Turnaround strategies to improve business performance

Restore or strengthen performance by embracing proven turnaround and restructuring strategies

Turnaround and restructuring teams often function like trauma surgeons—summoned when a company’s viability is at risk. By then, the organization may be facing dire liquidity issues or other financial distress. It could be severely wounded due to fraud, reputational damage, and/or a failed merger or acquisition transaction. In most cases, it takes desperate measures to revive and sustain a company in crisis.

As with human health, there are significant advantages to addressing signs and symptoms before they escalate into a financial or operational crisis. Why wait until you need costly, complex solutions? Taking a more preventive and proactive approach can help reduce the pain of underperformance—and turn around your ability to deliver ongoing value.

Use targeted interventions

We have identified five turnaround and restructuring strategies that you can deploy across your organization—or via a more surgical approach within individual functions, regions, or business areas. Targeted interventions like these can help free capital to reinvest in the business, creating a virtuous cycle of value creation.

Start with a fresh perspective on your business plan—and clear steps for improving profitability and EBITDA.

Sometimes there are signs that a business plan isn’t working. Maybe profits are way off. Maybe the original assumptions were flawed. Or maybe the model itself simply isn’t working. As soon as you suspect an issue, assess what’s working, what’s not working, and potential steps to get performance back on track. That may include a plan for specific financial and operational improvement initiatives to boost profit and EBITDA—for example, consolidating your geographic footprint or rationalizing your customer base, optimizing your workforce, or identifying alternative supply sources to reduce costs.

Evaluate short-term opportunities to cut labor costs.

When a business area is in distress, the first to-do is stabilizing the operations. In many restructuring and turnaround initiatives, the greatest savings are often realized by trimming labor costs. Yet it’s important to exercise caution. When reducing headcount, protect the talent that is critical to mid- and long-term viability.

It may also help identify specific products or services that can be eliminated, inventory that can be liquidated, and other resources that can quickly be turned into value.

Identify savings on facilities, back-office, and administrative costs.

In addition to finetuning core processes, look for ways to trim costs and free value trapped in your facilities, as well as in back-office and administrative operations. For example, implementing a shared services model can help improve standardization and reduce costs across human resources, treasury, IT, and other back-office functions.

You may also have opportunities to cut costs by addressing underutilized real estate or by simplifying your IT infrastructure. Sometimes the answer is new investment—for example, deploying artificial intelligence (AI) tools to increase the speed and efficiency of some routine tasks or transactions while enabling your workforce to focus on higher-value activities.

Find ways to enhance liquidity and improve working capital.

When you identify softness materializing in part of your business, you may not have time to methodically optimize working capital management. But you can still be proactive and aggressive—for example, by collecting as much outstanding revenue as possible, delaying payments as long as possible, or both.

At the same time, you may be able to contact suppliers to negotiate extensions on payments you owe or offer customers discounts to accelerate payment of their bills. These short-term tactics often create some breathing room that enables you to restabilize part of the business before moving on to other performance improvement initiatives.

Proactively engage with stakeholders, from lenders to vendors to customers.

When part of the business is struggling, it can be tempting to avoid or deny the issues. A better approach is to tackle them head on. Communicate and collaborate with lenders, vendors, customers, and other stakeholders that may be able and willing to help the business find its footing again. For example, if you realize that you aren’t going to have enough cash to meet debt obligations, don’t wait to communicate with your lenders. Be proactive in informing them and working together to explore possible solutions.

In some cases, efforts to navigate financial risks may free up liquidity to keep the organization afloat and, ultimately, improve performance. In other instances, your organization may need to go even further—exploring refinancing alternatives, evaluating restructuring options, or identifying potential exit strategies.

CEOs and strategy leaders face increasing pressures to preserve margins, drive growth, and deliver lasting value. To make that happen, many are turning to performance improvement initiatives.

Let’s start a conversation about getting there Improve Your Performance With KPMG

In a shifting competitive landscape, a healthcare equipment organization was experiencing a decrease in market share and a corresponding drop in revenue with a somewhat fixed cost structure. The KPMG Turnaround & Restructuring team analyzed financial results and trends to develop a customer and geographic profitability model. We also identified performance improvement initiatives (including potential locations for consolidation or closure) and reviewed cost structure (including labor, purchase services, supplies, and equipment).

The team created a three-year business model and financial forecasting tool to support the recapitalization of the organization. This enabled the analysis of customer contracts for pricing methodologies and standardization, creation of a database of customer terms, and development of a new pricing methodology for the national sales team. Additionally, the KPMG team analyzed the company’s vehicle fleet and worked with a fleet management vendor on refinancing more than a quarter of the lease costs. These efforts yielded improved financial performance by enhancing top-line revenue activities as well as optimizing expenses affecting the bottom line.

When a business function, team, or area is floundering, it can be tempting to keep pushing ahead with unrelenting optimism. While positivity is a plus, it isn’t a strategy for turning around a troubled part of your organization.

The sooner you identify issues and formulate a plan, the greater your options—and the higher your odds of success in getting value creation back on track. By operating on specific functions and teams within your business, you can free up capital to reinvest in the business. Every successful initiative helps increase stability, bolstering your ability not just to survive but also to innovate and grow.

KPMG supports organizations in planning and executing successful turnaround and restructuring initiatives. With capabilities spanning working capital and liquidity, business planning and strategy, operational improvement, and strategic alternatives, we can help you navigate dynamic internal and external challenges and opportunities.

Learn more about how Performance Improvement delivers value

What sets apart good from great strategy leaders? It's their ability to make better strategic decisions that reduce waste so they can efficiently grow their business.

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