5 turnaround elements to restructuring a distressed business

April 2020 | Article


The spread of the Covid-19 pandemic has forced many businesses and countries to impose strict social distancing practices to ‘flatten the curve’. As a result, companies have started encouraging workers that work on online systems to perform their duties remotely and have facilitated this through technology tools and services. However, not all businesses can run on this model as some of them depend on site-specific functions, or require manual intervention, such as in the manufacturing industries, or the oil and gas sector. Due to this crisis, these businesses and others have had to limit their operations severely, putting a massive strain on their operating capital, which in turn impacts all their suppliers, vendors and other third parties.

As a result, fintech startups and institutions are feeling the strain of this pandemic today. With no clear end in sight, a number of businesses have started to realise that they are facing a serious situation that will impact their ability to not just deliver services but also may threaten their survival.

So, what can a fintech business in this situation – or similar special situations – do?

As experts in the fintech and payments sector, we’ve worked with businesses of all shapes and sizes, and know what’s needed to survive difficult situations. While this crisis is a bit more unusual and widespread in nature, there are a number of situations specific to a business that could force it into distress. We offer our knowledge and guidance in times such as these to help businesses in special situations approach the system logically and methodically and help them build a viable restructuring strategy that can turnaround their business quickly and efficiently.

Here are 5 key elements you should keep in mind when approaching a business turnaround:

A clear understanding of the situation

This is probably the most crucial step. When facing a distressed situation, it is important that the fintech business realizes that they are facing a difficult situation, one that will likely require tough decisions to be made. The business needs to look at itself holistically, and ask some key questions, such as –

  • Is the business plan still relevant? Does it need to adapt or evolve its strategy?
  • Are the business’s customers satisfied with the offering and service? Are the right customers being approached and/or nurtured?
  • Does the product or solution still fill a need? Does it need a redesign to leverage cost efficiencies or newer technology? Are the processes involved optimized?
  • What does the business’s financial situation look like? How much debt is it carrying? Has the sales team been efficiently managing the sales process? Does the business have enough cash flow to sustain operations?
  • Does the business have the right people to steer it? Do they have goals that align with the direction of the business?

Answering difficult questions like those above will help in identifying both the problem and the possible solution. A number of companies, though, are too close to the situation to assess themselves accurately. An experienced fintech consultant can help by stepping in to provide much needed objectivity, clarify the situation, and identify the root causes that need to be addressed to successfully turnaround the business.

Redefining the strategy

Once the underlying issues that have led the business to this position have been identified, it’s time to figure out how to get the business back on track. The key to this is making sure to keep an open mind; the new strategy might involve either identifying specific fixes, or possibly going back to the drawing board and resetting the direction of the company. These changes could also involve restructuring the operations to leverage cost efficiencies and integrate agility and modern methodologies into the process. Being efficient and clear goes a long way in defining the fintech’s turnaround plan, and is key to ensuring that it recovers from its distressed position.

Examining your finances

A detailed understanding of the fintech’s finances is essential to not only understanding where the business stands today, and how it got there, but also in defining next steps. The business’s finances help define the timeline, gauge its stability, and ensure that investments can be made in the right areas. If the business is already in a heavily leveraged position, other sources of financing may need to be explored. Specialised fintech consulting firms with deep knowledge in the industry will be able to provide options as well as optimise spending plans to ensure the business rebounds quickly.

Engaging the people

At the core of every fintech business is the people that work there. Therefore, any good turnaround plan will focus on ensuring that the team is involved in the process. A strong business turnaround plan will focus on making sure that key resources are maintained at all levels, while inefficient resources may be needed to let go. These are not easy conversations to have, and could involve discussions with well-established team members that are no longer relevant to the business. This is especially relevant in the fintech space, where the technology is constantly changing, and qualified and skilled resources are valuable. An external consultant with insights into the industry and market trends can help make sure that the fintech business focusses on developing the right talent.

Executing the turnaround plan

When the decisions have been made, and the plan is clear, it’s important to be able to execute that plan effectively. An experienced fintech consulting firm can set clear landmark goals, and help establish a performance-driven approach, that tracks key performance indicators to ensure success. Establishing a well-documented plan, building in control charts and closely monitoring performance can be time-consuming, and an experienced fintech consultant can act as the business’s guide to keeping the operations well within the defined guardrails.

Penser encourages all our partners and clients to leverage our knowledge to help them better make informed decisions. With years of experience in fintech consulting, we have the knowledge and the expertise to guide fintech businesses out of special situations, and ensure that they hit their turnaround targets. We have also acted as advisors to a number of financial clients on their digital transformation journeys, as well as supported them with due diligence and strategic planning services. Click here to contact us for more information.