Reviewed by Aug 27, 2020| Updated on
What is a Turnaround?
When a company that has undergone a period of poor performance transitions into a phase of a financial recovery, it is called a turnaround. After a time of recession or depression, a turnaround may also apply to the recovery of the economy of a nation or region. Likewise, it may refer to the recovery of an entity whose personal financial situation, after a while, improves.
Why is Turnaround Important?
Turnarounds are critical because after enduring a significant period of negativity, they represent an upward shift or change for an individual. The turnaround is analogous to a cycle of restructuring in which the company turns the losing era into one of productivity and prosperity, thus stabilising its future.
How to Implement a Turnaround?
Turnarounds may occur from the person to the economy of a country or even be a global event at many rates. The term refers to a process when an organisation starts experiencing steady and successful financial or output recovery after a period of decline.
In most situations, understanding the issues causing the decline is the first step for going into a turnaround process. They may examine changes in management in the case of a business, or problem identification and strategies for solving them. The best action in extreme situations can be to liquidate the company.
Who Needs to Implement a Turnaround?
There are specific characteristics which will usually identify an entity that needs a turnaround. For a company, these may include a decrease in the price of its stock, the need to lay off staff, and sales that do not meet creditors' payment requirements.
Changes in the competitive advantage of a company and obsolete products or services may also be indicative of a business that needs to explore strategies for turnaround. Failure to control resources like labour and capital can also put pressure on the company. A stock speculator can benefit from a turnaround if he correctly anticipates a poorly performing enterprise's improvement.