround, and not based on some theory or turnaround methods used by big compani es.
Read this if you want to discover the best strategies, to turnaround your business in these uncertain times that will totally destroy so many others. The reason you have to follow a series of logical and step by step p roven turnaround strategy steps, is to lead to faster enhanced performance and a bigger chance for survival when in a crisis.
What is turnaround strategy?
B usiness turnaround strategy refers to the strategic processes needed to restore a current struggling business under distress, to its former financial health and viability. B usiness turnaround strategy is an informal management-led reversal process to prevent a financially struggling or poorly performing business from insolvency and liquidation by returning it back to profitability, and restructuring debt using an out-of-court debt negotiation process that’s outside the legal framework. There are two main “business turnaround strategy types” for small business. But this is not only for businesses that are in a crisis or in distress. The same turnaround strategy steps can be used to take a very successful business to the next level, or help an underperforming business to reach its full potential.
Remember: Earlier intervention can lead to a much better outcome for the business and provides your business with the best options. If you have any doubts, please contact us for a free strategy sessions " free strategy sessions" today. During "The Strategy Call", t here's no sales pitch or attempt to sell you anything, ever. T his call is about helping you, to talk about your unique business, and to brainstorming ideas and strategies to help you increase your sales and profit immediately.
The 7 Turnaround Strategies Steps for a Business In Crisis
Here is the step-by-step proven turnaround strategies for a business in crisis, so you can take back control and turnaround your business:
Discover your position and what caused the problems you are dealing with.
Making sure that everybody fully understands, commit and support the situation.
Prepare a realistic turnaround plan your creditors will support.
Stabilizing the business finance, maintain positive cash balance while creating a highly profitable core.
Increase Profitability - Focus on profits and cash flow - Not revenue.
Increase Sales - Without spending more on advertising
Implement your business turnaround strategy steps with precision and consistency.
Why follow a turnaround strategy, step by step.
Over the last few years so many business owners have come to me because they are really stressed out, scared and uncertain about their future.... and it is totally understandable. I know you’ve worked very hard for years to grow your business and now circumstances that you may have nothing to do with, is threatening not just your business but also your family’s well-being and financial future.
You must remember that you are not alone, many business owners find themselves in this mess each year. Many businesses will fail, but they don’t have to, Yes, most businesses can be saved, because most business owners have what it takes for a successful turnaround. In most cases where businesses failure seemed certain, a turnaround strategy can can help to transform the business to achieve sustainable recovery, and restore confidence and control.
Instead of being in a state of Panic, fear and uncertainty that will paralyze you, and cause you to think in circles, and sometimes unable you to recognize obvious and simple solutions that may be right in front of you. Following a series of logical step by step actions -- p roven turnaround strategy steps will lead to faster enhanced performance and a bigger chance for survival when in a crisis. Step-by-Step. If hard decisions and action are taken fast.
But one of the key success factors is to take action early, timing is essential and will provide greater opportunity to save the business.
"When you find yourself in a hole, stop digging."
- Will Rogers -
When things go bad and your business is in a crisis we normally we go through the stage where we start avoiding the situation and believe that with patience and time, somehow by holding on, the business will survive, the market will regain its confidence and the business will turn itself around. This illusion normally prevents us from performing the drastic surgery, so often required, to save the business crisis.
Then we start to come up with reasons, excuses & stories for why business results are external, and it’s someone else's fault. Many pass beyond this point without recognizing and responding to the crisis at hand. The indicators of business decline are continuously showing themselves, yet we believe that when their business is in trouble, a little “Quick Fix” will do the trick.
The first “Quick Fix” is normally to borrow yourself out of trouble, but you can’t, and you can certainly go broke trying to. You need to produce positive cash flow, from operations (not borrowed money) while systematically restructuring the business around a "profitable core."
In the following steps, you will learn how to turnaround your business and build a highly profitable and cash flow rich one, step by step.
Step 1: Discover You Current Situation
The first step in small business turnaround strategy, before you even start to fix and turnaround things in your business, is to d iscover your current situation. The "First Step Turnaround Checklist" was created with the intention to help business owners in analyzing their business position, and to be able to make the right choice regarding their business turnaround strategy . You need to discover what caused the problems you are dealing with in the first place. Here are the keys to a successful turnaround.
Your first step in a turnaround strategy, is to do "Sufficient analysis" - Analysis have to be done on every area of the business to identify the real cause of the problem. This is key to a success turnaround because you have to make decisions based on facts, so you can choose the right turnaround strategy. Your best chance for a successful business turnaround start with your ability to identify, measure, and evaluating the key performance indicators in different parts of your business.
What Is a Business Turnaround Analysis?
Business Turnaround analysis is the process used to identify and discover areas of opportunity and problems in the business, either strategic, operational or financial, that represents a weakness or vulnerability that, if not addressed soon, will lead to business failure.
The analysis process is the most important part of selecting the best business turnaround strategy, and deserves a significant amount of time and attention to ensure that the correct options are selected.
With Little Time, No Margin For Error... And Few Second Chances - the outcome of the business turnaround analysis will you be able to choose between the two main types of business turnaround strategies:
- The Strategic B usiness Turnaround (profit & cash flow improvement)
- The Business Rescue (financial restructuring and debt reduction)
Remember, if the business is insolvent you must act to maximize the creditor’s interests otherwise you may personally be held accountable. However, don’t panic, there are many options you can follow, but time plays a vital role.
A Viable Business – You need a business that has the potential for future growth, development and profitability. Is the product or service near the end of its life cycle? For example, is the business still in the “typewriter” market, how viable or competitive is your product in the market? Is there a market for your product/service?
If the answer is no, go back to the drawing board. Start over. Because no matter how great you think your product is, if no one needs it/wants it/buys it, you don’t have a business. Be completely objective and prepared to look at your business with new eyes, looking for new ways of doing business. turnaround strategy steps
While evaluating the business, it is important to identify essential and important issues for the business’s survival like internal strengths and weaknesses, as well as the business’s external threats and opportunities. (SWOT)
Determine solvency - Before you start implementing your business strategy successfully you need to determine the business solvency . These questions will give you a good idea of where your business stands at this point, and you may need to get some legal or professional advice with this one. It's important to know that you are legally required to present accounts to show a true and fair picture of the business, and if the business is insolvent you must act to maximize creditor’s interests. Here is a basic test that you can use to determine if the business is
The Balance sheet test: Do you owe more than you own as a business, or are the business’s assets exceeded by its liabilities? Do you or another partner owe more than you own personally? (It is important to know that it should include contingent or future liabilities.)
The Cash flow test: Can the business pay its debts when payments become due? If your business can't pay expenses, employees, creditors, or Income Tax for example, then the business could be insolvent.
If a creditor has obtained a Judgment against either the business, partnership, or an individual, this may demonstrate the businesses, individual or partnership may be insolvent, and the creditor may petition to issue bankruptcy proceedings.
If yes, to either of the above, then the business could be insolvent. However, don’t panic, look carefully at all issues and consider the rest of your options available to the business, i.e. Turnaround, liquidate, sell, and ...
Adequate Financing and Timing – Any business on the recovery path needs time. Success doesn’t happen overnight. It’s also critical that you are able to generate sufficient cash to survive in the short-term, while a turnaround strategy is being formulated.
Motivation – You must be motivated, have a passion for success, and will do whatever it takes to achieve your goals. In many cases, the owner has lost interest, desire, and drive due to the long period of financial pressure.
Execution of the turnaround plan Success is won or lost through execution of the turnaround plan. Many business owners get past the crisis, soothe their creditors, restore a positive cash flow, and then fail to execute the turnaround plan and subsequently the wheels come off the wagon. Don’t let this happen to you! Work your plan every minute of every day. And stay accountable to your plan.
