Sometimes, business might not go as good for your company as it used to. This is the moment when you should intervene and try to improve its financial status. Such a process is called turnaround management, and requires a lot of attention and strategy. Sometimes, the result might not be beneficial for the company as an entity, but it always brings cost reduction as a priority.
What does turnaround management mean?
Turnaround consists of all those processes that help a company recover financially after a bad period. It is some sort of renewal, and makes use of a series of strategies to make the company profitable again, or at least bring it back to solvency.
Turnaround management starts with finding the source of the problem. Then, based on the nature of the problem, the company officials should develop a strategy. There are many analyses and reviews involved but, in the end, the result should be positive for the company.
In some cases, the strategy isn’t always what you have been expected. The situation of a company might not be good at all. In this case, trying to put it back on the track is useless. To make sure you cut the costs and avoid any future losses, you sometimes have to abandon the company and liquidate it.
Causes of sudden company losses
Before having to initialize turnaround management, you should know what might bring your company at a loss. A company starts experiencing trouble if its revenues start getting smaller. When this happens, the company can no longer afford to pay salaries, credits, or costs.
This might be caused by a sudden decline in stock prices, and might lead to both monetary and personnel losses. Anyone and anything can perform turnaround management, as anyone can be the victim of loss. It can either be an individual, a company, an entire industry, or even the economy at an overall level.
Most of the time, the customers can notice that a company is going through a tough time. The difficulties have been reflected by its products and services, whose quality might have dropped a little. This is why turnaround management is essential.
How to start a turnaround
These processes don’t start by themselves, and they need a lot of planning and strategies. Depending on the problem, you can start by cutting the unnecessary expenses, making serious changes in the internal management, and editing the manufacturing processes.
Sometimes, these turnarounds might come from outside as well, even if it happens rarely. When a company is going through a bad period, some external factors might help it. For instance, the company might have suffered losses because some unexpected costs, which now might go back to a low level. Also, this might bring a sudden profit that can solve the situation without much effort.
Turnaround management steps
If you want to improve the situation of your company, you should do some research and respect all the steps of the turnaround process. It’s not an easy technique, but the well-being of the company depends on it. Here are a few steps you can follow to make sure the process goes smoothly.
1. Thorough analysis of the company
At first, you should identify all the problems that brought your company in a bad place. Look at the overall financial situation of the company, and then discover its weak points. You won’t be able to improve anything if you don’t know what goes wrong. Once you’ve discovered all the issues, you can start shaping the strategy.
Meanwhile, it’s important to continue the activity of the company. You should try to reduce the costs as much as possible so that you won’t enter insolvency.
2. Start planning the strategy
Once you’ve identified the issues, you can start building a strategy on how to solve them. This should follow a SWOT analysis, where SWOT stands for strengths, weaknesses, opportunities, and threats. Such an analysis accounts for both internal and external factors.
The internal factors are the strengths and weaknesses, while the external ones represent the opportunities and threats. When making a plan, it’s important to look both ways. This way, you can find a business objective that works in the context as well, and can find out what strategies will be effective on the long term.
3. Identify the action you have to take
After you have devised a strategy, it’s time to learn how to apply it. A theoretical plan is necessary, but then you should proceed to turn it into reality. Draw a list of all the tasks and actions that you have to do to achieve your objective and vision.
However, don’t forget you are not alone in this. Turnaround is a difficult process, and it needs the entire company staff to work for it. Therefore, inform all your employees on the decisions you’ve made. Then, draw a schedule they need to respect, and stick to it.
4. Perform periodical reviews
From time to time, it’s important to see if your strategies work. Take a break and conduct short reviews of your actions and their consequences. If they brought good results, you know how long you should keep them up. If not, it means you should review your plans and objectives. This is an important step that might save you a lot of resources.
Examples of turnaround
As mentioned above, turnarounds might take place at all kinds of scales. Let’s take the individual situation first. A person might be unemployed for a period, while they struggle with financial difficulties. The turnaround happens when this person finds a job and a stable source of income.
At the company level, a business might notice a turnaround after it changes some strategies and its management. This might lead to either a reduction of costs or a sudden increase of the profits. When it comes to industries, they can see a period of growth if some older trends return. Turnarounds can happen in entire economies as well. They occur immediately after recession, during the first gains.
Turnaround management is essential for a company to get back on the right track. Unfortunate situations happen all the time, when businesses have to struggle with sudden losses and a bad financial state. To escape the difficulties, any officials should know how to analyze the situation of their company and how to take the best decisions to save it.
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