Guide to turning around a struggling business
There is no doubt that the way in which the recent economic crisis placed severe restrictions on cash flow has had a far more damaging effect on small businesses than it has on large organisations. This is illustrated by the way in which job creation has proceeded at a much faster pace amongst larger companies than it has amongst small businesses, which are traditionally considered a reliable source of job creation. Mark Zandi, the chief economist at Moody’s Analytics, explains that this is largely because of the way in which the squeeze on credit, in which it became harder to borrow and maintain a healthy cash flow, affected small businesses to a much larger extent, paralysing them in the process.
These issues have taken a particularly high toll on struggling businesses, even if their future had by no means yet been decided. In such cases, concerted efforts to restructure and turn around the business need to be made as quickly as possible. If problems and issues are identified at an early stage and dealt with immediately, they become much easier to isolate, preventing their spread to other parts of the business and stabilising the company and its operations. However, establishing exactly how a company should restructure and turn around their organisation can be difficult and, to a large degree, will depend on their specific circumstances.
Recognising the need for change
Possibly the hardest aspect of restructuring is identifying the issue in the first place. Though the effects of problems can usually be observed relatively easily, establishing exactly what is causing them is another matter entirely. Understanding exactly how capital is moving through your business, where it is facing resistance and at what points it is leaving the company, are all essential to isolating the problems. Consequently, the first stage of restructuring should involve ensuring that all financial records are up to date, that they are specific and detailed enough, and that they are sufficiently understood. When this is complete, it should become easier to trace problems back to their source.
The creation of extensive reports detailing where problems are believed to exist in the business allows those in charge to develop solutions that are tailor-made to issues faced by the organisation. In the business world, there are no ‘one size fits all’ solutions and the complexities and subtleties of any market should be respected by working hard to create specialised restructuring plans. Though there will be issues that affect whole industries and markets, the way these issues affect a particular business will be unique to the specific practices and organisational structure of that company. Consequently, the ways in which they will overcome any issues will also be unique.
Plan the scale of your restructure appropriately
Restructuring is by no means a small undertaking and will have important repercussions throughout the business. With this in mind, it is important not to forget the human element of any organisation and to consider precisely how it will affect them. Periods of change often cause concern amongst a workforce, particularly in times of economic difficulty, so it’s vital that a healthy balance is struck between informing staff of developments and ensuring that they’re motivated and continuing to work to the best of their abilities. Though complete reassurance may not always be possible, such situations need to be handled with tact, respect and truthfulness. Clients and customers may also raise concerns, all of which need to be handled quickly and efficiently, leaving no doubt in the minds of those you are working with that any changes will not negatively impact business relations.
Bringing the professionals in
When it comes to making structural changes and attempting to turn around the business, many organisations find that they have neither the depth of knowledge required by such a specialised task, nor that they are comfortable making decisions without advice. Fortunately, there are always plenty of opportunities to request advice or professional expertise from those that have made business restructuring the focus of their trade. Industry experts will usually offer you intelligent advice that deals with your precise situation, suggesting ways in which the situation can be changed for the better and how an organisation could implement them successfully.
There are an almost infinite number of problems that a business could face during its existence, all of which require an intelligent and well-designed response if a business is to succeed. Though poor cash flow is just a single example, it is an issue facing a large number of small businesses today, and one that will cause the failure of more than a few. Turning around a struggling business is both difficult and demanding, and it’s important to remember that those working within the organisation won’t always have the answers. With this in mind, it may be worth thinking about the ways in which professional advisors may be able to help turn your business around.