Reason why businesses failing
Find out what caused the problems in the first place
With little or no margin for error, no time to waste, and few second chances, sufficient and accurate analysis have to be done swiftly and on every area of the business to identify the real cause of the problem. This is key to a success turnaround because you have to make decisions based on facts, so you can choose the right turnaround strategy.
The success of your turnaround strategy starts will depend on your ability to identify, measure, and evaluate your business key success factors in different parts of your business.
Every reason for business success, and business failure, except for a few external reasons like a sudden illness, legal challenges, natural disasters or unfavorable government policies can be found within these 6 areas:
- Marketing and Sales
- Product and Service
- Process and Systems
The real reason why most businesses fail is our ability to react to changing conditions, to implement the necessary changes and improvements in 6 critical areas of your business There are many reasons why most small businesses fail or finds itself with declining profits, sales, cash flow. But the largest single cause of most small business failures is a management failure.
After 32 years in business, owning 40 of my own and helping many other businesses, I agree with the top business analysts that out of the top 6 key business drivers, poor Money Management is the number one reason why most small businesses fail or go bankrupt. You can quickly isolate the causes by looking at the top reasons in " 42 Major Reasons Why Most Small Business Fail "
Key points:
Most will spend 90% of their time, money and resources on solving problems, and focusing on things you can't control or that has low value.
The first key to a business breakthrough, or successful business turnaround, will come from spend 90% of your time on finding the right solution, and defining the problem properly, and only spending 10% of your time, and money on fixing it.
Step 2: Everybody Understands The Situation
Get everybody on bord
Making sure that everybody fully understands, and is committed to supporting the current situation.
Bring together all employees and clearly define the problem, making sure that everybody fully understands the situation. Employees, managers, suppliers, banks, investors, unions, and anyone else who may influence your business should be involved, to some degree, in formulating the turnaround strategy. The involvement of all stakeholders in planning and implementing the strategy will generally increase their level of commitment to your business turnaround.
Explain the severity of the situation, emphasizing that without their commitment and loyalty, the business can fail. Employees need to ‘come to the party’ and be involved in the rebuilding of the business. When a company is in crisis mode, management and staff need to be in harmony and in step with the need of the company.
Team Support – Support from all key team members is necessary. Create a shared commitment to action between employees and owners/partners. When a business is in crisis mode the owner and staff need to be in harmony and in step with the needs of the business.
The right results come from the right people doing the right things at the right time in the right way for the right reasons." When all your team members are not committed to your business mission, vision, and values, they are also not committed to executing your goals. You not only need to show people what direction the company is headed in, but you need to get them to "buy into" this direction. Great success is almost always the result of great teams. An aligned team always out-performance an individual.
Commitment - Everybody should help pla y his/her part in saving the business, but this won’t help if the owner doesn’t lead by example. Commit to your new way of operating. It's easy to make plans to change, but it's another thing to actually carry out those plans. Success is a result of action based on planning. It’s quite obvious that things need to change, but the question is do you ‘have to’ change?
Different Actions - Recognize that getting different results requires a different course of action. If you simply keep doing the same things, you’ll get the same results. To expect anything different without changing the way you operate is insanity.
Step 3: Prepare a Business Turnaround Strategy Plan
How to create a realistic business turnaround plan
How do you write a turnaround strategy plan
The objective of writing a business turnaround plan is to prove to your creditors that you can stay in business while you turn things around.
A business turnaround plan is a document describing your core business, sales plan, staff reductions, and cost-saving actions. It includes a cash budget, and a set of monthly financial projections with objectives indicating how you intend to get out of your situation in measurable terms. Your turnaround plan serves as a roadmap to save your business, and to insure and convince partners, customers, employees, banks and suppliers to support you.
So, take your time and do it right. Be brutally honest in your assessment and clearly state how you got into this situation and how you will stay in business while you turn things around. This will help restore your credibility. You will need this to obtain concessions from your creditors.
To prove that you can stay in business while you turn things around, you need to do the number-crunching to ensure profitability? If not, go back and work your numbers. In any event, do your homework and figure out what you need to charge to make your profit target.
What Creditors Want to See
A good credit rating can make or break you personally. Likewise, it can make or break your business. Often small businesses run on personal credit lines. Keeping your and your business’s credit rating in good standing is important for operations, growth, and development. When lenders look at your business, they will consider the four C’s: Condition of business - Are your industry and your company profitable—or likely to stay profitable? How long have you been in business, and what has the condition of your business been? Character - What is your credit history, your experience in your company’s industry, your ability to manage a loan? Has your business taken a loan in the past? What has the payment history been? Have you defaulted on any loans? Capacity to repay - Is your projected income sufficient to make a profit, maintain healthy cash flow, and pay off the loan? Do you have sufficient sources of income? Collateral - Do you have enough assets or collateral to sell if necessary in order to repay the loan? Additionally, lenders want to see your business plan. It does not need to be your full-length business plan, but it should cover what your business does, what is your competitive advantage, what your projected earnings are, and when you intend to repay any loans.
Turnaround Plan
Key To A Successful Business Turnaround Plan
The key to a successful business turnaround plan is s ufficient and accurate analysis and planning in every area of the business. One of the most important lessons I have learned in business over 30 years, was from Steven Walker, (CA) who taught me that all the information you need to make the right decisions regarding your business can be found in your numbers. It will provide you with financial anticipation and foresight to make the right daily decisions.
Want to know where to spend your advertising money, where is the most business coming from, what is your most valuable products and customers? Where is significant potential for growth and profitability? Listen to your numbers, they will guide you. Without these numbers, you will not be able to make accurate daily decisions.
It is vital to understand your financial information, set financial and sales targets, preparing a cash flow forecast. Set targets for each day, week, and month and measure everything – from cash flow, sales, and profit. This section explains what the effect of all these changes will be by presenting detailed forecasts in the form of short-term financial statements and projections.
The problem is, you’re not going to get the information you need from your year-end financial statements or your accounting system. And unfortunately, this is about all the numbers the average business owner has. That’s why the most business owners simply don’t know their important numbers.
Looking at your financial statements tells you what happened, but not why. It does not show us what would happen if you make incremental changes to current costs, prices, and revenues. It’s also extremely difficult and almost entirely useless for decision-making purposes because the minute you receive them the information is outdated and limited.
You can add a budget and a forecast to it, and you can see what was intended and how well you did. A big improvement and useful, but not sufficient. If only one element in your forecast change, everything change, and you have to do it all over again. These reports are lagging rather than leading indicators or measures.
The second problem is if you do not have the relevant information (numbers) regarding your business performance, you may not know when a situation requires corrective action. Making it impossible to identify problems on time, which is causing you to lose money that may lead to a situation where your business runs out of cash and are unable to pay the bills. In most cases, we can only respond to current situations, usually too late when the damage is already done.
So, you've got to add up some of your own numbers. You need to measure what really matters.
Measure What Really Matters
With little or no margin for error, and few second chances, s ufficient and accurate analysis have to be done swiftly and on every area of the business to identify the real cause of the problem. This is key to a success turnaround because you have to make decisions based on facts, so you can choose the right turnaround strategy, that will improve your ability to adapt and survive the crises.
The success of your business turnaround start with your ability to identify and analyze, simple but very important Leading and Lagging numbers in your business. These Leading and Lagging numbers, also known as indicators, business drivers, key success factors, KPI's and many more, are important (key) measurable values in a business that are used for measuring and evaluating the performance, and success in different parts of your business.
