Services for Growing Businesses

Turnaround

Continuum are committed to helping ailing businesses to survive and prosper.

Wherever possible, our aim is to provide the management of an ailing business with practical turnaround solutions. We combine our own skills and expertise with those of the existing management and professional advisers. Our team includes specialists from different disciplines and brings together years of experience in this field, from the provision of intensive care management to access to turnaround finance.

The trick is not to let things reach the intensive care stage. Business failures are a bit like fires. Something smouldering may be difficult to see but relatively easy to put out with little risk if caught early. Once a fire is really ablaze, it is much more obvious but also much more difficult to deal with. DON’T LEAVE IT TOO LATE TO CALL IN THE FIRE BRIGADE.

What causes business failure?

There are really four types of business failure:

The start up that never does. Sadly, most businesses cease trading within the first three years. This may be due to the market for the product not being as large as originally perceived, difficulty in obtaining funding or a lack of resources meaning that a relatively small setback can prove fatal.
Overtrading. The business grows faster than the cash resources can support.
Catastrophic failure. The business may be sound but ‘falls off a cliff’ due to the impact of a significant event, often outside the direct control of the company. Examples include major fraud, lost litigation or a sudden change in regulations.
General Decline. Most failures follow the ‘business decline curve’. A business that is underperforming starts to become distressed and, as the decline steepens, falls into crisis and eventual failure.

How do businesses get themselves into these situations?

Our experience highlights five main contributing factors to most ‘normal’ business failures:

Management problems. The autocratic leader driving the business into the ground whilst driving away anyone who tries to disagree; the board dispute that has led to civil war; the lack of anyone who really understands what the numbers are telling them; the family company run in the interests of the family members and not of the business.
Strategy challenges. Failing to detect changes in the market or customer demands; changes in technology that mean reinvesting or moving on; changes in competition which require improved efficiencies to keep the cost base competitive.
Lack of financial control. Cash has become tied up in excess stock or debtors; management do not have timely or accurate financial reporting; no accurate costings to really determine how much margin is being made in different areas of the business.
Lack of operational control. Hard issues such as up to date machinery and efficient factory layout or soft issues such as organisational structure and staff management.
Big projects. Anything that adds extra disruption to the business while consuming cash and management time can prove to be the straw that breaks the camel’s back. These may include the problem acquisition, the new computer system, the new product launch and the premises move.

What is involved in turning a business around?

At its simplest, turnaround is about reversing the decline curve and by doing so restoring stability to the business and regrowing its value.

Spotting the problem is the first step. The starting point is for management or its advisers to spot that the business has a problem that needs to be fixed. Once identified, the next step is to put together a stabilisation plan setting out how to stabilise the business and return it to health. Finally, the execution of the plan is the crucial task - the plan needs to be made to happen!

What help can a turnaround practitioner give?

The business will need help with an analysis of the position, an experienced eye to determine how deep a potential crisis may be, and an assessment of the options and informed judgements on the best measures to implement.

Individuals who can cope with challenges and difficulties in a professional way are vital to any turnaround. The help provided by a turnaround practitioner is therefore generally very hands-on in nature. We are the ‘doers’ who drive through the change.

If any of the above strikes a chord at all, don’t wait and hope. Call us for an initial health check. If caught early enough, most problems are readily resolvable.