Sunday, July 7, 2013

Guide to turning around a struggling business

There is no doubt that the way in which the recent economic crisis placed severe restrictions on cash flow has had a far more damaging effect on small businesses than it has on large organisations. This is illustrated by the way in which job creation has proceeded at a much faster pace amongst larger companies than it has amongst small businesses, which are traditionally considered a reliable source of job creation. Mark Zandi, the chief economist at Moody’s Analytics, explains that this is largely because of the way in which the squeeze on credit, in which it became harder to borrow and maintain a healthy cash flow, affected small businesses to a much larger extent, paralysing them in the process.

These issues have taken a particularly high toll on struggling businesses, even if their future had by no means yet been decided. In such cases, concerted efforts to restructure and turn around the business need to be made as quickly as possible. If problems and issues are identified at an early stage and dealt with immediately, they become much easier to isolate, preventing their spread to other parts of the business and stabilising the company and its operations. However, establishing exactly how a company should restructure and turn around their organisation can be difficult and, to a large degree, will depend on their specific circumstances. 

Recognising the need for change

Possibly the hardest aspect of restructuring is identifying the issue in the first place. Though the effects of problems can usually be observed relatively easily, establishing exactly what is causing them is another matter entirely. Understanding exactly how capital is moving through your business, where it is facing resistance and at what points it is leaving the company, are all essential to isolating the problems.