Lagging Indicators/measures
Lagging Indicators are an important (key) measurable value of an intended result or the goal that you want to achieve. For example, to increase your business growth, sales, profit, and income... Lagging measures, reports past results or events that already happened -the end result. For example, total sales for the month, total Net, or Gross profit for the month. These results have passed, and there is nothing you can do to change it. They are history.
Leading indicators/measures
Lead indicators or measures in business are the day-to-day activities that lead to the result of the "Lag Indicators"(The goal or objective you are trying to achieve). These Lead activities (Input) drive the performance and success of the "Lag Indicators" and predict future results.
To change any current results in your business, you have to focus on the Lead indicators or measures. They are the things you can control and influence that will lead to a different result.
Read the complete step-by-step process for identifying your business most important lead and lag numbers here: Leading vs Lagging Indicators Examples In Business
Knowing this will empower you to make the right daily decisions for the future. Measuring the leading key numbers will allow you to have Insight, the ability to understand why you have certain results (numbers) in your business. After that, you can start to ask various “What if questions, such as “What if we increase the income by 20%?" Or "What if we reduce cost wit 10%?” These changes probably will have numerous results, many of which might have never been anticipated. By asking a series of "what if" questions will give you the ability to have the foresight that will allow you to manage your business a 100 % better, Reduce risk, have confidence in your decisions and make you considerably more profitable and grow your business substantially
Determine Outcome and Goals For Your Turnaround Plan
This is the hardest part, and that’s to make the decision to become responsible for your own future. As long as you know where you are and where you’re going, it’s easy to get there. Set some goals for your business to have clarity where you’re going and why are you doing what you’re doing.
It’s important to measure your progress from where you start now, not against how far you have to go. Remember! Your past does not determine your future; only what you do now determine your future. Each action or strategy you implement or make happen boosts your profits and growth. By comparing your progress with the point at which you started out, you will be encouraged to continue.
Goals are achieved step by step and each step needs to be validated - otherwise, the goal may seem far away, and it may feel you are making little progress when really you are. Then compare your current reality and state of progress with the final vision.
Once the short-term cash survival evaluation is complete, you need to decide:
What issues need to be attended too immediately? For example, how can funds be generated immediately within the business?
What issues need to be attended to in the short term? For example, what possible short-term financing is required.
What issues will be attended to in the medium to long term? For example, look for new outlets and markets for the products/services on offer, or develop/improve new products/services.
What components of the business should remain the same? For example, all core profit-generating items to remain. No large projects are undertaken in the short-term.
Step 4: Stabilizing The Business Finances
Stabilize your business if it is in crisis, and maintain positive cash balance at all times is very important because you need to be making good decisions without being under pressure. The key to stabilizing your business is to immediately create and then maintain a positive cash balance at all times. There could be a number of reasons why a business is in trouble, but what’s important is to find out what caused the problems and dealing with it. Part of stabilizing the business is negotiating the restructuring of your debts and obligations to the level your cash flow will support - nothing more.
Negotiate The Restructuring Of Your Debts
Negotiate the restructuring of your debts and obligations to the level your cash flow will support - nothing more. Sort your creditors into two groups: Group A and Group B. Group
Group A creditors - are those you need to do business with in the future, like banks and critical suppliers.
Group B creditors - are those you can replace and don't need to survive. Usually, Group B creditors create the most noise.
Because you've done your homework and are operating with positive cash flow, you are now in a position to negotiate. Meet personally with each Group A creditor and sell them on your turnaround plan. Be factual and positive. Show them how they will be repaid from the cash that flows from your reorganized company. My experience is that most Group A creditors will go along with you.
Creditors often try to strengthen their position and compromise your long-term viability for the sake of recovering their money more quickly than your cash flow allows.
Politely tell them, "No." Remind creditors that it is only the cash flow from your reorganized business that can repay them.
Don't waste time with Group B creditors. Hire a debt negotiator to obtain a settlement for you and move on. These specialists are a unique group, and frankly, some are better than others.
Improve Cash Controls
In the difficult times ahead it is crucial to centralize the control of cash receipts and payments, make sure “everyone” knows that cash is tight, and you are taking personal control of cash flow. Don't buy anything that is not absolutely required. Remember survival is KEY, CASH IS KING for now. Profits will soon flow from very tight cash controls.
Improve Cash Generation
It’s critical that you are able to find adequate ‘bridging finance’, be it external such as the increasing of overdraft facilities, borrowing from a third party; or internal were dead stock and unneeded equipment are identified and sold, reducing of assets, improving accounts receivables or down payments for orders.
A key factor is creditor and lender support for the financing while the business is in a turnaround state.
Manage Payable's Better
The owner must develop a cash-generating system for the business. Cash is king. More businesses fail due to cash flow problems than anything else. The owner has to generate sufficient cash to survive in the short-term. This can be done with better Debtor collection policies, and processes to reduce the time collections take by handling slow payers better, reduce credit limits, and improving credit approval processes to reduce credit losses.
Improve Inventory Management
The Inventory represents an enormous capital investment for any business. The goal of inventory management is to create a balance between holding enough stock to optimize sales, while at the same time avoiding the costs and risks of overstocking. This is an important management function in any business, but particularly in manufacturing, wholesaling, and retailing. Profits tend to evaporate when inventory is not properly supervised, or when inventory levels and stock purchasing are not given sufficient thought. Good stock control and inventory management start with accurate records. You will need to know exactly what and how many stocks are being held, their value, and cost. Incorrect or out-of-date stock records spell disaster, and it's important to have an efficient, reliable, and accurate method of keeping records.
Step 5: Increase Profitability - Not Revenue
Profitability
Focus On Profits and Cash flow - Not Revenue
After stabilizing your business, and maintaining a positive cash balance it's time to create a highly profitable and cash flow rich business model. "Profit is the future cost of staying in business".
Read the complete step-by-step process for: The World's Fastest way to increase profit
Improve Profit Margins
Profit margins will be increased by the reduction of variable costs, increasing margins and productivity. The only way to assure continued profits for any business is through constant analysis of what’s happening in that business. Whether you are selling products or services, it’s important to periodically study sales and cost figures relating to your business. In them, you will discover clues to what you must do to increase profits each year.
Sometimes it means cutting expenses or increasing the price of certain products or services and sometimes it can mean adding something else to your line and sometimes it means dropping a product or activity that’s clearly unprofitable. Focusing on one area alone may or may not generate more profits for you. However, focusing on several areas and monitoring your results can have a HUGE impact on your bottom line .
Reduce Cost
All businesses need to manage costs and expenses. The old saying "You have to spend money to make money" can be a dangerous one. Every business has its costs, but in a time of crisis, it’s vital to your company’s survival, that every business owner takes the time to distinguish between essential expenses and "nice to have" expenses.
Read the complete step-by-step process for: How To Reduce Cost In Business Safely: Step By Step !
Whatever the size of your business I can tell you this; you can always cut costs. No matter how many smart business people tell you they have already cut costs, you will always find more savings in their businesses. So don't forget to be tough on costs to save your business. Reduce all fixed costs by 10% - constantly audit all facets of your company and break down each area of your business and attack it individually.
Step 6: Increase Revenue - Without Spending More On Ads
Increase your revenue, you can read the full step-by-step process here: the world's fastest way to increase your sales..
