The growing business handbook : inspiration and advice ... - Sparkler

31
Managing
setbacks and
turnarounds
1.6
Do not let a setback become a failure. Mike Wellard and Alex Nowak at Mazars
look at how to make the right response
All businesses, regardless of their size, complexity or the industry in which they
operate will suffer setbacks from time to time. However, the measure of a
successful business is one that recognizes the root cause of a setback and implements
an effective turnaround plan to mitigate against the risk of business failure. No
business wants their latest setback to be its last.
By its very nature, a setback is where something has not gone according to plan.
This may be as a result of factors within the control of management or where external
factors have had a detrimental and lasting impact on the business. Given the current
economic environment, it is probable that businesses are experiencing more than
their fair share of setbacks on a continuing basis. Management need to be very
conscious of whether the situation can be recovered and what their available options
are and must then evaluate the associated costs of recovery action.
What is a setback?
Setbacks come in different shapes and sizes. Management need to be alert as to
whether the current setback is either:
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Temporary – a short-term timing problem where a situation is expected to
reverse in the near future – such as an increase in the length of cash collection
from customers. Management need to consider whether this temporary
situation can be recovered and at what cost. If it cannot be recovered, the
likelihood is that the setback will become permanent.
Permanent – these setbacks can be detrimental to the underlying performance
and sustainability of a business. Examples may include the loss of a major
contract or finance. In such instances, management may be required to make
some difficult choices to compensate for these setbacks, such as the closure of