How do you know if your business is in a turnaround situation...and what should you do about it?

Business can be tough. Some business owners dig in when times get hard. They work longer hours, get more stressed, do more of the things they have always done. But sometimes that isn't enough. The business keeps trading unprofitably, suppliers demand payment and the business finances get worse.

Spotting the signs of a struggling business early enough can make the difference between survival and failure.

What is needed is a radical review or 'turnaround plan'. My own professional body, The Chartered Institute of Management Accountants describes this as 'a set of actions required to save an organisation from business failure and return it to operational normality and financial solvency'

There are 6 stages in a turnaround situation:

• Management accept the need for change
• Carry out a business review and identify underlying problems
• Prepare a recovery plan
• Implement the plan
• Stabilise the business
• Embed the change

Often an external consultant or turnaround specialist can help senior management make the challenging decisions which will be needed. There is a an Institute for Turnaround which recognises the specialist nature of the skills required to deliver this kind of work. Finance professionals also have a key role in supporting a turnaround - reporting on the financial status of the business and the areas of poor performance and setting up reporting systems to track improvements. Good financial forecasting models are also essential.

I have been involved in several turnarounds in my role as an external accountant, usually working alongside a turnaround specialist and the business owner. The most successful outcomes have been where the business owner has accepted the need for change at an early stage and put their full weight behind a turnaround plan. The few instances where management have just carried on doing the same thing and hoping for the best have inevitably not ended well

The tell tale signs of a business which might need a 'turnaround' remedy are:

1. Shortage of cash
2. Pressure from suppliers for faster payments
3. Showing continued losses in monthly or quarterly accounts

If your business is in this position taking urgent and radical action is probably required. If you would like an informal discussion to see how we can help please get in touch using the link below

www.base52.co.uk/services/consultancy