Firstly, try to increase the amount of money every customer spends every time they buy from you. Remember that it takes five times as much effort and money to generate sales from new customers than from existing ones. Secondly, try to increase your conversion ratio . Let me explain. If you are currently converting 3 out of 10 leads into customers - your conversion ratio is 30%. But if you increase that number to 4 of 10 – your conversion ratio is 40%. If you can accomplish this, your revenues will increase by 33% Third, try to increase the frequency with which every customer purchase from you. This is all about customer service and delivering on your promise. Keeping them happy Your goal should be to create customers for life. You are better off investing in your current customers and generating new business from them than you are trying to find new clients. Now, after you have taken these steps first, you can begin to increase your leads (potential new customers) While it may seem obvious to start with Lead Generation and finding new clients first, it doesn't work. Increasing Inquiries, or Lead Generation, for many Business Owners, is the most common way of increasing sales. The reason for doing Lead Generation last is that marketing and advertising can be one of the most expensive ways to market your business. It can also be the most costly if you don’t have the right marketing strategy.
Brian Tracy
Improve Service Delivery
“The key measure of business success is customer satisfaction”.
" The true purpose of a business is to create and keep a customer"
Improve Service Delivery:
As hectic as things may get, do not forget the importance of customer service! Understand that it is the small things that create great results and makes a great impression on your customers. This includes everything you do; from the way, you greet your clients, to the quality of your product and service and availability of stock.
Consistency is the keyword that leads to repeat visits, increased spending, and word of mouth advertising. If your service exceeds people’s expectations consistently, they will stick with you and tell all their friends and family. If your service is poor they also tell all their friends and family.
Customer service is also a powerful way to set yourself apart from your competition. It’s one of the strengths a small business has, and by emphasizing customer service, you can compete with larger companies who may offer more variety, lower prices, and other perks you can't afford
A su ccessful business turnaround is won or lost through execution.
I've seen many business owners get past the immediate cash crisis and calm their creditors down, only to fail to execute their turnaround plans. They stop focusing on cash flow, lose their discipline of daily measurement, and turn instinctively back to sales (where the fun is).
The result is a predictable slide back to negative cash flow, missed payments…and the wheels come off the wagon. The owner loses all credibility and there is no recovery. To avoid this, stick to your plan and do all the tasks in your turnaround plan. Insist on personal and staff accountability. Success is won or lost through execution.
Step 7: How To Implement Your Turnaround Strategies Steps
For full details on each of the following 8 steps you can read the article: How To Implement Your Business Strategies: Step by Step
Success is won or lost through execution of the turnaround plan. Many business owners get past the crisis, soothe their creditors, restore a positive cash flow, and then fail to execute the turnaround plan, and subsequently they lose everything. Don’t let this happen to you! Work your plan every minute of every day. And stay accountable to your plan.
Step 1 – Evaluate business current reality
Step 2 – Determine outcome and goals
Step 3 – Decide on preferred solutions and actions
Step 4 – Take action
Step 5 – Monitor and Evaluate results
Step 6 – Refine your strategy and Re-measure.
Step 7 – Increase what's working, or discard what’s not
Step 8 - Rinse and Repea t
Your Next Step?
The assessment of the business at this stage is of critical importance. This is an in-dept’ look at both business and personal challenges, areas of untapped potential, sales, marketing, and financials. You need to look at the ‘whole picture’.
Sufficient analysis must be done to ensure that the correct options are selected. Once you have to figure out which parts are working, we help you to improve them and have you do much more of those things that work. We will also figure out which parts of your business aren't working so that we can fix them or get rid of them entirely - so that they will stop wrecking your business. Of course, once those poorly working parts are fixed - or gone - the whole business starts to perform amazingly.
Remember: The best business owners in history have faced downturns – those who reacted early to face the distress came out stronger. Those who faced the crisis alone usually failed.
Earlier intervention can lead to a much better outcome for the business and provides your business with the best options, so if you have any doubts, please contact us for a free strategy sessions today. " free crisis strategy sessions" During "The Strategy Call", t here's no sales pitch or attempt to sell you anything, ever. T his call is about helping you, to talk about your unique business, and to brainstorming ideas and strategies to help you increase your sales and profit immediately. T he First Solution Is Always Free, Just To Demonstrate That I Can Help You, By Actually Helping You ... For Free
If you would like the best immediate solution for your business you can go to The 40-Day Business Turnaround P rogram will take your business from a "Breakdown & chaos to a Breakthrough & control" in 40 days or less. Stop the urgent pressing cash flow problems that's forcing you into making bad decisions, and forcing you into digging yourself into a deeper financial hole. Let us help you t ransform your cash-demanding profit-seeking business back in to a highly profitable cash-flow rich business
Thanks for reading, I hope you found it valuable
Talk soon
More Related Resources
Signs and causes of financial distress in business, business turnaround: self-diagnostic questions for creating a perfect strategy, 230 business turnaround analysis questions, about the author hans.
Hans had 40 of his own businesses over the last 30 years and is famous for creating fast-growing businesses” He is an author, speaker, coach, and consultant and a specialist in business optimization and turnaround, helping smaller business owners eliminate business limitations, threats, and growth challenges in achieving their sales, profit, cash flow, and income goals with sniper precision.
Popular posts
20 big money mistakes business’s make in 2021, 6 ways to save & turnaround a failing business, ten keys to a successful business turnaround.
Turnaround Strategy – Definition, Types, Stages & Examples
When a company’s performance, market conditions, or country’s economy are in the declining phase, then businesses employ various strategies to minimize its impact. Turnaround strategy is among one of them. Today, we’ll discuss what is turnaround strategy, its types, and various stages with real-life examples.
Table of Contents
What is Turnaround Strategy?
A turnaround strategy is a form of retrenchment strategy when a company realizes that it has made wrong decisions earlier. Now, it needs to undo some of its works before it could impact the company’s profitability and income. It’s a strategy where you retreat and back from the earlier made wrong decision, and transform the company’s position from loss to profitability.
Now, the question is when the company should follow the turnaround strategy. It becomes necessary for the company to follow the turnaround strategy because of the changes in the external environment. Like government policies, the demand of the product in the market , threat of the substitute product , change in the preferences of customers, and the external environment.
When the company is going through the loss period, then it needs to follow the turnaround strategy. As they say “health is wealth,” which means that you can only make a profit when your business is healthy. However, turnaround is a very good measure in order to deal with the issues of industrial sickness.
Turnaround strategy is a process of restructuring and transforming the company from loss to profitability. It allows the company to stabilize its performance by getting back the industrial units to their original units. Now, the success of the strategy relies on the commitment and dedication of the top management.
When we talk about the survival of declining businesses and companies, turnaround strategy is very important for them. It brings positive changes to the company’s performance in order to get desired results. However, implementing a successful turnaround strategy is a complicated process that demands a strong business core and a sound management team.
Some of the other elements of the turnaround strategy are trust, capital, management, leadership, and the support of shareholders and employees.
Why do companies Use Turnaround Strategy?
Why businesses and companies should follow the turnaround strategy. Some of the reasons are as follows;
- Return on capital employed (ROCE) start declining
- There’s a change in the structure of competition and industry
- Performance measures start decreasing
- Profit and revenue stream is falling
- The company’s losses and costs are unbearable
- Net margin and gross profit is low
- Market share is low
Types of Turnaround Strategies
Some of the main types of turnaround strategies are as follows;
Cost Efficiency Strategies
Companies implement a turnaround strategy as a recovery protocol in order to achieve cost efficiency. The cost-efficiency requires a wide range of activities for a company to take in order to gain a quick win. Before developing a complex strategy, the measures would improve the company’s financial position and stabilize its cash flow.
Companies often apply a cost-efficiency strategy as a first step in the turnaround recovery strategy. Because it requires little capital, easy to implement, immediate effects, and companies could easily achieve cost efficiency.
It comprises of lower the research and development cost and marketing activities, investing in diversification , cutting inventory, decreasing account receivable and pay increments, and increasing account payables.
When you cut various costs, then the company is vulnerable to many risks like low morale and employee motivation level, high turnover rate, declining working conditions, and low job satisfaction level. Cost efficiency could badly impact a company’s resources that are vital to its growth and success.
