Business transfer: Plan for a successful business turnaround

14 June 2023 by National Bank
business turnaround

Are you looking to transfer your business that’s in financial trouble? Several solutions are available to you, including a recovery plan for a business turnaround. It could allow you to return to profitability while increasing the value of your business. Here’s how to develop and implement it.

What is a business recovery plan?

A recovery plan can help you put your business on the road to profitability once again. This plan, which usually takes 18 to 24 months, involves putting a strategy on paper that will help turn your business around.

Transferring a business that is experiencing financial trouble can be a challenge, whether you plan to pass the reins to employees or to entrepreneurs who specialize in taking over businesses in order to get them back on their feet before reselling them.

To increase your chances of success, it’s essential to define a long-term vision that must be shared with the next generation of owners.

For example, you could develop a clear strategy for keeping your organization going while anticipating the issues that future owners of your business may face. Alternatively, you may decide to make a plan that focuses solely on maximizing the value of your business before you transfer it. In either case, it's important to properly think through your plan so you’ll know which actions to take.

When is a recovery plan a good idea?

Here are several situations in which you might consider a recovery plan:

  • Your company is experiencing major financial difficulties, losses or high debt.
  • Your company is contending with strong competition or a major change in market conditions.
  • A major project has failed, or your company has suffered losses in a market segment.
  • Your company is dealing with internal management problems; for example, with respect to cash flow or human resource management.
  • Your company has an obsolete business model or is facing critical technological changes.

What are the key steps in a recovery plan?

Assess the situation

First off, it’s critical to clearly assess your organization’s strengths and weaknesses. To do this, you need to ask yourself what your company creates in terms of value in the market, what sets it apart from the competition and what its blind spots are.

You’ll need to understand your company’s position in comparison to the competition. For example, you might ask yourself if your company has kept pace with changes in the market or what gives the competition an edge. The goal of this exercise? To determine the root causes of the problem and the critical factors that have contributed to the precarious situation you currently find yourself in.

Identify the elements that need changing

Once you have identified the main source of your company's financial difficulty, you’ll need to determine the means by which the situation can be corrected.

Depending on your specific situation, this might involve:

  • Reviewing your marketing plan and sales messages
  • Updating your technology or equipment
  • Redesigning your business model
  • Downsizing your workforce
  • Consolidating your operations
  • Renegotiating your contracts
  • Using more efficient technologies or more modern equipment

Implement your recovery plan

Appointing someone to be responsible for executing your recovery plan will increase your chances of success. Choose a solid leader, i.e., someone who can mobilize your teams and make difficult decisions while communicating effectively with various stakeholders. A solid leader won’t hesitate to seek out other expertise for additional input, which could help strengthen the process’s credibility.

What is the successor’s role in the recovery plan’s development?

If your goal is to turn your business around before transferring it, you'll need to make sure that you include your successor in the process. If you haven’t yet identified a successor, you’ll need to involve your management team. Here is our guide to help you prepare for transferring your business.

Contact the people who will be directly affected by the recovery plan, including your managers and various teams. It’s important to inform them that you have started to reposition the business in order to get it back on track.

What resources are available to support you?

It’s important to have a team you can trust. By surrounding yourself with experts in strategic planning, brand positioning or accounting who can accompany you throughout the process, you’ll find setting up and deploying your recovery plan much easier.

The support of your banker is also essential to the success of your project. They will offer vital support, and the trust between you will form the foundation on which you can rebuild your business.

Be transparent and respect the commitments you make. If you anticipate that you won’t be able to, contact your financial institution to find a solution.

This approach, based on mutual understanding, openness, honesty and perseverance, has helped many companies find their way back to prosperity.

Find out how National Bank can help you transfer your business.

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