As a business owner you are invariably passionate about what you do, and the management of the business probably consumes most of your time.
As things become more challenging you commit even more time not giving a second thought to the huge personal sacrifices you make to ensure that the business keeps going forward.
However, in an ever-evolving business environment, unfortunately a business sometimes enters a downward phase which, no matter how much hard you work, you cannot seem to reverse the company’s fortunes. There often comes a time when you realise that the company needs a turnaround strategy if it is going to be able to continue to operate and often when this decision is taken the company has limited time to implement those changes.
No one knows the mechanics of the business better than the business owner but under these circumstances the contracting of a turnaround consultant to assist would probably be in the best interests of the company.
While a turnaround consultant must have the company’s best interests at heart, being more dispassionate than the business owner allows the turnaround consultant to have a different perspective and recommend courses of actions which the business owner may be less inclined to do.
Objectives
When contracted to be involved in a company’s turnaround, the turnaround consultant’s objectives must be to:
– Stabilise the company’s cashflow as quickly as is possible
– Conduct an analysis of the company’s affairs to identify problem areas
– Draft a set of recommended actions to be implemented to improve the company’s finances
– Assist with the implementation of those recommended actions.
The turnaround consultant’s involvement with the business is usually limited to a period as short a 3-months but it may extend for a much longer period – up to 3 years in some cases.
Services and interventions
While a turnaround consultant needs the appropriate business experience, as the process is ultimately based on improving the company’s finances, the turnaround consultant needs to have a strong knowledge of financial matters.
Some of the responsibilities a turnaround consultant will assume could include:
– Analysing the company’s cashflow and preparing projections to understand the potential of the impending problems
– Developing a business model which is based on various assumptions that may be considered by the business owner/s
– Negotiating with various stakeholders such as other shareholders, creditors/financiers, employees, or their representatives.
– Development of marketing plans, including pricing strategies
– Assessment of current operations and performance indicators
– Assisting with the raising of capital with various institutions
– Assistance with the implementation of operational changes
It is apparent that the scope of a turnaround consultant is quite extensive which is why they often work in collaboration with other experts.
Conclusion
Turnaround consultants often work in stressed environments where time is of the essence.
Plans need to be drafted as a matter of urgency and the decision-making process must be efficient and definitive.
Unfortunately, the consequences of not engaging a turnaround consultant often leads to a business having to proceed to an enforced turnaround process in the form of business rescue where control of the company is surrendered to a business rescue practitioner or worst where the company is liquidated.
The earlier a turnaround consultant is engaged the more potential options the company has and the greater the chance that the turnaround will be successful.