Asset Retrenchment Strategies
If a company is facing an issue of low performance, then it should follow the asset retrenchment strategy after the cost-efficiency strategy. It’s such a strategy that allows companies to analyze their non-performing areas and remove them to become efficient.
The utility of asset retrenchment and turnaround strategy is when the company has a better cash flow system. For instance, a company earns cash by disposing of obsolete assets, and it allows the company to invest in new ventures with the same cash.
Focus on Your Business core Activities
The turnaround strategy allows you to focus on the core activities of your business. By concentrating on the main activities mean adopting new measures, recognizing the products that could potentially increase the cash flow, and identify the customer market.
For instance, a company focuses on the new product line and price-sensitive and loyal customer segment of the market. It gives the company a clear competitive edge in the market.
Change of Leadership
Companies sometimes change their management and leadership as a turnaround strategy. They usually hire CEOs from outside the company in order to inject new and fresh blood into the company to change the way of its thinking and operations.
CEO has the complete responsibility and authority of company’s performance on its shoulder, when you hire someone from outside, then it sends a signal of change. The new leadership and management mean change in the company’s strategies.
Stages of Turnaround Management
Assessing viability .
Assessing the viability means conducting a detailed investigation of your business and its circumstances for 2 to 4 weeks. The analysis gathers plenty of information like;
- A swot analysis offers clarity
- Analyzing the viability of the current business
- Studying whether business issues are controllable or not
- Potential solutions
- The main cause of it
- Capabilities of the management
- Debtors and stakeholders
- Historical financial records like costing system, cash flow, balance sheet, P&L
The summary of the abovementioned elements offers decision-makers to consider priorities and risk factors. The board of directors has to make a decision based on the information.
Stabilizing & Developing Strategy
After recognizing the priorities and risks of your business, next, you have to develop a recovery strategy and stabilize the business position. The timeframe usually depends on the complexity of the business circumstances ranging from few weeks to 3 months. However, some of the main elements in the second stage are as follows;
- Crisis Stabilization: it means taking control of your finances by decreasing cost, cash management, and short term finances
- Improved Leadership: because of unstable management and lack of skill, the company needs a new management team
- The focus of Stakeholder: engaging with the stakeholders relies on the government officers, industry association, customers, employees, creditors, financiers, and etc.
- Strategic Focus: redefining the core activities of your business, divestment, M&A, and restructuring
- Organizational change: improving employees’ morale, communication, etc.
- Improving the Process: improving the company’s operations by addressing the main risky issues
- Restructuring Finances: it requires cash monitoring, tighter control, equity, securing short-term funds, selling not utilized assets, and generating cash flow.
Implementing & Monitoring
After stage two, the focus here is on the implementation and monitoring strategy, next you have to bring the board of directors and owners on one page in order to implement the strategy. It would make the management focus on its core skills, and it takes approximately 3 to 12 months.
Example of Turnaround Strategy
Dell declared that it would implement the cost-cutting strategy in 2006, and the company did by removing the middlemen and directly selling its products to the customers. The company had faced huge losses. In 2007, the company followed the turnaround strategy and started selling its computers through retailers and middlemen, and became the world’s largest computer retail brand.
Evernote
Evernote is a software application that allows users to create lists, organize, and make notes. Stepan Pachikov laid the foundation of the company in 2008, and he decided to shut down the company after one year. Just before closing down, investors pledged to invest 500,000 dollars in the company in order to give it a chance. It turned out a success and the company attracted 20 million users.
Apple
The CEO of Apple, Steve Jobs left the company in 1985 due to the declining company position. The tech company kept on declining for the next 12 years and reached the level of bankruptcy. However, Steve Jobs rejoined the company in 1997 with a new strategy and enthusiasm, and it became the world’s leading Tech Company later.
FedEx
Frederick Smith established FedEx in 1971 with 4 million dollars of his inheritance money, and he borrowed loans of 80 million dollars. He started the company based on his Yale University idea, and the company went under huge debt and close to bankruptcy, in the initial two years in business.
When funds were draining out, and he had 5000 dollars left in his pocket. He decided to gamble the last 5K in Las Vegas on the verge of bankruptcy. He went there and gambled 5K and converted it into 27,000 dollars. However, it allowed to save the company and raised 11 million dollars. FedEx delivered its first profit of 3.6 million dollars in 1976.
The revenue of FedEx reached 1 billion dollars seven years later. It was the first US Company to touch the one billion figure within its decade of a startup. The company has been growing and thriving since then.
About The Author
Ahsan Ali Shaw
Academia.edu no longer supports Internet Explorer.
To browse Academia.edu and the wider internet faster and more securely, please take a few seconds to upgrade your browser .
Enter the email address you signed up with and we'll email you a reset link.
- We're Hiring!
- Help Center
Turnaround Strategy
Strategic management is one the management strategies to overcome business challenges and run a successful and sustainable organisation. The study guide (MNG4801:12) illustrates the path that management has gone through to arrive at strategic management as a contemporary means of surviving in the current dynamic environment. From management theories it is understood that strategy as a concept began with ancient civilization especially in military parlance (Sun Tzu) and the Pericles of Athens (Cummings. S 1995), then evolved from business policy to classical planning pioneered by the Harvard Business School promoting the idea of managers to be train to think strategically. We will explore later what it means to think strategically. World War II benefited greatly from strategic thinking as it was necessary to ration resources in the economy as explained by Ghemanwat quoting from Morgenten book on the theory of games and economic behavior. Planning school became inefficient tool when...
Related Papers
International Journal of Management Reviews
Franz Lohrke
123 456 , Richard Whittington
Unathi Henama , Unathi Henama
South Africa is the first African country to have hosted a mega sporting event, the 2010 FIFA World Cup™ and the tournament increased the exposure and prestige of not just the continent but specifically South Africa. The increased arrivals envisaged for the tournament and after, there was an opportunity to ensure that the tourism supply-side (including accommodation, tourist safety, attractions, transports, events, etc) are upgraded which will in turn increase the competitiveness of South Africa for the long term (DEAT, 2005). Tourism plays an increasing role in South Africa and tourism (WTTC, 2012) contributes 2.7% of total Gross Domestic Product (GDP) in 2011 and is forecasted to contribute 5.7% in 2012. Tourism is developed to create jobs, distribute income and benefit small, and medium businesses and South Africa is known for its unrivalled wildlife, wine, justice tourism and according to Cornelissen (2005) the Western Cape province of South Africa is one of the country’s premier tourist attractions. South Africa has been to host to the World Summit on Sustainable Development (WSSD) in 2001 and several other major conferences, exhibitions and meetings. Tourism generates in excess of R48 billion in revenue from foreign tourists each year and since, 2000 has been growing volumes at rates averaging between 4% and 6% according to Airlift Strategy 2006 by the Department of Transport (2006). Van Schalkwyk (2012) noted that the tourism sustains one in 12 jobs globally and contributes 9% of worldwide gross domestic product. The tourism industry provides compelling reasons for its development in a country such as South Africa that has abundant wildlife, natural beauty and more than 2000 kilometers of coastline.
Journal of Business Strategy
Marius Pretorius
Abhinandan dole
chantel nefale
Harshdeep Singh
This chapter continues the literature review aimed at completing the exploratory study that forms the basis of the final model prepared for empirical testing. The first section of this chapter defines the entrepreneurship process and discusses why acquiring skills is a key requirement of the entrepreneurial process. The chapter then proceeds to investigate the importance of the skills identified in chapter 2 in terms of their importance in each of the four main stages of the entrepreneurship process. This review further highlights other key skills that are likely to influence (positively or negatively) each stage of the entrepreneurship process. Thus this chapter presents the final model of skills that SMEs must acquire to succeed in each of the 4 stages of the entrepreneurship process.
