Companies can find themselves in trouble for a variety of reasons. Some involve internal challenges like the failure of a major project, poor sales, ineffective financial controls, lack of data for good decision-making. Other reasons can be external, like natural disasters, change in regulations, or economic recessions.
No matter why a company becomes distressed, the basic elements of a turnaround strategy remain the same. If you’re involved with a troubled company, here are 8 turnaround tactics you should know.
1. Focus on Cash First
Nothing will destroy a company faster than an inability to pay its bills. Get back to the basics. Focus on how to regain steady cash flow over the next three months and give yourself breathing space to do what else needs to be done.
2. Find an Alternative Lender
Companies in need of a turnaround may not be able to access traditional bank financing, with its strict set of financial parameters. An asset-based lender, for example, can be more flexible in providing assistance because they use physical assets as collateral. If your company owns valuable equipment, inventory or accounts receivable, an asset-based lender can work with you on a plan to move out of crisis.
3. Use All Your Resources to Analyze the Problems
Don’t assume you know what the problems are. Get input from your stakeholders. You may be surprised at what you can learn from meeting with employees individually. Ask about company culture, communication, management and day-to-day processes. Also talk to your customers about any issues they have with service, products or your brand. Ask questions of vendors and suppliers, too.
4. Use All Your Resources to Find Solutions
Once again, get input from a variety of sources, especially those with business and finance experience. Your board should be a resource for industry and risk-management knowledge. Financial sponsors are generally well-versed in turnarounds and will develop strategic options. If you are working with an expert lending team, especially one experienced in dealing with companies in transition, they can be a valuable resource for funding solutions.
5. Be Transparent
If you try to hide problems from employees, suppliers, investors, lenders or customers, they will not be supportive when they finally find out…which they will. The best approach is to craft a simple, straightforward and truthful “change story” that will get your inside people behind the changes that will need to be made and show your other stakeholders that change for the better is coming.
6. Define Your Plan
You will probably need bold actions in multiple directions to get your company back on track. Some proven approaches include increasing revenue, releasing assets that are performing poorly, lowering costs, making strategic purchases, managing inventory more effectively, restructuring teams and automating manual processes. But what you do and how you do it will depend on your individual circumstances.
7. Build Traction With Quick Wins
Starting with goals that can be accomplished quickly will help get everyone on board with the plan and reassure all your stakeholders. An independent asset-based lender can close quickly on the credit facility you’ll need to stabilize cash flow and ensure your immediate bills are paid. This is a very positive first step.
8. Innovate
Companies that don’t continue to innovate over time don’t survive. A transitional period is a perfect time to think outside the box, because it’s a time when people are willing to try things they might otherwise not consider. Improve company culture, make operational changes, add or change products, fix your branding approach…now is the time. An innovative asset-based lender can maximize your liquidity, enabling you to invest in opportunities that can bring your company to a new level of success.
Gibraltar’s client-centric approach to creative, responsive financing solutions has supported viable growth for businesses in transition in a variety of industries. If you are a company considering a commercial loan or a private equity sponsor seeking turnaround financing for a sponsored portfolio business, talk to a member of Gibraltar’s expert sales team to learn how asset-based financing and our extensive experience can help.
