Where Your Turnaround Strategy Is Going Wrong
Where Your Turnaround Strategy Is Going Wrong
When your company needs a turnaround strategy, it’s because things aren’t going to plan. Your executives may not be able to take their full salary to keep costs down or you may find yourself struggling to pay your bills. Perhaps your original strategy has been left on the drawing board as you try to keep your business afloat.
A turnaround strategy is something that thousands of businesses have successfully implemented. This strategy focuses on reversing the decline of your business to create a positive direction of travel. It’s not a simple strategy of cutting costs or reducing your overheads.
For your turnaround strategy to work, it can often mean overhauling your entire business. The reality is that most turnaround strategies don’t work. The number one reason why they fail is that they’re created by the people who caused the business to decline in the first place.
Hiring a CFO or a senior financial professional gives you the benefit of a fresh perspective. If your turnaround strategy is going wrong, it’s time to call in outside help. At FD Capital, we’re a boutique financial recruitment agency that connects businesses with financial professionals who have the skills and experience to implement a successful turnaround strategy.
What is a turnaround strategy?
No two turnaround strategies are the same. On a basic level, they exist to change the direction of travel for a business. It’s a strategy that seeks to repair the damage done to a business and change its fortunes. The pandemic saw businesses in every industry having to implement a turnaround strategy to survive the economic challenges.
If your business is struggling, a turnaround strategy may be the best choice to overhaul your company.
When would my business need a turnaround strategy?
Every business is different. Most companies will choose to focus on a turnaround strategy when the survival of the company is in question. If you’re building up debt, struggling to get clients, or dropping in sales, it might be time to consider a turnaround strategy.
Other signs to look out for include:
- A steep decline in your sales and losing customers.
- Regularly hitting the overdraft limits on your business banking account.
- Struggling to pay the rent on your commercial properties.
- Having a lack of resources, including equipment necessary for your business operations.
- Low staff retention levels and difficulty recruiting new staff.
- Negative relationships developing between senior leaders of the company.
- Your employees are becoming demotivated and uninterested in their work.
- Struggling to source equipment or items necessary for manufacturing your product or operating your business.
Why a turnaround strategy is all about change
Turnaround strategies fail when businesses approach them with the wrong mindset. You want to remember that this strategy is all about implementing changes. You can’t continue working the same as before without putting your company in jeopardy.
Incorporating change at the heart of your turnaround strategy can allow you to take advantage of future opportunities and support your current workforce. If your business is recovering from the pandemic, a turnaround strategy is about dealing with the ‘new normal’ – whether it’s complicated supply chains or changing consumer behaviour.
Change is healthy for any business. By approaching your turnaround strategy with an open mind, you’re more likely to be successful.
Where companies go wrong with their turnaround strategy
There isn’t a 5-step plan for creating the right turnaround strategy. Every business is different. Your turnaround strategy should be tailored to address the pitfalls in your business – your Achilles’ heel and the source of your problems.
If your turnaround strategy isn’t getting you results, you might be making one of these common mistakes.
- Focuses on ‘quick fixes’
For a turnaround strategy to be successful, it needs to be more than a ‘quick fix’. When companies do their strategy internally, they often make the mistake of focusing on quick fixes. These solutions usually yield short-term results or simply represent a wasted opportunity for the business to make real change.
Focusing on quick fixes can often cause more harm than good, leading to further challenges for your business in the future. It’s better to address the source of your problem head-on rather than to delay with quick fixes.
Most businesses implement quick fixes because it makes them feel like they’re doing something to help address their problems. These quick fixes often haven’t been properly researched and ignore the root cause of the business’ weaknesses.
Focusing too much on the crisis
While your business will need to evolve, focusing too much on the crises can be just as damaging. Focusing too much on the crisis at the expense of all else essentially puts your company on a so-called war footing.
Your turnaround strategy is on the wrong path if it’s all your company is focusing on. Doing so would reduce the creativity and talent of the people working within and around your company. Focusing too much on the crisis could lead to your business missing opportunities to grow and develop.
Treating the symptoms, not the causes.
Turnaround strategies fail when they focus on your symptoms and not also the causes. You can’t afford to overlook the underlying causes of your company’s problems. They’re likely to be more than poor cash flow and could include poor management, poor customer service, and other problems you can promise solutions work.
If you want to repair your business and set it on the path to long-term success, you need to get to the root cause of every problem. Failing to identify and address these problems may be a costly mistake in the future.
It’s worth remembering that there are problems that may not have an easy solution. Global supply chains and the continued impact of COVID-19, along with import rules related to Brexit, are clear examples of this.
When you’re identifying the problems your business faces, you need to be prepared to ask tough questions about your performance. This fact is why it’s usually easier to hire a third party to oversee your turnaround strategy. An interim or part-time CFO could join your team with a focus on transforming your turnaround strategy and saving your business.