Loading Preview
Sorry, preview is currently unavailable. You can download the paper by clicking the button above.
RELATED PAPERS
Elizabeth Snyman-Van Deventer
Mark Matabi
Esterhuyse Abel
Blessings Kudakwashe Tinarwo
Potchefstroom Electronic Law Journal
Tebello Thabane
Qadeer Ahmad
The Southern African Journal of Entrepreneurship and Small Business Management
Marius Ungerer
Journal of Media Business Studies
Prof. Dr. John J Oliver
South African Journal of Economic and Management Sciences
Journal of Business Strategies
Guclu Atinc
Journal of Transport and Supply Chain Management
Joachim Vermooten
Gabriel Maotwanyane
albert Agbenyegah
Oswald Mhlanga
Donald Bibeault
Vuyisile Rodolo
Colin Diggines
SA Journal of Human Resource Management
Anea Burke le Roux
The International Journal of Business & Management
Samuel Maina
Caroline Kibui
Mercy Mungwini
Antony Okello
Acta Commercii
Kamilla Swart
Asia Pacific Journal of Management
David Ahlstrom
RELATED TOPICS
- We're Hiring!
- Help Center
- Find new research papers in:
- Health Sciences
- Earth Sciences
- Cognitive Science
- Mathematics
- Computer Science
- Academia ©2023
- DOI: 10.1108/09555341311314799
- Corpus ID: 154161978
Strategies for Business Turnaround and Recovery: A Review and Synthesis
- Richard Schoenberg , N. Collier , C. Bowman
- Published 10 November 2013
- European Business Review
82 Citations
Theoretical review of turnaround strategy and its organizational outcomes.
- Kenneth Ateng' Nyagiloh , J. Kilika
- Business International Business Research
- View 1 excerpt, cites methods
THE ROLE OF MANAGEMENT ACCOUNTING IN A TURNAROUND STRATEGY
- A. Jamaluddin , Nurul Izwah Mohd Husin , N. Omar
- View 1 excerpt
REVIEW OF LITERATURE ON TURNAROUND STRATEGY IN BANKING
- M. Munir , M. Muda , Ummi Salwa Ahmad Bustamam
- Economics Humanities & Social Sciences Reviews
- Highly Influenced
- View 11 excerpts, cites methods and background
Accomplishing Organisational Turnaround through a Repositioning Strategy in a Manufacturing Context in Kenya
- Beatrice A. Oduor , James M. Kilika , Anne W. Muchemi
- Business Journal of Business and Management Sciences
Pursuing Firm Economic Sustainability through Debt Restructuring Agreements in Italy: An Empirical Analysis
- Alessandro Danovi , Francesca Magno , G. Dossena
- Business, Economics Sustainability
- View 3 excerpts, cites background
Implementing turnaround strategies as an entrepreneurial process
- Peter Baliouskas , Juan Llopis , J. Gascó , R. González
- Business International Entrepreneurship and Management Journal
Developing Dynamic Capabilities for Bank Turnaround
- W. Lawrence
- View 2 excerpts, cites background
Successful turnarounds in bankrupt firms? Assessing retrenchment in the most severe form of crisis
- Manuel Rico , Francisco Puig
- Business BRQ Business Research Quarterly
- View 1 excerpt, cites background
How audacious strategies pay off during hard times: Case studies of Indian information technology firms
- M. Kailasam , Winai Wongsurawat
Leadership of change in South Africa public sector turnarounds
- M. Kumalo , C. Scheepers
SHOWING 1-10 OF 26 REFERENCES
STRATEGIC CHANGE IN THE TURNAROUND PROCESS: THEORY AND EMPIRICAL EVIDENCE
- Vincent L. Barker , Irene M. Duhaime
Firm Turnarounds: an Integrative Two‐Stage Model
- K. Arogyaswamy , Vincent L. Barker , M. Yasai-Ardekani
- Highly Influential
- View 6 excerpts, references background
Corporate Governance and Financial Constraints on Strategic Turnarounds
- I. Filatotchev , S. Toms
Turnaround: Retrenchment and recovery
- D. Robbins , J. Pearce
AN ANALYSIS OF THE TURNAROUND STRATEGY IN COMMERCIAL BANKING
- Hugh O'neill
- Business, Economics
Curing sick businesses: changing CEOS in turnaround efforts
- G. Castrogiovanni , B. R. Baliga , R. Kidwell
- Business, Medicine
- View 1 excerpt, references background
Environmental Change, Human Resources and Organizational Turnaround
- G. Boyne , K. Meier
- View 3 excerpts, references background
Creating Value in the Face of Declining Performance: Firm Strategies and Organizational Recovery
- J. Morrow , David G. Sirmon , M. Hitt , Tim R. Holcomb
Turnaround in East Asian firms: evidence from ethnic Overseas Chinese communities
- G. Bruton , D. Ahlstrom , J. Y. Wan
CEO AND DIRECTOR TURNOVER IN FAILING FIRMS: AN ILLUSION OF CHANGE?
- C. Daily , D. Dalton
Related Papers
Showing 1 through 3 of 0 Related Papers
Turnaround Recovery Strategies
A set of measures that companies use to address a decline in performance
What are Turnaround Recovery Strategies?
Turnaround recovery strategies are a range of measures that companies employ to recover from a period of a performance decline. The range of measures is important since they mark an upturn phase of a company after a period of significant negativity.
The concept of turnaround strategies is also applicable in a country or a region’s economy following a period of stagnation or recession . Similarly, the concept can be used to refer to a fundamental adjustment in an individual’s strategy during a financial crisis.
- Turnaround recovery strategies are a set of measures that companies use to address a decline in performance.
- Companies use turnaround recovery strategies to mark an upturn period after a significant period of negativity.
- Some of the common turnaround recovery strategies used by companies include a change of leadership, focus on core business activities, and asset retrenchment.
Understanding Turnaround Recovery Strategies
Companies suffer a decline in their annual reported earnings from time to time. Several factors can cause a downturn in a business, including new competition entering the market, high costs, inadequate financial controls, unforeseen demand shift, poor management, and over-management.
Companies focus on different change processes to bring about an improvement in performance. The presence of warning signs of a financial downturn prompts executives to think of turnaround recovery strategies before the crisis escalates. Managers first adopt low-risk measures, and if the risk worsens, they become progressively more radical.
The period of decline and recovery in performance is called the turnaround and is measured based on net income . In each turnaround phase, companies identify management actions and decisions, as well as other factors that impact profit before devising appropriate actions. Various elements are involved in the strategies.
Types of Turnaround Recovery Strategies
1. cost efficiency strategies.
Most companies implement turnaround recovery strategies in the pursuit of cost efficiencies. Cost efficiencies entail a varied range of actions aimed at producing quick wins for a company. The measures may improve a company’s cash flow or stabilize its finances before coming up with more complex strategies.
Cost efficiency strategies are often implemented first in any recovery strategy. Companies prefer turnaround recovery strategies that achieve cost efficiencies because they are easy to implement, require little capital, and their effects are almost immediate. Cost-oriented turnaround strategies include reducing research and development (R&D) , stretching accounts payable, eliminating pay increases, reducing accounts receivable, cutting inventory, investment diversification, and reducing marketing activities.
The measures can be accompanied by reduced pressure from debt repayments through financial restructuring. However, such an action carries some risk. Companies that solely rely on cost-cutting as a turnaround recovery strategy risk face increased staff turnover because of the reduced employee morale . Cost efficiency strategies can also damage the resources necessary to maintain a company’s core focus.
