3 key myths of turnaround management

With many businesses struggling to stay afloat in the current climate, businesses have had work hard to identify how they can adapt all aspects of their operations in order to keep pace with the changing needs of the marketplace.

This can include anything from their business model and corporate strategy to their financial management. For some firms, a business turnaround plan may provide them with the support and perspective needed to make the transition from an underperforming business to a successful one.

Here are some common misconceptions about the turnaround management process.

1. Turnaround management means a business has reached the end of the road

Drawing on turnaround management does not mean the demise of a business is imminent. Instead a business turnaround can be seen as a proactive measure that a firm can take when it is showing the early signs of financial distress below, as outlined by the Chartered Institute of Financial Management (CIMA).

• Borrowing near to the maximum level available and a significant shortage of cash
• Suppliers make demands for payments to be made faster
• A business is consistently losing money each month

2. Turnaround management takes the power out of a company’s hands

When carrying out a business turnaround, an insolvency practitioner will work alongside a firm to arrive at a solution that reflects the needs of the businesses concerned, with the business still having the overall authority on any changes that will be implemented. As an example, while insolvency practitioners can help to find new management to help drive the business forward, it can also work with the existing management team to formulate a new plan for the business.

3. Turnaround management will only help a business in the short-term

While the immediate goal of a business turnaround is to prevent a business from going into liquidation, the number of far-reaching changes put into place as a result of a turnaround strategy may actually help a business to significantly overhaul its operations and objectives, leading to sustainable success.

These changes can include anything from operational restructuring to the creation of a comprehensive business plan.

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