How to turnaround your business in challenging times?

The slowdown of economic activity caused by the COVID-19 outbreak and measures implemented to reduce the spreading of the pandemic have led to challenging times for businesses. As economies emerge from their initial lockdown periods, the route to recovery is unlikely to be smooth, and businesses need to be in the best possible shape for the journey.

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In light of these circumstances and assuming that economic conditions will most likely be challenging in the foreseeable future, Eight Advisory is eager to share their expertise and provide you with 6 success factors to improve the profitability of your business and arise from the storm, stronger than ever before.

Last year, Eight Advisory traced the path of a sample of companies that decided to carry out a turnaround plan after underperformance.

We found that a number of those fared significantly better than the rest and got intrigued.
What made them different? Was it just sheer luck?

Through a survey of 36 questions, followed by a group discussion with renowned experts, we were able to put together some remarkable characteristics in how you as a company can weather the storms.

Based on our results, we are keen on providing you 6 success factors to restore the profitability of your business and enable you to arise stronger than ever.

Let’s kick off with the core insights.

Take Immediate Action

Even the greatest business leaders can miss the first signs of distress. The very first step is to be able to recognize there is a problem. Today, the decision to start a recovery plan or turnaround plan often comes too late. Learn how to identify the key signs for distress and act, while you still can.

Top 3 signs for distress

82%
EBITDA decrease
69%
Liquidity squeeze
56%
Volume decrease

Finance Your Turnaround Plan

Each new plan needs to be sufficiently financed in order to be successful.

The results of our survey clearly state that the most effective turnaround plans included a cash injection. However, we should not assume this new money only comes from existing shareholders as alternative financing sources are a possibility as well. At the end of the day, new money is balance between various stakeholders.

85%
The most effective plans need a cash injection
64%
The cash injection comes from a financial contribution from the shareholders
63%
An outperformance of EBITDA needs new financial sources
"A turnaround limited to cost reduction initiatives cannot succeed. The focus should also be on the mid to long term investment requirements, not only on the short-term cash impact."

Build a Successful Team

Needless to say, management involvement is one of the key success factors of a successful turnaround plan. In addition to that, our study showed that your turnaround plan might be more successful when changes in the executive committee are made.

Not only because most managers struggle to make the shift in mindset needed to make radical changes, but also because a brand-new executive committee can bring the change in dynamic your company needs.

In addition, you may also need to seek a temporary reinforcement of your management team, a Chief Restructuring Officer can support the effectiveness of your turnaround plan.

89%
Successful plans have both a strong management involvement as a fast implementation.
14%
I believe a turnaround plan can succeed with the sole involvement of the finance department

Challenge Your Current Business Model

Your number one priority to avoid a distressed situation is to systematically review your business plan and start your turnaround with a thorough initial review in parallel with a financial, operational and strategic analysis of your business.

86%
A thorough initial review is a required starting point for a successful turnaround plan
82%
It is important to question the business model while conducting financial, operational and strategic analyses.

Be Both Realistic and Ambitious

To ensure the effectiveness of your turnaround plan, ambition is key, but you should remain realistic.
Be ambitious in your operational actions to ensure their effectiveness.

59%
Having the ambition to exceed historic performance is a key factor to entail an over-performing EBITDA
100%
If your initial objective is ‘damage control’, you will merely reach an under-performing EBITDA

Set the Pace

Speed is a determining factor of a successful turnaround. Most successful turnaround plans are achieved in a timeframe of less than two years.

Timing of the Plan
58% 37% 5%
Less Than 2 Years
Between 2 and 5 Years
More Than 6 Years
59%
A successful turnaround plan needs both strong management involvement and a fast implementation (less than 2 years)
67%
Surrounding yourself with experts will allow you to limit the risks, increase results and optimize planning.

Note on the Authors

Philippe Fimmers

Philippe Fimmers is the Managing Partner of Eight Advisory Belgium and leads the Restructuring team in Belgium. Philippe has been leading companies through crisis during more than 20 years and conducts large client engagements for private equity houses and multinational corporations.

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Tom De Troyer

Tom De Troyer is an Operational Restructuring partner and is leading the Belgian Transformation practice. For more than 12 years, Tom has led international assignments for private equity houses and corporations and has specialist knowledge in the design and implementation of transformation and turnaround strategies.

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Both Philippe Fimmers and Tom De Troyer founded the Belgian Eight Advisory office in 2018.

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