2. Asset retrenchment strategies
Companies that face performance decline usually pursue asset retrenchment actions after a cost-efficiency drive. Under the strategy, companies evaluate underperforming areas to eliminate them or make them more efficient.
The usefulness of retrenching assets as a turnaround recovery strategy depends on a company’s ability to generate cash flow. For example, a company may dispose of its old assets to generate cash or invest in new ones.
3. Focus on a company’s core activities
Companies also resort to focus on their core activities as a turnaround recovery strategy. Under the increased focus, companies identify markets, customers, and products that can potentially generate high profits, and adopt the measures as the main focus of the firm activities.
For example, a company may re-focus on loyal or less price-sensitive customer segments or product lines best known to it. It may develop a clear competitive strategy through focus.
4. Change of leadership
Companies often replace incumbent CEOs as a turnaround recovery strategy. During turnaround situations, most companies appoint new chief executives from outside the company as a way of injecting a new way of thinking into the top management.
It is inspired by the idea that CEOs bear the responsibility for a company’s negative position, and their replacement serves as a signal of change. CEO replacement can always be accompanied by an overhaul of the top management team to avoid repetition. As a result, a new senior management team can enable a company to focus on new strategies to lead the turnaround.
Real-World Examples of Turnaround Recovery Strategies
The declining sales and profits of the iconic motorcycle manufacturer, Harley-Davidson, during the 2008 mortgage crisis were met with turnaround recovery strategies that aimed to attain cost-efficiency.
Harley-Davidson cut its production costs to protect its brand’s image by balancing supply and demand. The subsequent consolidation of production operations led to massive job losses. In the same vein, the motorcycle manufacturer transferred its distribution of parts and accessories to a third-party provider.
Also, the subprime mortgage crisis of 2007/2008 led to the collapse of some of the leading banks in the United States. The federal government later responded with a series of turnaround recovery strategies. It imposed a tightened lending environment for auto sales.
General Motors (GM) declared bankruptcy, leading to the delisting of its stock from the NYSE. However, the bailout and package funds helped the company restore its business activities.
Related Readings
CFI offers the Commercial Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful:
- Bailout Takeover
- Corporate Reorganization Clause
- Recapitalization
- Type A Reorganization
- See all management & strategy resources
- Share this article
MBA Knowledge Base
Business • Management • Technology
Home » Strategic Management » Business Turnaround Strategies
Business Turnaround Strategies
When a firm has experienced a serious decline in its market position, it is a candidate to mount an all-out effort to turn the firm around and improve its market position. Use of a turnaround strategy appears to be most appropriate when the firm’s decline is caused by internal actions such as improper strategy selection or poor implementation and execution of a workable. If the analysis indicates the firm’s present strategy is appropriate, then the problem is poor implementation. If the analysis indicates the firm’s present strategy is inappropriate, then the problem is improper strategy selection .
Turnaround strategies attempt to revitalize businesses in a slump. They involve a combination of cost-cutting measures and revenue-enhancing strategies.
Before a firm elects a turnaround strategy , two questions should be asked:
- Does the firm have the capabilities to earn an acceptable level of profits in the future?
- Will the firm’s value after a successful turnaround strategy be significantly greater than its present liquidation value?
If the answer to both of these questions is yes, then the following turnaround strategies should be evaluated.
Danger Signals
The best turnaround is the one that does not have to happen; prevention is a lot better than cure. What are some of the danger signals that indicate impending trouble? John Marris of Booz Allen & Hamilton offers 12 danger signals that are remarkably similar for both industries and companies. Companies that are in turn around situations typically exhibit one or more to the following characteristics:
- Decreasing market share. This is perhaps the most telling signal of a major problem. It may be masked temporarily by sales increases due to market growth or inflation . However, the company’s competitive position is eroding, portending future trouble.
- Declining constant dollar sales, inflation-adjusted declines in sales in comparison to industry criteria (such as sales per square foot of retail space) indicate trouble.
- Decreasing profitability . This can show up as lower dollar profits, lower return on sales or investment , or similar measures.
- Increasing reliance on debt. A substantial increase in debt or the debt-to-equity ratio , or a lowered credit rating can cause significant problems.
- Restricted dividend policies , such as lowered or eliminated dividends. Do not confuse this with actions taken to affect a turnaround, however, once the need is recognized.
- Inadequate reinvestment in the business. Adequate reinvestment in plant, equipment, and maintenance is required for a business to remain competitive. Deferred indicates that the company is mortgaging its future for the short term.
- Proliferation of new ventures. Such actions, if done while ignoring the basic business may be attempts to cover up problems anal a search for a bailout. Diversification should supplement, not replace, the basic business of the firm.
- Lack of planning. Unplanned growth or inattention to environmental changes and strategy is sure to create problems.
- CEO resistant to the ideas of others.
- Management succession problems.
- An overly passive board.
- Inbred management. Management that feels nothing can be learned from outsiders, professional conferences, competitors, and the use is headed for trouble.
Action is Needed
While such danger signals may be present, they are valuable only if recognized and acted on. Many firms ignore such signals until it may be too late. Or management prevents action from being taken. At some point, however, the firm must face the music and someone has to intervene and take charge. Once consensus has been achieved that trouble exists, the turnaround can begin.
Extraordinary powers must be granted to those responsible for the turnaround. The “turnaround team” needs to select and focus on one or two activities offering the greatest opportunity to affect company performance. Singleness of purpose is crucial–the company cannot tolerate business as usual. The cause of the decline must be isolated and corrective actions taken. In turnaround situations, achieving a positive cash flow, not profits, becomes all important. Profit-making, but cash-absorbing, assets may have to be sold to generate cash. In any event, cash outflows must be stopped in the short run, with a goal of restoring profitability as the next step. Curtailing investments and dividend payments are obvious ways to conserve cash. Others are price increases and cost and asset reduction programs.
Turnaround Options
Four major turnaround options exist. Depending on the firm’s position in relation to its break-even point; the following actions may be taken:
- Cost-cutting strategies. If the firm has high direct labor costs, high fixed expenses, or is close to the break-even point, cost-cutting may be most appropriate. Such actions usually take effect relatively quickly.
- Asset-reduction strategies: may be needed if the firm is far from its break-even point, since there is no way to out costs sufficiently. Assets or capacity unneeded in the next two years or so should be the first to go.
- Revenue-increasing strategies. If the firm is close to covering its fixed costs and has low variable costs (such as direct labor costs), revenue increasing approaches such as price increases may be most beneficial. This option is an alternative to asset reduction strategies if the assets are likely to be needed within the next year or two. Keep in mind that revenue-increasing strategies may not pay off as quickly as cost-cutting or asset-reduction approaches.
- Combination strategies. If the firm is covering fixed costs but significantly below its break-even point, a combination of the previous three approaches may be most fruitful.
Whatever action is pursued, the focus must be on short-term cash flow, while minimizing long-term damage. Whether or not a turn-around strategy is required, keeping a low break-even point should be considered essential for any business; therefore, periodic retrenchment may be warranted. The break-even point can be kept low by automation , such as the use of robotics or, in banking, automatic teller machines . Automation provides depreciation, which labor does not. From a human standpoint, it is better to have a thriving business with 30 percent fewer people, than a business with 100 percent fewer people because of bankruptcy .
However, one must keep a core of key, motivated, and talented people. Subcontracting all nonessential activities (such as janitorial, grounds keeping, maintenance, and the like) is one way to keep the organization lean.
