How To Turn It Around: 5 Strategies for Business Owners Facing Operational & Financial Challenges
The UK business landscape is facing an unprecedented crisis – with insolvency levels predicted to hit record highs.
According to insolvency experts Begbies Traynor, there has been a record jump in the number of UK businesses in critical financial distress.
Those suffering the most hardship include those in hospitality, leisure and retail.
A report by Begbies Traynor found a sharp increase of 50% from September to December last year, taking the number of businesses in this category to 46,583.
The number of UK businesses considered to be in significant financial distress meanwhile also rose by 3.5% during the last quarter to 654,765.
In times of severe business distress, history shows that those who act decisively, restructure effectively, and communicate transparently emerge stronger. Investors, too, are drawn to companies with solid turnaround plans.
Strategic advisor and business expert James Disney-May highlights the importance of swift, strategic choices: “Survival is about choices – cutting losses quickly, stabilising operations, and proving you are in control of your recovery.
“The businesses worth saving are those already taking action. Investors don’t back intentions; they back momentum.”
Here, James outlines five strategies to help business owners navigate financial and operational distress.
- Act Fast: Stabilise Cash Flow and Prevent a Liquidity Crisis
Time is not typically on your side when a business is in distress. The first key step in any turnaround is rapid financial and operational stabilisation – securing cash flow, identifying immediate cost savings, and ensuring the business can meet its short-term obligations.
This requires a ruthless assessment of your company’s liquidity position. How many weeks of operating cash remain? What are the near-term payment obligations? Then evaluate cost structures and determine where cuts can be made without crippling core operations.
Non-essential projects should be stopped. Vendor payments can often be renegotiated. Unprofitable customer contracts should be reconsidered. And if redundancies are necessary, they should be done decisively to avoid prolonged uncertainty.
Many business owners delay tough decisions, hoping that a market upturn or a big customer win will turn things around. However, indecision can often accelerate a decline. The priority should be to stop the bleeding fast before attempting any deeper structural reforms.
- Unlock Liquidity Without Sacrificing Ownership
Equity dilution is often seen as the only route to secure new capital in a crisis, but there are other ways to unlock liquidity without giving up control.
Asset-based lending, invoice financing, and sale-and-leasebacks can provide an infusion of cash using existing company assets. Businesses with strong recurring revenue could also consider revenue-based financing or factoring agreements to improve liquidity without sacrificing equity.
Another option is revisiting supplier and customer terms. Extending payables and accelerating receivables can create short-term liquidity without raising expensive capital. Likewise, renegotiating lease agreements or deferred rent payments could also help.
These options might not provide a lasting, long-term solution, but they can buy time to execute deeper structural changes – without handing over control to opportunistic investors.
- Streamline Operations to Drive Efficiency and Build Investor Confidence
The best turnaround stories aren’t companies that just survive, but ones that emerge as stronger, more efficient businesses. Once immediate liquidity concerns are addressed, the focus should shift to sustainable cost efficiencies and operational discipline.
Identify the company’s core strengths. Which products or services drive the highest margins? Which customers deliver the most value? Many struggling businesses have grown bloated, chasing low-margin revenue streams that consume excessive resources. Simplification, whether through product rationalisation, automation, or supply chain efficiency can create a leaner, more investable business.
Operational improvements build confidence among lenders and potential investors. A company that demonstrates discipline in cash management, efficiency in operations, and a clear path to profitability will have greater access to capital – through credit, strategic investment, or even a future sale at a premium valuation.
- Engage Stakeholders Transparently to Secure Support and Confidence
Turnarounds don’t tend to happen in isolation. Employees, suppliers, creditors, and investors all play a role in the success or failure of a distressed business. Managing expectations and securing stakeholder support requires transparency and proactive communication.
For lenders and investors, a clearly articulated recovery plan backed by realistic financial projections is important to maintain credibility. Provide data-driven justifications for how the business will stabilise and return to growth.
Employees may need reassurance and direction. Morale tends to plummet in distressed situations, and a disengaged workforce will only accelerate decline. Clear internal communication, coupled with visible leadership, can prevent unnecessary talent loss and operational disruption.
Suppliers and creditors also require careful handling. Defaulting on obligations may seem inevitable, but strategic restructuring – renegotiating payment terms, offering partial repayments, or securing temporary relief can prevent relationships from deteriorating.
Managing stakeholders effectively isn’t just about damage control – it’s about creating a coalition of support that can help the turnaround process.
- Explore Turnaround Investment Options Before Insolvency
The least opportune time to raise capital is when a business is on the brink of collapse. Distressed investment – through private equity, special situations funds, or strategic partnerships should be explored before insolvency becomes a reality.
Many investors specialise in distressed businesses, offering capital in exchange for ownership stakes or structured debt agreements. Others may see strategic value in a struggling business and be willing to provide rescue funding or acquisition offers.
The earlier a company explores these options, the better its negotiating position. Waiting too long can force business owners into fire-sale scenarios, where lenders dictate terms, and value is eroded.
Image Source: Unsplash
