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Ask the Experts: Turnaround for small businesses


Originally written for the FSB, we have answered frequently asked questions about turnaround below, including the practical steps you can take and how it can help your business.

What are the signs that my business needs help?

This depends upon the extent and informative nature of your management information (MI). Often, the MI doesn’t exist or give sufficient information, so you need to work from the headline number(s); this could include declining sales volumes, or margins, but invariably is evidenced by declining bank balances, or increased overdraft or borrowings.

In what areas can turnaround expertise help me?

Depending upon the level of distress, the most important area that turnaround expertise can help with is to stabilise the immediate situation, analyse the reasons for the distress, devise and help implement a strategic plan. They will also help introduce the financial disciplines necessary during any turnaround process and look to see where cash can be generated, by either new funds or better working capital management. Any Turnaround Professional (TP) will know the market and be able to negotiate the most appropriate funding for your business.

What are the first practical steps that I can take?

Any turnaround will be more effective with the help of turnaround professionals, so the first practical step to take is to engage a turnaround professional. But either with, or without a TP, you must produce a realistic and comprehensive profit and cash forecast, and with that engage with all stakeholders. You will almost certainly need their support with areas like time to pay arrangements and ongoing supplies. Once you have spoken to your lenders, you can work out which debts take priority in the short term.

I’m worried about my bank. How should I be working with my lender?

As part of the process described above, your Bank will be one of the main stakeholders. They will want to understand (if they don’t already) how the distressed situation arose, what your plans are to correct the situation, and what implications there may be for the Bank. They may want to transfer the management of your account to another manager who specialises in distressed situations. Working WITH your bank will be very important throughout the turnaround.

Where can I reduce costs?

There are areas a TP will be able to reduce costs, and there are often some small gains to be had straight away. However, usually cost reduction is not the long-term answer to correcting the business problems. A comprehensive business plan will highlight this.

Can I afford a Turnaround Professional?

Clearly this can be viewed as an additional cost, but in reality it is an investment to help resuscitate your business. They need not be a full-time appointment – many operate on a part-time basis as and when needed. A good Turnaround Professional will more than cover their cost over a relatively short period.

If you are in need of business turnaround support, or financial management and business strategy and growth advice, Playfair Partnerships can help. We exist to make a difference in the SME world; our business strategy advice and financial management help enterprises survive and prosper, so our clients can have better businesses and better lives. Please do not hesitate to contact us today.

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