In summary, firms would prefer never to have to use turnaround strategies. However, because of the dynamic nature on the environment in which firms must compete, they are often forced to. The major factor causing a firm to use such strategies is declining demand. However, success is possible even in hostile environments, particularly if the firm can achieve the lowest delivered cost position and the highest product, service, and quality position in the industry. If possible, the firm should attempt to gain or defend a leadership position in the industry.
Related Posts:
- Components of a Strategic Plan
- Grand Strategy Matrix
- Strategic Implications of Business Life Cycle Analysis
- The Stability Strategy in Management
- Competitor Analysis
- Alcar Model of Value Based Management
- Key Elements of Strategic Management
- The Strategic Game Board
- Difference Between Business Strategy and Corporate Strategy
- Strategy Diamond - The Five Elements of Strategy
Leave a Reply Cancel reply
Your email address will not be published. Required fields are marked *
This site uses Akismet to reduce spam. Learn how your comment data is processed .
- SOUTHEAST ASIA
- Retail News
- Health News
- Telecom News
- Energy News
- Real Estate News
- Brand Equity
- IT Security News
- Government News
- Hospitality News
- ET TravelWorld News
- CIOSEA News
- Innovation Masters
- Internet of things
- CIO Movement
- Next Gen Tech
- Leadership Circle
- Latest CIO News
- Strategy & Management
IPA usage will increase in credit risk, compliance & customer-facing engines: Deepak Sharma, President & CDO, Kotak Mahindra Bank
Deepak Sharma, President & CDO, Kotak Mahindra Bank believes that a disruptive and emerging technology such as IPA should be given attention before it's too late to gain a competitive advantage with its transformative potential.
- March 14, 2023, 07:31 IST
Sponsored Stories
Subscribe to our newsletter.
Join the community of 2M+ industry professionals
Alleged HDFC Bank subsidiary data breach: The inside story
More organizations' data waiting to be leaked? Here is the inside story as an ETCIO exclusive on the recent data breach at a subsidiary of HDFC Bank
How digital lending has become a game-changer for Axis Bank
Tech mahindra’s use of internal employees rises to 71% in january, women in tech: hits and misses, chatgpt plans an entire ai project for cios: an overview, chatgpt is transformational with wide ranging ramifications: tech leaders, ai powered business will rule the future: gary bhattacharjee, infosys, most read in strategy & management.
Vijay Mahadevan Iyer, Wipro on how account aggregators will enable the future of open banking
Key risks of ignoring the modernization of a data infrastructure: Niraj Kumar, Datametica
Investors, fintech companies help out cash-crunched startups
3 Major enterprise network trends to expect in 2023: Genius Wong, Tata Communications
Top 5 automation trends expected to rule the year 2023
CISOs under pressure: An overview
Evolution of BFSI and serving the new world
The future of digital lending
Trilogue Chat: Driving Intelligent Observability And Agility For A Proactive Customer Experience
Building tech for future: An overview
IMAGES
VIDEO
COMMENTS
turnaround strategies identified. We also provide a contemporary example to illustrate the application of these strategies in the current economic environment. Originality/value: The paper offers practitioners an evidence-based view on effective business turnaround and recovery strategies, in addition to providing researchers with an
Turnaround strategy is about doing different things and attempting to change companies' fortunes by fundamental adjustments in strategy, such as acquisition and divestment. Operating...
Identify effective turnaround strategies. Operational strategies include increasing revenue, reducing costs, selling and redeploying assets, and competitive repositioning. ... Strategic initiatives include adopting sound corporate and business strategies and tactics, setting specific goals and objectives that align with the ultimate goals of ...
(PDF) TURNAROUND STRATEGIES FOR COMPANIES IS CRISIS (on BRQ BUSINESS RESEARCH QUARTERLY) TURNAROUND STRATEGIES FOR COMPANIES IS CRISIS (on BRQ BUSINESS RESEARCH QUARTERLY) February 2017...
Cash will often be required to implement the turnaround strategy and this must also be sourced without delay. Often, unprofitable business units or operations are sold as a means to raise cash. Operations that cannot be sold within a reasonable timeframe may be liquidated. 5. Stabilisation - once the business has stopped haemorrhaging, overheads
To establish clear strategies to reduce operational costs by 15% by (a given date), without compromising sustainability of the mine. The major strategies identified were: 01.) Ensure correct Ore Resource Management 02.) Optimise Power & Water Utilisation 03.) Eliminate Waste - Stores and Salvage 04.) Align Labour Costs (Bonus & Overtime) 05.)
Goals, Priorities and Strategies Outlines the goals, priorities, and strategies to meet the mission 3 -4 overarching goals aligned with mission Priorities, activities, objectives, strategies are in more depth, have more specificity -each goal could have a few different objectives / strategies associated with it
Here is a case study on a turnaround strategy implemented by McDonald's in the late 2000s: Background: McDonald's is a fast-food restaurant chain founded in 1940. By the 1990s, the company had become a global icon with over 30,000 locations worldwide. However, by the mid-2000s, the company faced several challenges, including declining sales ...
Business Turnaround Strategy PDF Business Turnaround Strategies In a business turnaround, you have 3 options: Increase revenue Decrease costs Do both This may sound super simple, but you'd be surprised how many highly qualified people I've had to teach this to. Let's look at each of these business turnaround strategies in a little more detail.
Key elements of our business turnaround approach Total shareholder return lens We focus turnaround projects on TSR--not just operational fixes. Topline growth and strategy are part of every program We emphasize our clients' top-line growth and strategy execution over tactical cost-reduction. Rigorous methodology for rapid, sustainable impact
Business Turnaround Book - Sanlam
Business Turnaround Plan PDF - FREE DOWNLOAD By haroon September 27, 2021 Welcome to the business turnaround blog! I want to bring you the best business turnaround content. If you've Googled, 'Business Turnaround Plan PDF' then you're in the right place. That's a very specific phrase so I've created this very specific post.
Business turnaround strategy is an informal management-led reversal process to prevent a financially struggling or poorly performing business from insolvency and liquidation by returning it back to profitability, and restructuring debt using an out-of-court debt negotiation process that's outside the legal framework.
Turnaround strategy is a process of restructuring and transforming the company from loss to profitability. It allows the company to stabilize its performance by getting back the industrial units to their original units. Now, the success of the strategy relies on the commitment and dedication of the top management.
assets.kpmg.com
According to Low and Venter, a turnaround strategy consist of retrenchment, recovery and revenue growth which can be applied depending on, to quote Pretorius a matrix based on resource munificence (firm's available resources) and causality of distress which can be either internal or external.
Introduction TherecentstoryofChrysler'ssuccessfulturnaroundhighlights thepotentialforcarefullyconceivedstrategicactiontodramatically improveabusinesssituation ...
Take the time to examine your operations and evaluate which elements of your turnaround strategy yield the best results. Continue to develop your strategy as you create new habits that support your long-term goals. Related: 8 Tips for Creating Sales Strategies That Work. Tips for a business turnaround
This paper presents a model proposing that turnaround firms exhibit two classes of response to decline: (a) decline-stemming strategies that reverse the dysfunctional consequences of decline, and (b)… Expand 246 Highly Influential View 6 excerpts, references background
Cost-oriented turnaround strategies include reducing research and development (R&D), stretching accounts payable, eliminating pay increases, reducing accounts receivable, cutting inventory, investment diversification, and reducing marketing activities.
Business Turnaround Strategies. When a firm has experienced a serious decline in its market position, it is a candidate to mount an all-out effort to turn the firm around and improve its market position. Use of a turnaround strategy appears to be most appropriate when the firm's decline is caused by internal actions such as improper strategy ...
Other than creating efficiencies, how does it help redesign customer experiences, and improve customer turnaround time and data governance? We are seeing a convergence of voice, data, and text ...