Your business is busy, but there never seems to be enough cash. You’re working harder, yet the debts aren’t getting smaller. Another strong sales month might help, but will it fix what’s actually causing the pressure?
That's where a business turnaround starts. Before cutting costs or chasing new funding, you need to understand why the business is under pressure and whether there's a realistic way forward.
Business restructuring can be part of that work. But a turnaround strategy usually needs more than a new repayment arrangement. It means looking at how the business makes money, where cash gets stuck and what needs to change.
What is a business turnaround?
A business turnaround is the work involved in stabilising a struggling business and improving its ability to operate sustainably.
It might involve reviewing prices, changing the mix of work, improving cash collection or dealing with debt. Some businesses may also need a formal business restructuring process.
There’s no single plan that suits every business.
Where should you start with a business turnaround?
When bills are piling up, it’s natural to focus on getting through the month. But looking only at the next payment can make it harder to see what’s causing the pressure.
6 areas to review when planning a business turnaround
- Cash flow: What needs to be paid over the coming weeks, and when will customers pay?
- Profitability: Which products, jobs or customers make money once their costs are included?
- Debt: What does the business owe, and can it manage the repayments?
- Working capital: How much cash is tied up in unpaid invoices or stock?
- Capacity: Can your team deliver the work already promised, at a margin that makes sense?
- Financial records: Do you have current reports and forecasts to support decisions?
A cash flow forecast can flag an upcoming shortfall. Job or product profitability reports can pinpoint where margins are being lost. A full order book can look reassuring, but if every job is underpriced, taking on more work may increase the pressure.
Your accountant or business advisor can help you work through these questions and tell the difference between a short-term cash gap and problems in how the business operates.
What needs to change in a business turnaround?
Once the pressure points are clearer, you can start testing possible changes. That might mean reviewing prices and margins, improving how quickly customers pay, adjusting costs or changing the mix of work. If jobs aren’t profitable, more sales won’t solve the problem. Review how they’re quoted and which work the business accepts.
Where does debt restructuring fit?
If debt is part of the pressure, make sure you understand what’s owed, when payments are due and what the business can afford. Debt restructuring or refinancing may be worth exploring, but neither will fix an underlying lack of profitability. Get advice before making commitments or offering security.
The details matter. "Improve cash flow" isn't much of a plan on its own. Set out what will change, who’s responsible and when you’ll check whether it’s working.
You’ll also need to allow for the cash needed to make those changes. If earnings take months to improve, the business still needs a realistic way to meet its obligations in the meantime.
What business restructuring options might be available?
Some businesses may be able to make operational or financial changes while continuing to trade. Others may need to discuss new terms with lenders or creditors, look at refinancing or consider a formal process.
Small business restructuring
Small business restructuring is one formal process. It allows directors to stay in control of day-to-day business activities while working with a registered restructuring practitioner on a plan for creditors. There are eligibility and compliance requirements, so get advice before assuming it’s an option.
Voluntary administration
Voluntary administration is another formal process. An independent administrator takes control of the company and investigates its affairs. Creditors may consider a deed of company arrangement (DOCA) to deal with the company’s debts. If a DOCA isn’t proposed or accepted, the company may proceed to liquidation.
These options aren't steps every business moves through in order. The right option depends on the business’s position, its eligibility and whether it can keep trading. An accountant, lawyer or registered insolvency practitioner can help you understand what may be available.
Who should be part of a business turnaround?
A turnaround touches several parts of a business, so it helps when the people advising you are working from the same information.
Your accountant and business advisor can assess cash flow and profitability, test forecasts and track progress. Your lawyer can review directors' duties, creditor issues, contracts and the legal implications of proposed changes.
A finance broker can assess whether suitable funding options are available. If a formal restructuring or insolvency appointment is needed, an appropriately registered practitioner will also be involved. It helps to understand what each advisor is responsible for, and which decisions remain with the directors.
Find a way forward for your business
If your business is under pressure and you’re unsure where to start, BlueRock’s accounting , business advisory and law teams can help you understand what’s driving it and explore your restructuring and turnaround options. Our finance team can join the conversation where funding advice is needed. Get in touch via the form below.
Disclaimer: The information in this article is intended as general information only and should not be considered as advice on any matter and should not be relied upon as such. This information has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information before acting or seek advice before making any financial decisions.
