Why Businesses Need Turnaround Executives
Hiring a turnaround executive may be one of the most important and critical business survival decisions a business will make.
Any business, even one with a long history of strong performance, will at some stage need to introduce fresh ideas or change direction to remain competitive.
For underperforming or distressed businesses, stabilisation and careful steering out of crisis is required before setting out in a new direction.
In both cases, it is extremely difficult for people within the business to find the time or energy to objectively and critically evaluate what direction the business should take.
Those who take the time to think about the future of their business will consider hiring turnaround executives to help with the challenges.
How turnaround executives help businesses
It’s becoming more common practice in Australian business to appoint specialist turnaround executives to assist businesses in distress or facing challenges.
It’s less common, but smart firms are also looking to turnaround executives to help when they have lost direction or require measures to improve performance.
Turnaround executives provide a business:
- Accurate financial projections to meet the company’s financial obligations. This is particularly important if there is a cash crisis and tight cash controls are required.
- An objective and independent business review. For businesses wanting to sharpen their competitive edge an objective business review, leading to long term, robust operational performance improvement, is vital to their growth and preparing for the challenges ahead.
- Exit strategy options. At some point in its life cycle a business will exit from a market, product or acquisition, or a retiring owner will be keen to sell the business. Turnaround executives can provide an optimum profit maximising exit strategy.
- Refinancing. Lenders have workout departments that spot companies in trouble and quickly act to claim what is owed to them. They may request that the company hires a turnaround executive to obtain an independent opinion on the company and its health before new finance or extension of existing finance is granted.
- Negotiation with lenders and other creditors (e.g. ATO). A struggling company, especially one that has missed some payments, will be on the watch list of lenders. An active turnaround executive, with skilful ability to negotiate, can give the company more credibility.
- Capital raising. If a fresh capital injection is required, turnaround executives should have plenty of contacts to obtain equity. They should also have good relationships with lenders to obtain appropriate financing. Most importantly, they will be able to prepare the business for the injection of fresh capital.
- Changing the perception of the market and outside world. Having a turnaround executive can be a great way to return the business to profitability. It will also provide a good indication to external stakeholders that management are serious about avoiding or overcoming trouble, and are proactively looking for a solution.
Appointing a turnaround executive
As I’ve mentioned, the decision to hire a turnaround executive can be a critical one in the life of any business.
Unfortunately, often management’s pride comes first and such an appointment is seen as a loss of control or an admission of failure.
In these instances, appointing a turnaround executive either happens too late or not at all.
Recognising the need to appoint a turnaround executive can be an important step to maximise the business’s chance of survival and success.
If insolvency becomes inevitable, turnaround executives can be helpful in negotiations with lenders and creditors; easing the pain of the process for management.
Turnaround executives who have experience working with distressed businesses can deliver profitability and productivity improvements to a business, and often companies on the brink can be brought back to life.
Vantage Performance is one of Australia’s leading business transformation and turnaround management firms – solving complex problems for businesses experiencing major change. We source and select the highest calibre turnaround executives for your business.