If you’re reading this post, it’s most likely because you’ve Googled something like, ‘what is a business turnaround’ or, ‘business turnaround definition‘. And if you’ve Googled that, it most likely means that your business is in a spot of bother and you need some help. That’s why in this post, I’m not going to simply give you a definition of business turnaround, but I’m also going to give you some great resources to help you along your journey. Sound good? Let’s dive right in.
My Business Turnaround Definition
“Long-term security has been achieved by finding the root causes of the problems, putting corrective measures in place and ensuring they do not happen again.”Haroon Rashid, Managing Director – Business Fixer
This is my business turnaround definition. Let’s break this down in more detail.
Long-Term Security Has Been Achieved
When I say this, I mean that the business is in good shape financially. This means that all 3 financial statements (Profit and Loss, Cash Flow and Balance Sheet) are all showing the picture that you want to see.
The Profit and Loss should show you your desired level of profitability. The Cash Flow should show you your desired level of surplus. The Balance Sheet should show you the desired level of Shareholder Equity.
All 3 statements have a purpose and tell a different story. They must all work together in harmony to achieve the financial picture that you’re trying to create.
Once you have achieved your financial goals, then you have a level of economic stability. That means that in the long-term you anticipate that your business will be in a strong position.
It’s not about achieving a good month. It’s about being able to sustain that level consistently for at least 6-9 months. Once you can sustain performance for that sort of period, then you know that you have achieved long-term security.
Finding the Root Cause (and Making Sure it Doesn’t Happen Again!)
In a business turnaround, it’s vital to understand what caused the issue in the first place. Quite often we fight fires, however, these are not the things we should be focusing on. Instead, we must look for the things that are causing the fires in the first place – this is the root cause.
Once you find the root cause then we have to do 3 things:
- Fix it
- Fix the process/create a new process
- Safeguard the process to make sure it doesn’t happen again.
You’ll notice the above has a long-term mentality when it comes to my business turnaround definition. Short-term will only get you so far, but when it comes to business turnaround, our approach needs to be long-term. It’s all about being able to sustain that good economic performance for a longer period of time. If you manage to do that, then you become strong enough to stand on your own two feet with fewer worries. You become independent, stronger and ultimately more sustainable. Now that’s my definition of business turnaround.