Critical Care for
Turnaround Step 9: The Turnaround Business Plan
Why you should
read this section
You will need a compelling story to convince customers, employees, and
bankers to stick with you. This section tells you how to develop that
The Turnaround Plan serves as your roadmap to save your business. You
will learn in this section how that roadmap comes together
“A genuine leader is
not a searcher for consensus but a molder of consensus.”
Your goal in the
executive summary is to quickly and concisely provide an overview
(within 1 to 3 pages) that convinces your target audience to continue
reviewing your plan. Although an executive summary appears first, it
should be the last part your write.
The executive summary
should highlight key elements of the entire turnaround business plan,
objectives for the turnaround.
products or services, with emphasis on their distinguishing features and
the market needs they will meet. Mention the products you have
discontinued and why.
estimate of market potential and assessment of the competition.
management team’s experience and talent. Point out any management
the products will be made, or the services performed.
financial results compared with pre-turnaround financials.
much money you need, and what you will do with it.
anticipated return that investors will realize, and when they can expect
This section of your
business plan describes:
business you are in.
product or service and potential customers.
background of your business, and the roles of key management
personnel. Include an explanation of the main reasons behind the decline
of your business.
short and long-range objectives of the business.
This section and the
“Marketing Strategy” section are typically the two most difficult for
the turnaround team. Here is where you convince your target audience
members that customers will buy your products and services. Your
objective is to convince skeptics that:
is a market need for your product or service.
understand the potential customers’ needs, and your product or service
can sell your product or service at a profit.
Current and Potential
the major current and potential customers for your product or service.
Respond to such questions as:
are your major customers?
do they buy (e.g., because of the price, for convenience)?
do they buy?
are their expectations for price, quality, and service?
Marketing Size and
and others want to know the current and potential size of the market.
How big will the market be in 5 years? 10 years? Support growth
estimates with industry trends, technological developments, changing
customer needs, and other market factors. Your sources and assumptions
should be clearly stated, and they should be realistic. If you
overstate the size of the market or your potential share, investors will
question the credibility of the entire business plan.
the companies that are your competition and assess their respective
strengths and weaknesses, including:
market share potential of each competitor.
your product or service compares with competitors’ in price, service,
warranties, and other features.
competitors’ strengths and weaknesses in the financial, marketing, and
operational areas of management.
A matrix is a good
way to present comparative data on the competition. An objective
appraisal of your competition will add significant credibility to your
turnaround business plan
Product and Service
An investor and other
audience members want to know what distinguishes your products or
services, how they will provide a competitive advantage, and what market
needs they will meet. Therefore, this section should include the
Description of Product—Describe
in laymen’s terms the product or service that you sell or intend to
sell, and include photographs or sketches if they would be helpful.
Remember that many investors are not specialists in your field.
Describe the key features of your product or service and its benefits to
potential customers and compare them with those of your competition.
Emphasize your competitive edge and demonstrate your understanding of
the marketplace. You should also candidly discuss any limitations of
your product or service. This will make your plan more credible.
your patent or copyright position, or any other means of protecting your
technology or obtaining a superior position in your industry.
Other Barriers to
addition to patents or copyrights, other conditions can discourage
competitors from entering the field. Discuss these other factors, such
as an exclusive arrangement with a distributor or an unusually long
lead-time from product or service conception to delivery.
the primary research and development activities that will be required to
bring your product to market. Indicate how much it will cost and how
long it will take to have a marketable product, and the probability of
any regulatory or other approval requirements.
your plans for additional new products or services that will meet
changing market needs. In most cases, these should be an extension of
your existing product line or service capability.
This section of the
plan must demonstrate to prospective investors that you understand how
your market should be segmented, and that you have the ability to sell
and deliver your product or service effectively to the correct targets.
This is the place to show why customers will buy from your
your target market(s). It is important to segment and target the market
properly—something that new companies frequently overlook.
Concentrating your resources on the needs of a specific segment and
carving out a market niche may mean the difference between success and
Estimated Sales and
the market share and sales volume that you think you can achieve over
the next 2, 3, 4, and 5 years. Identify which portions of your estimate
represent “hard” purchase commitments, and present this information in
the pricing strategy and policy for your product or service and compare
it to that of your competition. Show how your pricing approach will
enable you to:
and increase market share in a competitive environment.
how and where (currently and in the future) you plan to sell and
distribute your product and service. What changes have you made to your
previous strategy in the following areas:
and compensating distributors.
you be making any changes to your direct sales force?
many salespeople will you need for this new strategy?
they be compensated by salary or by commission?
education and experience will you require, and how will you find
and attract good salespeople?
degree of sales efficiency can you expect?
many sales calls will it take to get an order, and how large
will an average order be?
Answering these questions will help you prepare a
sound sales plan and determine your sales expenses.
how you will generate awareness of your product or service among
potential customers. Answer such questions as:
is the “image” of the business which you would like to
communicate to customers?
promotional activities will you use—public relations?
Advertising? Trade shows? Sales incentives? Promotional
these expenses be a large percentage of total expenses?
Remember to always
reference your old strategy and describe why this new strategy will have
a greater impact on your business success.
