A straight-talking guide to the differences between business restructuring and turnaround, including how the two services work and key scenarios in which each can help restore your firm’s operations to profitable levels. Whether you’re facing a winding up petition or simply want to improve your financial standing over the course of this fiscal year, SFP offer a range of recovery solutions for distressed businesses whatever their situation.
When a business becomes distressed, it can be difficult to discern whether restructuring or turnaround is appropriate. The key is to take steps as early as possible, as likely there will be more options available. The later directors leave it, the less likely turnaround will be possible and restructuring may be the only viable option. Whatever happens, SFP can undertake a review to determine the most suitable route for your firm.
Business turnaround strategies focus on aiming to help struggling firms plan for their short- or long-term financial recovery, rather than considering formal insolvency processes such as a CVA or administration to ensure its survival and / or the successful sale of its assets.
Investopedia defines business turnaround as involving “the financial recovery of a company that has been performing poorly for an extended time”, whereby the business must “acknowledge and identify its problems” to “develop and implement a problem-saving strategy”.
The events which lead a firm’s directors to initiate a turnaround are, as with business restructuring, frequently wide-ranging. Often, some of the key indicators of a distressed firm in need of help include reducing revenues, an inability to pay creditors, lay-offs, salary cuts, poor customer retention or poor reviews, staff absenteeism, statutory reform and / or a decline in stock price. Should any of these circumstances sound familiar to your business, then it’s vital that you take action to resolve them before it is too late.
The turnaround process can be summarized in four key stages:
You can read a sample business review published by SFP here, wherein we determine those areas in which the example company is making profit and those where it is underperforming, as well as other specific areas such as “giving generous credit terms” to certain partners which “had a detrimental impact on cash flow”.
Here are some examples of how turnaround services can aid your business’ recovery:
If turnaround is not an option because a company’s problems are too severe, all is not lost: restructuring can still enable the company and/or its business to survive. The term ‘restructuring’ refers to a range of formal insolvency processes aimed at helping businesses in significant distress – whether they’re struggling to fulfil the terms of a CVA, facing the prospect of administration or undergoing other crises – to resolve the situation, with the outcome varying depending on the business’ circumstances and ultimate ambitions.
At times, no matter how vigorously a business attempts to maintain its viability, there are often instances when the firm in question stands a scarce chance of survival unless it seeks the potential benefit of formal, restructuring intervention. It’s at this point that several main options come into play; should the directors consider filing for administration, propose a company voluntary arrangement (CVA) or simply liquidate?
The outcomes of these different restructuring strategies can vary considerably: where a successfully concluded CVA will result in the limited company’s survival, the administration process can lead to the survival of the business following a transfer of the business and assets to an alternative entity (if it has been determined that the company itself cannot be saved). Liquidation, meanwhile, often signifies cessation of trade, involving the selling of assets to repay creditors with the eventual aim of the company’s wholesale dissolution.
Investopedia adds that the restructuring process has a range of different purposes and desired outcomes, but where possible, its broadest aim is to achieve “smoother, more economically sound business operations” and – provided the company survives in some capacity – “greater efficiency in production”.
The first step most companies usually take in restructuring will be to seek independent professional advice from a restructuring specialist which may result in them undertaking an independent business review, wherein they will assess that business’ current financial situation and ongoing viability. This review will allow both parties to more fully understand the position and options and help plan an appropriate restructure.
The means by which the business in question would achieve their goals frequently vary, significantly depending on the extent of their current difficulties. SFP’s experienced and professional staff will always provide the necessary guidance
Here are a few examples of how SFP’s restructuring services have helped businesses to date:
Be sure to find out more about our business restructuring and turnaround services. These pages will provide further information on the distinctions between both and how SFP Group can assist in your business’ recovery. Above all, get in touch today and one of our expert consultants will gladly discuss your firm’s present situation and help to ascertain the most suitable solution for its problems.