If you are dealing with periods of uncertainty in your business, you may be asking what you should do next. The great news is that it does not need it is necessarily time for you to close shop – instead, you should focus on what you can do to get back on track.
This is where a turnaround strategy comes in. A good turnaround will help you recover from financial instability, identifying the problems and finding appropriate solutions. As a result, you can minimise the symptoms, such as falling revenue, profit losses and limited cashflow, as well as prevent insolvency or worse bankruptcy.
To get the results you want, you will need to implement a suitable strategy that will effectively fix the issues and place yourself on a steady footing. The plan you choose should make your operations financially sound and alleviate the strain on your operations while using appropriate lending options to make it actionable.
In this blog, we have identified five of the most effective strategies for business turnaround and how they can help you, as well as the role turnaround finance plays.
- Streamline operations
- Take out a company voluntary arrangement
- Improve your offering
- Utilise innovation
- Revitalise and restructure
Streamline operations
When businesses are experiencing financial difficulties, it is often caused by falling sales and rising costs. Consequentially, cashflow will under pressure, which leads to further problems such as inability to pay for supplies, services or staff salaries. In this scenario, immediate work needs to be done to address the balance, ensuring that what goes out does not exceed what is coming in via sales and revenue.
The quickest way to redress the balance is to cut costs. In most cases, this means streamlining your operations.
Start by reviewing your operational costs and determining any labour, material and expenses that can be eliminated. You should also consider any overheads that could be lowered: this may mean switching to cheaper providers for energy and supplies, looking at sales and leaseback on any owned assets or reducing staffing levels.
Once you have trimmed away the fat, focus on what you can do to make your operations more cost-effective. An example of this would be implementing a green initiative across your business, which would seek to reduce energy use while maintaining productivity. As a result, you can cut costs as well as gain positive publicity for being eco-friendly. Another option might be outsourcing specific processes to external companies, thereby removing the associated running costs from your business in exchange for a service fee to the external provider.
By undertaking cost-cutting measures, you will be able to lower your overheads and free up working capital. However, by reducing costs in a clever and considered way, you will still be able to ensure productivity, meet demand and assist recovery.
Take out a company voluntary arrangement
If your company is struggling with debt, a company voluntary arrangement (CVA) may help. A CVA is an agreement with your creditors that you will pay off a proportion of your debt – as part of an arrangement – to prevent them from taking further legal action. For example, you may agree to pay off 25% of your debt under the CVA agreement over a set period normally 5 years, the rest of the debt is written off assuming that the creditors agree to the arrangement.
The CVA will cover all your creditors under one proposal. So, if you owe multiple companies, they will be bound into the same agreement.
A CVA essentially offers a clean slate from historic debt, while leaving control in the hands of the company directors. As such, it is an effective turnaround measure, allowing an enterprise to move forward and focus on rebuilding itself.
If you are undertaking a CVA, it is essential that you stick to the terms and that you avoid incurring further debt beyond that covered by the CVA. By doing so, you will be able to create a stable financial foundation for your business and allow it to regrow.
Improve your offering
Another way to turnaround your business is to focus on how you can provide value to your customers. This means taking an introspective look at your existing offerings, such as products and services, and identifying ways they can be improved.
It is vital to put yourself in the shoes of your customers and understand what it is they need. Competitor research, market data and consumer analysis will help you to do this. You will then be able to address pain points and gain the edge over your competitors.
Improving your offering could include adding new products to your range or providing additional services. It could also involve adapting internal processes to ensure higher quality, diversifying your customer base, repositioning your brand and increasing customer satisfaction through customer service. Essentially, it is any way you can make your business better.
By effectively adapting your offering, you will be able to provide value to customers, leading to increased demand and sales. In turn, this can lead to better market share and revenue, which can be the saviour of your company.
Utilise innovation
Implementing innovation into your business does many things: it can streamline your operations, increase quality and accuracy, improve products and services and target a broader range of customers. It can also reduce costs by allowing you to make processes more efficient.
Examples of innovation could include introducing new equipment, utilising creative solutions and processes to logistical problems, using new platforms (such as for sales and marketing) or implementing technology.
All of these will require funding to become a reality. Grants and investment may be appropriate solutions for this. Alternatively, cashflow management solutions will allow you to release working capital into your operations that can then be invested elsewhere, such as in innovation.
Is it possible that you are sat on an unclaimed R & D tax claim? Businesses are constantly innovating, but what one person considers innovation, another takes for granted and so it is possible that you may have a claim. Most people think of companies in software, technology or manufacturing industries as innovators, but it also covers anyone who is ‘innovative’ and produces a product of some kind.
Revitalise and restructure
There may be times when the best route forward for a company is a complete restructure.
The first step of a restructure is identifying the causes of the issues within your enterprise by undertaking careful analysis. Once you have found the problems, you then need to determine the appropriate solutions to fix them. This should all be incorporated into a turnaround plan that should be followed carefully as your business recovers.
You will also want to re-evaluate your business model and vision and ensure that it is fully functional so that you have the core needed to allow recovery.
As you may expect, restructuring of a company requires appropriate funding. Turnaround finance helps with this, by putting you in touch with relevant lenders – such as investors or lenders – who are willing to provide you the funding you need.
It is essential to restructure your business in a way that considers the problems that exist and ensures future success. By doing so, you will be able to revitalise and re-introduce profitability, as well as convince lenders that you are eligible for finance to support your turnaround.
Get advice
There are many options for turnaround if your company is struggling. The option you choose should be tailored to the unique requirements of your business and the solutions needed to fix the issues that exist within your operations.
If you are experiencing problems within your enterprise and aren’t sure what to do next, we can help. Our team of experts have experience in supporting companies facing a range of challenges. As such, we are able to provide appropriate guidance as to how you can turnaround your business and help you shape your strategy.
We have access to a network of turnaround finance providers, allowing you to get the funding you need to implement your strategy correctly. We will also work with you to get your business plan in good shape, so you are able to win over the funding you want.