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Business Turnaround and Transformation – Beyond the Numbers

business turnaround consultants

At IMIG, Business Turnaround and Transformation isn’t just a service – it’s a lifeline that goes far beyond number crunching. In this article, we dive into the importance of uncovering the underlying issues that often go unnoticed within a company, and how addressing these is crucial to transforming a business from the ground up.

Uncovering the Root Causes

As a business owner or investor, the first signs of trouble usually appear in the financial numbers. While restructuring efforts often focus on these financial levers, the real root causes of distress typically lie deeper within the operational aspects of the business. These are the areas that senior management may be blind to, and this is where IMIG steps in. We look past the numbers to uncover the true operational issues driving those red figures. Our role is to give clients a clear plan, partnering with the financial team or the Chief Restructuring Officer (CRO), to restore the business, deliver value back to the investor and ensure continuity of supply to the customer base.

Real-World Examples: Digging Deeper Than Financial Figures

Take, for example, a recent project with a client where material costs were through the roof. Most financial experts would quickly point out that excessive scrap was the issue and would recommend controlling it. But what’s really causing that scrap? It wasn’t until we dug deeper that we discovered the problem was the use of improper cutting tools. The regular knives used to open boxes, which ensured products remained undamaged, had run out. Staff were using replacement blades that were damaging the carbon fibre products inside the boxes. This £1 blade was causing the company to scrap hundreds of thousands of pounds worth of products – a detail that would never have been uncovered in the boardroom or by looking at financial numbers alone.

Another example involved a client with a super expensive product being scrapped, and they spent months trying to identify the cause, carefully assessing each phase. After extensive investigation, we found that a broken floor was the culprit. The product was being damaged as forklifts transported it over the damaged area between production phases. Such operational issues, though seemingly minor, can have massive financial impacts that are not immediately visible through financial analysis alone.

The Risk of Single-Source Suppliers for OEMs

We often see OEMs with a single-source supplier showing interest in our business turnaround solutions. This scenario is incredibly risky, and one we see often. If something happens to that key supplier, the entire OEM’s business is at risk, and without a backup plan, the consequences can be dire. The financial impact of such disruptions is far greater than the cost of the parts themselves, highlighting the need for comprehensive operational risk assessments.

The Critical Role of Operational Insight for Investors and Financial Institutions

Investors and financial institutions, too, have significant exposure. When they invest in a company, they often rely on financial data. Their due diligence processes might miss crucial operational details. For instance, a walk around on the shop floor assessing that the stock levels match those on the balance sheet could lead to error because the stock is actually outdated, often the part number is correct, but the engineering level is different. Often by the time this is realised, it is too late, and they have invested but the stock on the balance sheet worth hundreds of thousands of pounds are effectively worthless in the real world. This is where our operational insights can make a difference, preventing costly oversights, as we would have spotted this.

Providing Extra Support for Executing Recovery Plans

Sometimes, our role in a business turnaround is not about rescuing a failing company but about validating the owner’s plan and providing the extra horsepower needed to execute it. When a business is under stress, the owner often has a good plan for recovery, but the team is too embroiled in day-to-day operations to focus on execution. By bringing in a small, focused team from IMIG of just 3 to 4 people for a few months, we provide the support necessary to get the plan off the ground without the long-term costs associated with hiring permanent staff. This approach is particularly effective for family-owned businesses, where personal attachment and legacy play significant roles. Our goal is to implement a critical plan that respects the owner’s passion for their business, but ensures it is not delivered in a critical way.

The Value of Early Engagement with Consultants

The CRO link is especially important to us. In the financial industry, consulting is a norm, with many accountants moving into consulting roles as they progress in their careers. However, in the manufacturing and operational sectors, consulting is often perceived as a last resort, which can lead companies to delay seeking help until the situation becomes dire, as internal efforts to address the challenges may not have yielded the desired results. Engaging consultants like IMIG early on can help address problems before they escalate, providing a much faster and more effective turnaround. It is most definitely not a failure. We pride ourselves in partnering with our clients, maintaining jobs and growing existing strengths. By intervening early, we help companies not just survive but thrive.

FAQs on Business Turnaround and Transformation

  1. What is business turnaround, and how does it differ from restructuring? Business turnaround involves identifying and addressing the root causes of a company’s financial and/or operational distress, often focusing on operational inefficiencies. Restructuring typically focuses on financial levers, such as debt reorganisation.
  2. What is turnaround consulting?
    Turnaround consulting helps struggling businesses regain stability and profitability by identifying root causes of distress, creating strategic recovery plans, and guiding their implementation. The goal is to prevent insolvency, protect jobs, and restore value to stakeholders.
  3. What does a business turnaround consultant do?
    A business turnaround consultant identifies the causes of a company’s financial or operational distress, develops a strategic recovery plan, and guides its implementation to restore stability and profitability. They focus on restructuring, cost-cutting, and operational improvements to ensure long-term viability.

Proud to be a member of The Institute for Turnaround (IFT)

The Institute for Turnaround (IFT) is the only body to accredit turnaround professionals globally, and for us this is our CEO, Alun Tribe. Each member is accredited to the highest standard, peer reviewed and must demonstrate significant experience in helping under performing businesses avoid unnecessary insolvencies. Bringing together independent professionals, bankers, investors and advisers that evolve together and respond to new challenges and trends. It’s a membership we’re very proud of.

Early engagement is key. If we can assist you today, please contact us, we are often onsite within 24 hours.

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