Getting carried away with cost-cutting
Another mistake that people make with their turnaround strategy is going too deep with their cost-cutting measures. While this may free up a little capital, it’ll often come back to bite. Many businesses use their wages as the first thing to cut to save money. With employee retention at an all-time low, drastic action like this could find you with no workforce ad an expensive recruitment process.
When you’re crafting your turnaround strategy, you must ensure that you’re not going too deep with your cost-saving measures. Going too deep could cause the ‘walking wounded’ in your business to quickly find themselves going out the door. Lower wages could also set your workforce up against senior management, spelling disaster for your business’ productivity and future.
Underestimating the importance of communication
Every turnaround strategy should have an effective communication plan at its heart. This communication isn’t between the company and its customers, but rather its employees. Companies often find that the root cause of their problems is that they don’t communicate with each other.
If your company prioritises communication, you’re less likely to experience common problems and can benefit from increased employee retention and loyalty. Accurately communicating your company’s goals and ambitions can keep everyone on track throughout your turnaround strategy.
When businesses are going through tough times, communication is often the first thing to break down. No matter what condition your business is in, your turnaround strategy should have communication at its heart.
Why Your Turnaround Strategy is Failing
Is your turnaround strategy not getting you results? Is your company continuing to struggle? Your turnaround strategy is likely failing because you used your internal team to create it. The benefit of outsourcing the strategy to an interim or part-time CFO is that they can approach your turnaround strategy from a completely neutral point of view. They can identify problems, bad habits, and issues that are feeding into the decline of your business.
Are you still not convinced about hiring an interim CFO? Here are some of the most common mistakes that internal turnaround strategy teams make.
Lack of experience
Most companies struggle with their turnaround strategy as they don’t have the experience in-house to create the right strategy. If you use FD Capital to find a part-time or interim CFO, we’ll ensure that we match you with candidates who have a proven track record of delivering successful turnaround strategies.
Not changing to meet the evolving industry
When a business can’t keep on top of the competition, they fall behind. Your turnaround strategy should acknowledge any potential failure to adapt to the changing market conditions within your industry.
Acknowledging the changes may lead you to raise your product prices, change suppliers, or make a deal with a venue for exclusive rights.
The internal biases
The number one problem your internal team will have is their biases. Even if they have experience with turnaround strategies, they’ll hold certain biases as the result of their time at your business. Your internal team may struggle with the idea of replacing senior management or selling off assets of the business if they hold sentimental value.
As your business’ turnaround strategy will likely require radical change, it’s often easiest to outsource this role. You don’t have to worry about the impact of an internal bias on any stage of their work.
If your business needs a radical turnover, a third-party CFO is usually the best person to curate the turnaround strategy to achieve this change.
Why You Should Outsource Your Turnaround Strategy
Are you pulling your hair at the idea of creating a turnaround strategy? The best option is to hire a fractional or interim CFO with a proven track record in delivering successful turnaround strategies. This hire is often a win-win for businesses.
You can focus on the day-to-day operations and your new CFO can look at your business through fresh eyes, allowing them to identify problems and propose solutions without holding any biases. Your fractional CFO will identify the areas of improvement and engage with your employees to make the strategy a success.
When you hire an interim CFO to oversee your turnaround strategy, they’ll usually approach the process in a four-step way. Each of these steps is vital to creating a successful strategy:
- Audit: Your CFO will review the current state of your business by auditing it. This stage evolves identifying any underlying problems and redetermining the business’ chances of survival. Often our CFO’s have an Audit / ICAEW background.
- Recovery plan: After the audit, your strategy team will come up with a restricting plan for your business. It’ll usually include features like selling off outstanding debt, reducing overheads, and growing the product or service.
- Implementing: A turnaround strategy is only as good as its implementation. Once your fractional CFO has brought the strategy to life, they can continue to support you through the implementation stage. They can execute your turnaround strategy in a more efficient way than your internal employees.
- Stabilising your business: Once the strategy has been implemented, your business should start to see positive changes. You may notice more cash flow or increased sales after your interim CFO has optimised the business. When the business is back on a positive trajectory, your CFO will adapt the ROIs and KPIs to meet the current position of the business.
Outsourcing your CFO can help you boost your leadership team and benefit from a fresh approach. An interim CFO will be able to take a non-bias approach to your turnaround strategy, helping them avoid making the common mistakes mentioned above.
Hiring the right interim CFO could radically improve the state of your business. Their turnaround strategy could see you pay off your debt, create a more productive workforce, and adapt your product or service to survive the evolving industry.
Are you ready to create a winning turnaround strategy? FD Capital is here to help you recruit the best candidate for the role of interim or part-time CFO. Request your free, no-obligation consultation on our website today.