Best Practices for Turnaround Restructuring: Getting Your Business Back on Track

Today’s businesses face constant challenges from changing customer expectations and competitive innovation to employee development and retention, to macroeconomic changes. These situations can result in financial stress, affecting growth and stability, and can result in a crisis for the business. The answer to getting the business back on track to a healthy and successful financial future often requires a company to go through a complete turnaround.

Determining the best turnaround restructuring path for a struggling business is a complex process that requires a thorough analysis of the company’s current situation. And with the ever-evolving landscape of financial services, the need to navigate client turnarounds while minimizing risk has become paramount.

JACO Advisory Group has years of experience analyzing the financial, operational, and strategic aspects of mid-market, closely held, and family-owned businesses. We are committed to working with our customers, and sometimes their banks, to implement a set of comprehensive best practices to manage these situations successfully.

The foundation of any turnaround effort is a thorough understanding of the current situation. The engagement begins by conducting a comprehensive assessment of the company’s current financial position, operational efficiency, market standing, and competitive landscape. This is accomplished by:

• Performing a cash flow analysis to understand short-term liquidity challenges and develop cash flow projections to estimate future financial obligations and possible cash shortfalls.

• Developing a debt assessment to understand debt structure including terms, interest rates, and covenants, and evaluating options to renegotiate terms with creditors to alleviate immediate financial pressure.

• Evaluating the company’s operational performance including operational processes, supply chain, workforce, and overhead costs. This also identifies areas for cost reduction, efficiency improvement, and potential divestitures of non-core assets.

• Performing a market analysis that assesses the company’s market position, customer preferences, and competitive landscape. When done correctly, this analysis likely will identify opportunities to evolve the business model, enter new markets, or expand products and service offerings.

Conducting a comprehensive assessment of the current situation will produce hard data to guide the next steps in steering the business in the right direction. Depending on the situation’s complexity, bringing in business advisory professionals, such as JACO, is strongly recommended at the beginning of an engagement to ensure the quality and depth of the assessment necessary for successful, long-term organizational changes.

Based on the insights gained from the assessment, JACO advisors can develop a detailed restructuring plan that outlines specific actions to be taken. This plan addresses financial, operational, and strategic aspects of the business. To help ensure the success of the restructuring plan, JACO advisors will do the following:

• Prioritize and execute the actions in the plan based on their potential impact and urgency. Then execute the plan systematically, monitoring progress along the way.

• Maintain open and frequent communication with key stakeholders, including employees, customers, suppliers, lenders, and investors. It’s important that everyone is informed about the restructuring process and the steps being taken to address challenges.

• Adhere to legal and regulatory requirements, which may involve negotiations with creditors, complying with bankruptcy laws, or seeking court approvals if necessary.

The execution of a restructuring turnaround plan is complex and requires effective management, by a strong leader with clear intentions. Our recent article, Key Characteristics of Effective Leadership During a Turnaround Situation, discusses the importance of leadership during turnaround and emphasizes key leadership characteristics needed to increase the likelihood of success.

As an endangered company stabilizes, it is crucial to continue to monitor the financial health and progress of the operational improvements. This requires rigorous and continuous analysis of key performance indicators, financial metrics, and operational benchmarks to ensure alignment with the objective outlined in the turnaround plan. It’s important to remain flexible and to be prepared to adjust the turnaround plan if certain strategies aren’t yielding the expected results. It’s also important to look ahead and proactively anticipate potential changes that could be on the horizon by doing the following:

• Forecast future scenarios and outcomes based on the implemented strategies. Have contingency plans in place in case the situation changes unexpectedly.

• Work to develop a long-term strategic plan that positions the business for sustainable growth and profitability.

Navigating a company through financial and operational challenges requires a thoughtful and strategic approach. Having an experienced team on your side can pave the way for a successful restructuring turnaround. By implementing these best practices, JACO Advisory Group steers our clients toward recovery. Give us a call, or drop us an email so we can learn more about your business and the challenges you are facing.

Jeff has over 25 years of strategic planning, business development, and business transformation leadership experience. Having worked with mid-market, closely-held and family-owned businesses his entire career Jeff has a unique understanding of how these enterprises operate and the challenges they face.

He is passionate about working with business leaders to build strong cultures while developing and executing strategies that deliver exceptional results that benefit all the company’s stakeholders. Jeff’s hands-on approach to working with companies begins with a commonsense approach to strategy development.

With extensive experience in organizational turnaround and growth Jeff follows a defined process (disciplined, focused, intentional) to guide clients from strategy to execution. His experience covers a multitude of industries, with an in-depth understanding of automotive manufacturing.

Jeff holds a Master’s in Business Administration from the Capital University School of Management and earned a Bachelor of Arts in Business Administration and Management from Ohio Dominican University.