When a business gets into trouble it is often tempting to simply throw in the towel and go and do something else instead, however there is an option.
Business turnaround is the practice of taking an ailing company, bringing in experienced and knowledgeable external support and enacting a recovery plan to put the firm back on the straight and narrow.
The first action directors need to take is to admit that they need a little help. It sounds easy but it’s a big step emotionally and a difficult one to take.
Turnaround specialists are generally insolvency practitioners or independent consultants who have made their profession the rescue of a sick business.
It’s good idea to get the input of an insolvency professional as they will be able to advise the directors on the chance of wrongful trading or trading whilst insolvent.
Once called in the turnaround expert will speak with the directors and build up a picture of what has happened to the business, its history, the background of the directors and the prospects if things carry on as they are.
This background information is useful in helping to inform the plan going forward.
The specialist will also speak with the directors regarding their wishes. It may well be that they simply want to leave the business and are looking for closure, in which case a managed insolvency and liquidation may be the option.
It is also possible that a Company Voluntary Agreement or a Pre pack phoenix plan may be options. All of these will be considered by a qualified insolvency practitioner who will be able to advise the company as to the best way forward.
If some or all of the directors want to carry on then the consultant will need to know what the eventual aim is. Although it sounds obvious that the business will simply want to trade profitably it may be that there are aspects that the directors don’t enjoy or that some directors may wish to exit the business.
Once they have completed an assessment of where the business is then the professional will be in a position to recommend a course of action or a number of options to the directors and owners of the business.
Turning around a business is a matter of identifying the ‘good’ parts of the business and optimising them and conversely spotting the ‘bad’ parts and eliminating them wherever possible.
If the company is saveable in its present form then the turnaround consultant will produce a budget along with a cash flow forecast in concert with the directors. There’s simply no point in imposing these on an unwilling business so these will be produced with full buy in from the people who will be ultimately responsible for delivering them.
It is also most likely that the consultant will suggest more controls over expenditure and will require better accounting and information systems to be put in place. Accurate and timely information is vital to allow directors to effectively manage their business.
The consultant may well need to speak with creditors and suppliers of the company together with any other interested stakeholders. It is sometimes possible to gain a little breathing space from creditors whilst a plan is put into place. Often people that are owed money are eminently reasonable as long as they are kept informed.
As the business returns to profitability and the turnaround consultant can see that the directors are enacting their plan then they will begin to take a back seat and more of a ‘watching brief’ until the day when the business can continue on into a profitable and secure future.
It’s exceptionally important that companies in trouble are helped by qualified and experienced professionals. Turning around an ailing business is not an area that should be left to chance and bringing in an insolvency practitioner at an early stage will give the plan the best chance of success.