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Venturn What is Operational Turnaround?

You’ve probably heard of the phrase "Financial Restructuring".

It is often used to re-engineer the balance sheet of a business, usually to the detriment of a mixture of creditors, shareholders and customers. You could also call it a quick fix. Operational Turnaround however is a different matter all together as this concentrates on fixing the underlying business issues that got you into the mess in the first place.

Financial Restructuring buys you time, but Operational Turnaround fixes the problem.

Financial restructuring is a form of business turnaround that restructures the legal entity and usually reduces the amount of money owed to creditors. It allows the underlying business to continue to trade by using some form of insolvency process - Creditor Voluntary Arrangement (CVA), Administration or Creditors Voluntary Liquidation (CVL). It can also include radical cost cutting measures, reductions in overheads and headcount reductions leading to redundancies.

Operational Turnaround is actually about improving productivity, making systems and processes work better, getting more out of your team, managing projects better and structuring your management team so that you get more out of your people.

Operation Turnaround however is a different matter all together.

Cutting costs in a company is the easy part. Maintaining operational performance after cutting costs is where things get harder. What any distressed business needs is to actually spend less money, but achieve more. More could mean increased sales, doing things quicker, reduced lead-times, getting product through your warehouse faster, holding less stock, reducing transport times, or managing projects better. What we are actually looking to do is to improve customer service levels, reduce customer lead times, improve profits and put more cash into the bank. So in actually fact, what we are usually trying to achieve during an operational turnaround is get more for less. This in turn increases profits.

At it’s simplest level therefore, Operational Turnaround is achieving more for less. If you can do this during a recession when trading conditions are difficult, you’ll more likely to survive where your competitors won’t. You will then hopefully end up picking up their market share after they fail, and therefore grow your business during the recession.

To read more about how to achieve to run an Operational Turnaround, see our article on the
6 key tips for an Operational Turnaround

Further reading

Stephen Moon, Venturn Ltd. October 2010

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