Turning a newly acquired business around

Business distress is currently at an extremely high level in the UK, as companies face up to issues including rising costs and plummeting consumer sentiment. While this is of course massively concerning for business owners, it also presents undeniable opportunities for buyers looking to acquire distressed companies.

Despite the difficult economic climate, acquiring a distressed business can be a real coup, providing the right turnaround strategy is applied and the business can be returned to profitability. Here are three steps that can be taken early on to help lay the foundations for a full turnaround.

Identify potential spending cuts
If a business has run into financial distress, then one of the key areas to look at first will be potential ways that spending can be cut to improve its cashflow. Examine the firm’s operating costs to determine whether what’s being spent contributes to revenue or is unnecessary. It will be important, however, to ensure that the quality of the company’s products or services is not negatively affected.

Input costs are skyrocketing for businesses across a huge number of sectors at the moment, as the prices of raw materials rise sharply. This, on top of rising energy costs and a slowdown in consumer spending amid the ongoing cost-of-living crisis, means that cutting unnecessary spending will be absolutely paramount to instituting a sustainable turnaround at a distressed business.

Prove yourself to clients and customers
When a business is struggling, its clients and customers will often notice the signs. Whether payments are being made late, the quality of products or services is declining, or key people have been leaving, the signs of distress will quickly be picked up on. This could lead to clients and customers looking elsewhere, an issue that will of course compound the company’s struggles.

Post-acquisition, you should seek to reassure customers that the business is taking steps to turn things around. Of course, the most important way to help reassure clients and customers is to ensure that products and services are of a high standard, but there are other ways to build and maintain trust that may have been damaged.

One particularly efficient route could be evaluating the company’s customer services, a step that can help to reinvigorate relationships with customers. This could involve simply connecting with clients or customers and seeking to find out areas they feel the business could improve upon, as well as the things they like (or previously liked) about their relationship with the company.

This will provide real insight into how the company is currently perceived, positives to build upon and help you to identify areas where the business is underperforming and in need of rapid improvement. This will all be key to determining its future direction.

Digitalise the business
Modernising and digitalising a business can be a crucial element of returning it to growth, ensuring that processes are as efficient as possible, and that customers and clients are receiving a service that is as up to date as possible.

Of course, digitalisation is something that will require considerable investment. So, unless you already have the existing capital to undertake this, it may be a step that will have to wait until the business’ cashflow has sufficiently recovered. It is, however, an investment more than worth making.

Early on in your ownership you can start to consider ways that the business could most efficiently digitalise. Perhaps there are processes that could be automated, new digital services that could be integrated, or it could be as simple as realising that employees would be more efficient if the company’s IT systems and infrastructure were upgraded, such as by buying new equipment or migrating to the cloud.

For customers and clients, digitalising your business will mean they are receiving a better, more efficient product or service and that they are getting value for money. In fact, receiving a service that is upgraded and incorporates up to date technology could make them more willing to pay a higher rate. This is just one long-term benefit of digitalisation that will help make the initial outlay worthwhile.