What Is a Business Turnaround

Turnaround Meaning in Business

Looking at a business turnaround, there are two different types, each with its own different strategies that can help to turnaround a struggling business? You can never assume that there is only one right answer or strategy to a particular problem.   Each business has its own unique set of problems as each business has its own distinctive ‘recipe’ for the way it runs and operates. It is dangerous to believe that what worked for a similar business will work for yours.

By understanding what a business turnaround realy is and the different options available makes it easier to chose the right one for your business.


Business Turnaround Definition:

Business turnaround is an informal management-led reversal process to prevent a financially struggling or poorly performing business from insolvency and liquidation by returning it back to profitability, and restructuring debt using an out-of-court debt negotiation process that’s outside the legal framework.

Business Turnaround Meaning

Business Turnaround Meaning

What Is A Business Turnaround?

Business turnaround is the processes needed to bring about those changes necessary to solve a business operational, strategic and financial problems that will restore the struggling business to its former financial health and viability.

The process is normally driven by the business owner(s) with the focus on improving management, profitability, cash flow, productivity and revenue. The business turnaround process is normally used in the early stages of business decline, poor performance and financial distress.

Funds are generated internally to insure the business has sufficient cash to see it through the next few months while a business turnaround plan is implemented.

Business Turnaround Types

The three main terms interchangeably used for business turnaround types are:

  • Change Management
  • Turnaround Management
  • Risk Management

They all meaning the same thing when it comes to SMEs and for the purpose of this article, and to keep things simple as possible I will define “business turnaround types” into two main groups.

  • The Strategic Business Turnaround (profit & cash flow improvement)
  • The Business Rescue (financial restructuring and debt reduction)

Business Turnaround vs Business Rescue: The Difference?

  • The process is owner-led
  • Objective is to save the business by returning it back to profitability
  • It’s an Informal out-of-court debt restructuring and negotiation process that’s outside the legal framework.

With a Business Rescue

  • The process is creditor-led, where creditors respond to breach of payment agreements
  • Objective is financial restructuring and debt reduction under The Companies Act.
  • Followed by formal legislated proceedings

It is dangerous to believe that what worked for a similar business will work for yours.

Never assume that there is only one right answer or strategy to their particular problem.   Each business will have its own unique set of problems that will have to be dealt with individually; as each business has its own distinctive ‘recipe’ for the way it runs and operates.

To determine which one will be suited for your situation. You may need to do a business performance analysis that includes an insolvency and viability tests. If you find that any of the above tests are positive for your current business situation, it is vital that you take action as soon as possible to address the insolvent position by speaking to a professional.

What Is Business Turnaround Rescue?

Business rescue will always be preferable to an insolvency and liquidation process – for all stakeholders. (Judicial, Liquidation) The principle behind a rescue model is not necessarily to save the business by returning it back to profitability, but to reduce the business financial obligations and save the business existence on a solvent basis. This is may be done by restructuring the undertakings, disposal of some assets and equity injections of a business through formal legislated proceedings, under The Companies Act.

Business Analysis

Business Analysis

The 7 Steps to Business Turnaround 

If you follow these 7 proven turnaround strategy steps, you don't have to worry about your financial future. In this article  you will learn a step-by-step proven process that will turnaround your business, so you can survive the temporary short term "crises", regain your profitability, confidence, and save your businesses. This process works in any business, but was specially designed to work in smaller businesses, and are not based on some theory or turnaround methods used by big companies.

1. Discover your position and what caused the problems you are dealing with.

2. Making sure that everybody fully understands, commit and support the situation. 

3. Prepare a realistic turnaround plan your creditors will support.

4. Stabilizing the business finance, maintain positive cash balance while creating a highly profitable core.

5. Increase Profitability - Focus on profits and cash flow - Not revenue. 

6. Increase Sales - Without spending more on advertising

7. Implement your business turnaround strategy steps with precision and consistency.

The same turnaround strategy steps can be used to take a very successful business to the next level, or help an underperforming business to reach its full potential.

Download More Turnaround Resources

Thanks for reading, I hope you found it valuable and helpful.

PS: If you would like me to personally help you find the best immediate solution for your business. You can contact us for a free crisis strategy sessions during this "lock-down" … Just go to "free crisis strategy sessions"

About the Author Hans

Hans had 40 of his own businesses over the last 30 years and is famous for creating fast-growing businesses” He is an author, speaker, coach, and consultant and a specialist in business optimization and turnaround, helping smaller business owners eliminate business limitations, threats, and growth challenges in achieving their sales, profit, cash flow, and income goals with sniper precision.

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