Turnaround: when is it necessary and how to do it?

Did you know that even the straining ones can turn over and rise again? Through turnaround, a process of turnaround of a set of measures meant to restructure and strengthen a business firm which has deteriorated and faces precarious situations, which are taken to change its fortune, or put differently, a process of turning around the fortunes of a business.
Being able to identify the point in time at which you should act and the steps required to get your company back to its best help you to clear off any hitch and win once more. However, how do you know when such a process is required?

To know when this turnaround process is needed, and how you should arrange it, keep reading and enjoy the tips!

What is turn-around?

Turnaround is the corporate restructuring strategy applied to restore the financial and operational health of an organization in crisis. It is the process in which the business attempts to recover from its bad situation, and its growth resumes again.

Talking about turnaround, surely one has to think of the word restructuring. This would really mean that the company is going to undergo some deep changes in areas as varied as finance, internal policies, operations, management, and even technology, so as to adapt to a new reality.

This process of general review of the company involves going through all aspects of the business, from the organizational structure to its mission, vision, and values. It finds strategic actions and adjustments in areas that may require the most changes given a careful diagnosis.

However, it is important to know that turnaround is not limited to cost reduction or staff cuts ( downsizing ). Although these actions may be part of the process, its focus is to promote a profound transformation, attacking the root of the problems and supporting sustainable growth .

When is it necessary for the company?

Many factors indicate that it is time to consider a turnaround for your company. A consistent drop in sales, increased debt or loss of competitiveness in the market are some examples. These may be signs that the business is not doing well — and that action is needed to change the situation.

Another warning sign is demotivation in the team and high turnover of employees. If the employees do not have any regard and no prospects of growth within the company, they can even directly influence the productivity of output and results in business.

Secondly, the following factors shall be taken into account: analytical mistakes in performance indicator, badly thought-through processes, and noise in internal communication. And for the external factors, the same is applied: an economic scenario change, increased competition, or even a hurricane.

Pay attention to such signs and consider the possibility of a turnaround in case there are strains within your company’s financial, operational, or management structure. Earlier problems will stand a better chance of being reversed.

What are the essential steps to perform a turnaround?

If you already discovered that your company requires a turnaround, then observe strategic steps on how to do it just the right way. Every step, without any doubt, plays its role in its recovery, from a diagnosis to further monitoring of results.

Want to find out more about the turnaround process? Just follow these steps and learn how!

Analysis of the financial situation

It is marked off as a starting point, an analysis of the financial health of the company. It entails three significant tasks: determining the core causes of losses, measuring the level of indebtedness of the firm, establishing the cash generation capacity of the firm, and outlining working capital requirements, among others.

All this detailed diagnosis will form a basis for designing an appropriate and realistic restructuring plan. With it, the company would better be suited for making decisions based on real data, and therefore better.

Following a diagnosis, the actionable and objective work plan must be outlined. This is essentially presenting definite goals, feasible deadlines, and tangible responsibilities applicable to all stages of the process.

The plan would thus have to include short, medium, and long-term measures that are always aligned with the recovery strategy. Another vital advice I can give is that turnaround is not a sprint. A turnaround is a process that requires planning and patience.

Debt renegotiation

One of the most urgent steps in a turnaround is to sit down with suppliers, banks and other creditors to renegotiate the company’s debts . The goal is to extend terms, reduce interest and adjust the payment flow to the business’s real cash generation capacity.

This measure relieves the pressure on finances and allows the company to have the breathing space to implement the other actions of the restructuring plan. Without it, debts will continue to increase and reach dangerous proportions.

Cost cutting

Although this is not the focus of the turnaround, it is impossible to talk about it without mentioning expense reduction. It is necessary to weigh up all expenses and identify those that can be cut or reduced without compromising the operation.

This involves everything from renegotiating contracts with suppliers to optimizing internal processes — and, in more extreme cases, reducing the number of employees. The challenge is to adapt the cost structure to the company’s new financial reality, without losing efficiency.

Increased revenue

In addition to efforts to reduce expenses, you need to look for ways to increase your company’s revenue. If possible, consider launching new products, expanding into new markets, or reviewing your pricing policy.

The focus should be on generating sustainable long-term results, and not just palliative solutions that provide momentary relief in cash flow.

Continuous monitoring of results

There is no point in implementing all the previous steps if there is no constant monitoring of the results obtained. Therefore, establish clear performance indicators and monitor them closely, making adjustments whenever necessary.

The turnaround process is dynamic and requires continuous vigilance to ensure the company is on the right path towards improvement.

Conducting a turnaround is not an easy task, but following these strategic steps can significantly increase the chances of success. This is a process that requires discipline, focus and, above all, a deep commitment from the entire team involved.