In this section, describe how you now plan to
manufacture your product or perform the service. What changes are
planning? Consider these factors:
the location of your business. Consider the most important cost
components, e.g., labor and material costs and availability,
transportation, proximity to customers and suppliers, taxes, local laws,
and utility costs
the facilities and equipment that will be required. Answer such
will these cost?
you lease or buy?
are your future needs?
Production or Service
the manufacturing process or the method of performing the service,
or operating process.
or operating advantage.
Quality control procedures.
of costs (fixed and variable).
and operation of the purchasing function.
or operations capacity.
or buy” decisions.
of raw materials.
suppliers and contractors.
Include a production
/ operations plan that gives cost information at various levels of
operation. This information will be incorporated into your cash-flow
the labor force.
are the costs?
there enough labor available with the right skills?
additional training be required? What will it cost?
labor force unionized or likely to be in the future?
CHECKLIST: HAVE ALL THE FOLLOWING QUESTIONS BEEN ANSWERED
IN THE PREVIOUS SECTIONS?
Ten Questions About
the Business Every Turnaround Business Plan Should Answer
Who are the venture’s customers?
How does the customer make decisions
about buying this product or service?
To what degree is the product or
service a compelling purchase for the customer?
How will the product or service be
How will the venture reach all the
identified customer segments?
How much does it cost (in time and
resources) to acquire a customer?
How much does it cost to produce and
deliver the product or service?
How much does it cost to support a
How easy is it to retain a customer?
Why will the business be successful
Management and Organization
One of the major concerns that needs to be addressed
in the turnaround plan is a company’s key management team members. As a
result, this section will receive significant attention from your target
how your company’s management team is organized, and describe the
primary role each team member plays. If appropriate, use an
organization chart. Demonstrate how team members’ skills complement
each other. Investors are looking for a team with a balance or
marketing, financial, management, and production skills, as well as
experience with the product or service you are developing. Remember to
describe changes that have occurred as a result of the turnaround.
a brief synopsis of each key manager, including:
Significant past accomplishments that demonstrate ability for the tasks
that will be required.
Include resumes in an
exhibit. Resumes should include sufficient detail for an investor to
“check out” each key manager.
This section should
also discuss any apparent weakness in your management team. Any
critical skills missing? If so, how will this be overcome—by training?
Recruiting? Outside advisors?
how each person will be compensated (by salary? Incentive bonus?
Profit sharing?), and what investment each has in the company. Include
a list of key stockholders, with the number of shares each owns.
your board members and briefly discuss how each helps in the development
of your company. Indicate any investments board members have made in
your company. ( A young management team might gain credibility by
having on its board retired CEOs of companies in similar fields.)
CHECKLIST: HAVE ALL THE FOLLOWING QUESTIONS BEEN ANSWERED?
Questions Every Turnaround Plan Should Answer
the founders/owners from?
they been educated?
they worked and for whom?
they accomplished-professionally and personally-in the past?
their reputation within the business community?
experience do they have that is directly relevant to the opportunity
they are pursuing?
skills, abilities, and knowledge do they have?
realistic are they about the venture’s chances for success and the
tribulations it will face?
needs to be on the team?
prepared to recruit high quality people?
they respond to adversity?
have the mettle to make the inevitable hard choices that have to be
committed are they to this venture?
Prepare a schedule that shows the timing of
activities for the major events of your plan. It is easy to
underestimate the amount of time to complete various tasks, so be
This section must include a discussion of risk and
how to manage it. A good turnaround business plan is a snapshot of an
event in the future. That’s quite a feat to begin with-taking a picture
of the unknown. The best plans go beyond that; they are like movies of
the future. They show the business from multiple angles.
To complete this section, brainstorm potential risks
(things that could go wrong and negatively impact the business).
Estimate the probability that this event could occur (#1 unlikely, #2
likely, #3 very likely). Finally, for #2 and #3 risks, develop a risk
mitigation strategy for each (if the risk occurs, what will you do?).
You will need to
include financial statements and projections for the next 12 months in
detail. Then 2-3 years at a higher-level summary. It will be beneficial
to include pre-turnaround financial documents as a comparison. Include
the following documents:
Projected statement of operations.
Pro forma balance sheets.
Your projections should
be tied to your market expectations. It is important to state clearly
the assumptions you used when preparing the pro forma statements and
projections. Your financial analysis should identify and support the
amount of money you are seeking from potential investors and creditors.
Match the financial
analysis up with the risk analysis. Calculate the numbers for three
scenarios: 1) most likely, 2) optimistic, 3) pessimistic.
How Much Money Do You
This section of your
plan should indicate the amount of money you will need, when you will
need it, and how it will be used. Respond to questions like:
How much money do you need now?
much will you need the next 12-24 months, and when?
will you do if you have underestimated the amount you will need?
will you use the initial funds?
financial structures are you proposing for the financing—i.e., what
portions of the funds will be debt and equity?
will the terms be?
Address your plans for
cashing out the venture’s invertors—for example, going public or
merging. Investors look at future value and liquidity of their
investment. Some investors, such as venture capitalists, may not take
an interest in your company if you do not plan to go public within 5 to
Include exhibits to
provide any additional details that help tell your story. These might
Photographs or sketches of your product or service
Resumes of key executives