What is business turnaround?

Businesses are constantly moving in relation to their competitors, whether it be forwards or backwards, generating greater profits or deeper losses. If a company is moving backwards, they need to make fundamental changes quickly, to have any chance of making a comeback.

After a period of poor financial performance, if a business’ situation begins to improve and recover, it is known as a turnaround.

What is involved in a Corelco business rescue and business re-structure?

Typical ways to formulate a business turnaround include focusing on a smaller number of products, selling assets, altering the workforce, adjusting prices, and refinancing.

It is important to note that a slight dip in profits, or general business success, does not call for drastic change. A turnaround is generally only needed when there is a prolonged period of poor results, and when focus has shifted from managing growth to managing cash flow.

When attempting to undertake a turnaround, the business must be broken down into parts and analysed. The key things Corelco take into account include how best to obtain a sustainable competitive advantage, how you can improve your margins, and what returns you are getting on your resources and property portfolio.

The turnaround process has two main aims: to quickly generate cash and to create maintainable and long-lasting business.

The usual process is as follows:

• First, analysis is undertaken to ascertain how much cash is available, how much is needed, and where it is currently being spent.
• Following this, a review of all components of the business takes place, including how the business delivers value to its customers.
• Next, decisions are made about what fundamental, and potentially large, changes to the business will occur, which are then communicated to any affected customers, lenders, distributors and suppliers. These changes can involve marketing, organisation and financing.

Turning things around

If you suspect that your business is failing, here are some of the biggest and most important changes you can make:

• Ensure a positive variable contribution

This means that the price you receive for your product must exceed the cost to you of delivering each unit. If your customers are priced differently, then analysis of this must be done on customer level.
If you find that your products have a negative variable contribution, it is important to increase the price, decrease the production cost, or stop selling that product altogether.

• Reduce your costs

An important first step in cutting your costs is to eliminate all non-essential spending. Following this, attempt to reduce the cost of utilities and rent.
Depending on the severity of your situation, cutting costs may involve reducing your staff or, at least, their hours.

• Prioritise payables

If you owe more money than you actually have available, then it is advisable to prioritise the order in which you pay people back.
Start by paying those who are vital for keeping your business open, such as employees. Then, focus on paying items which can result in large fines if paid late, such as taxes. Third, prioritise late payments, and finally worry about payments which are not yet late.

• Build a detailed cash-flow plan

Once you have worked out who you are paying and when, it is important to calculate the amount of cash you will have left and the receivables you anticipate collecting. This will allow you to create a detailed plan that shows clearly who you will pay, when you will pay them, and how much you will pay them.

• Communicate with creditors

Calling your creditors to explain the situation and make them aware of a pro-active plan devised by Corelco to improve the financial situation and pay them back, will often encourage them to work with you.

Call Corelco on 0203 773 1417