Entrepreneurial existential crises develop latently and start with a management crisis, followed by a strategy, turnover, earnings and liquidity crisis. Transformative measures are necessary and the chances of success increase the earlier they are initiated. Classic turnaround management pursues the goal of securing the company’s short-term survival and regaining a competitive position in the market in the medium to long term. Depending on the progress of the crisis situation, different bundles of measures are required. Overall, turnaround management comprises four fields of action that can be applied: strategic, operational, structural and financial turnaround.
Figure 1: Fields of action and goals of turnaround management
The goal of the strategic turnaround is the sustainable development of a competitive position and the ability to generate returns. The corporate goals, strategy and vision are realigned. This has an impact on the current business model, business areas, market segments and the product and investment portfolio. The information relevant to the decisions is determined through market and competitive analyses. Strategic alliances are also to be examined in order to distribute risks among several partners and to benefit from the expertise of others.
The goal of the operational turnaround is to improve the earnings situation, reduce capital commitment and improve liquidity. Benchmarks are used to set restructuring targets and serve as a yardstick to measure progress. Top-down measures are used to reduce costs and increase revenues in a timely manner. Despite the focus on cost reduction, costs should not be cut aimlessly in order to create a demotivating environment internally. When liquidating assets, care must be taken to ensure that there is no need for them in the medium and long term.
The structural turnaround focuses on optimising the entire corporate structure. This includes, among other things, the organisational structure and the quality of personnel as well as the optimisation of production sites. The establishment of a management and control system with decision-oriented reporting is also a central component. Monitoring and reporting are intended to maintain the pressure to act in order to inform the steering committee in short cycles about the status of results and liquidity. At the same time, monitoring and reporting also serve as a platform for feedback and communication from management to staff and vice versa.
The goal of the financial turnaround is to improve the equity structure and secure liquidity. In the short term, it is about securing survival through measures to avoid imminent insolvency. The focus is on securing liquidity by, for example, reducing working capital, liquidity proceeds from disinvestments or through external financing measures. In the medium and long term, the goal is to create a healthy equity structure. Financial restructuring is an important prerequisite for implementing operational, structural and strategic restructuring, as it provides the necessary financial resources.
In addition to classic turnaround management, we also support companies specifically with the following competences:
- Digital Turnaround: Determine and immediately implement effective measures so that the company successfully masters crises!
- Digital Transformation Strategy: Identifying and evaluating the potential of “digital capabilities” and prioritising them in the sense of a sustainable business model.
- Performance Improvement via Digitalisation: Use digital tools to reduce costs and increase efficiency in the value chain
- Lean Digitalisation of White-Collar: Maximising efficiency in indirect areas through lean digitisation
- Strategic Cost Reduction Program: Effectively implemented cost reduction programmes enable companies to maximise their gross margins
- Profit Improvement Teams (PIT): Deployment of a specific team of individual experts with many years of operational experience in restructuring and turnaround projects
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Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.Learn more
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