Most business failures are not sudden, they follow a pattern. The same is true for successful turnarounds.

Drawing on real experience, this simple five-stage approach has proven effective in turning around companies – from addressing management challenges to implementing strategic action plans. It provides a practical roadmap for restoring business viability.

We explore the following:

• Bad management or bad business.
• Solvency and liquidity issues.
• Diagnostic review
• Alternatives and action plans
• Lessons from experience

1. Bad Management or Bad Business

The first step is identifying the root cause of the problem. This shapes the entire recovery strategy. It requires a clear-eyed assessment of management capability, decision-making, and experience, alongside a rigorous test of the business model itself.

• Experience – assessing decision-making capability and leadership experience.
• Business Viability – determining whether the underlying business is fundamentally sound.
• Understanding Commercial Problems – identifying patterns of risk and opportunity.
• Management challenges – evaluation.

2. Solvency and Liquidity Issues

Once the problem is understood, attention turns immediately to cash. Maintaining solvency is critical. Liquidity pressures can quickly derail even the most well-conceived recovery plans.

• Constraints – recognising legal, operational, and stakeholder constraints.
• Employee Payments – ensuring timely payment of staff to maintain morale and continuity.
• Conflicting Agendas – managing competing stakeholder objectives.

3. Diagnostic Review

With short-term stability in place, a more detailed diagnostic provides the foundation for decision-making. This allows us to identify strengths and areas for improvement, forming the basis of a strategic plan for recovery or winding down.

• Comprehensive Analysis – review financial and non-financial performance, trends, projections, competitors, and constraints.
• Management Interviews – engaging with management to identify problems and potential solutions.
• Operational Improvement -understanding loss drivers and identifying potential for improvement.
• Competitive Environment – evaluating the business cycle and competitive dynamics
• Organisational Structure – reviewing management, structure, processes, and alignment.

4. Alternatives and Action Plans

The focus shifts to defining a path forward. This means taking steps to determine strategy, risk and reward, consensus, cooperation and support.

• Developing Alternatives – evaluating realistic options supported by financial and non-financial forecasting.
• Consensus Building – negotiating alignment among key stakeholders.
• Management Selection – choosing the right leadership for each stage of the turnaround.
• Asset Value Maximisation – realising value from assets where appropriate.

5. Lessons Based on Experience

Turnarounds succeed or fail in execution.

The emphasis here is on:

• Post-Restructure Viability – ensuring the business is viable after the restructure.
• Practical Approach – keeping solutions simple, actionable and aligned with people and systems.

David Levi is a Chartered Accountant who works almost exclusively with companies in financial distress or potential distress. DM him via LinkedIn or call him on 0418 602 466 for a confidential discussion. There is no fee for the call.