Companies don’t get into trouble. It is the owners and the management who do.

Most senior managers are familiar with success. When a company finds itself in a turnaround situation, it is often because owners and management teams have not weathered a similar crisis. A company that is in danger of failure usually represents a new situation for its leadership.

A company turnaround requires a different mindset from the day-to-day operating roles in which most members of senior management teams have excelled. It’s unfamiliar, it’s uncomfortable and it requires a new set of skills. 

When faced with a turnaround, however, many senior management teams become overwhelmed. Unsure of how to move forward, they continue to conduct business as usual, doing what they have always done before.

What these teams often fail to recognize is that the turnaround process brings with it a golden opportunity to improve the performance of a company. When performed correctly, a company can turn adversity into opportunity and emerge from a turnaround with a better, stronger business.

It used to be that a turnaround or restructuring was synonymous with bankruptcy. But the world has changed. Today, many companies have gone through dire straits. There is much more support among banks, vendors, customers and other stakeholders for a company that is striving to survive a crisis and turn itself around.

There are two particularly urgent issues that face a company in crisis: Cash and credibility. 

• To even have an opportunity to initiate a turnaround, a company must first get its cash under control.
  
• Second, a company must strive to maintain or regain its credibility. A company that faces a turnaround has made mistakes, and that usually entails a loss of credibility with its banks, vendors, shareholders and other stakeholders. By restoring credibility, a company buys time to develop and execute its turnaround plan.
  

A turnaround plan is a road map for helping a business recover. The first and most important ingredient in a turnaround plan is realism. Many companies believe that the crisis they face is a singular event and that the situation can’t possibly get worse. Typically, it does get worse before it gets better. Many owners and senior managers make the mistake of planning for an immediate, short-term remediation. A company turnaround is often a much longer and harder road than they would imagine.

The second most important element is to peel back the layers within the company and come to a very deep understanding of the metrics of the business – perhaps a deeper understanding than the company and its leadership have ever had before.

Many management teams get caught in a vision of their business that worked well in the past but is no longer appropriate for stemming and then reversing the downward trend. A turnaround requires considering new and different ways of doing things. Management teams need to ask themselves:

• Where does the company really make money in this business?
  
• Where is it losing money?
  
• Where are the opportunities to introduce new products or eliminate products that in the past have been the anchors?
  

Turnarounds require looking at your business objectively, and removing all the preconceived notions that your team or your employees may have about your firm's products or services. It means understanding the individual components of the business, because these are the building blocks of your turnaround plan – and the keys to a future for your business that is even more exciting and profitable than its past.