Many businesses have a life cycle that, as life cycles tend to do, concludes with a period of decline and failure. Often, the demise of a company is driven by internal factors — such as weak financial oversight, lack of management consensus or one-person rule.
External factors typically contribute, as well. These may include disruptive competitors; local, national or global economic changes; or a more restrictive regulatory environment.
But just because bad things happen doesn’t mean they have to happen to your company. To prepare for the worst, identify a business turnaround strategy that you can implement if a severe decline suddenly becomes imminent.
When a company is drifting toward serious trouble, there are usually warning signs. Examples include:
- Serious deterioration in the accuracy or usage of financial measurements,
- Poor results of key performance indicators — including working capital to assets, sales and retained earnings to assets, and book value to debt,
- Adverse trends, such as lower margins, market share or working capital,
- Rapid increase in debt and employee turnover, and
- Drastic reduction in assessed business value.
Not every predicament that arises will threaten the […]