Managing a turnaround involves one of two options: a longer path that depends on internal financing and hard work or a shorter path, which involves a recapitalization with new financing and hard work. The longer path ultimately leads to the shorter path that ends with a company’s re-start. The shorter path uses new capital as a substitute for the time commitment associated with an “organic” turnaround. Both paths, separately and collectively, involve a lot of concentrated work and commitment by all parties involved to a successful turnaround.

A simple illustration of the processes shows the two options and how they are related.

The turnaround process is just a variation of Bella Carlo’s overall management philosophy: A good idea, i.e., the target company, with a plan, i.e., the turnaround plan including goals, objectives and a dedicated team, leads to financing, i.e., either through recapitalization or internal means; and then execution of the plan results to net worth.

The first option, Option A, begins with a recapitalization of the company based on forecasted fundamentals in and surrounding the firm. This alternative simultaneously allows for executing repairs and maintenance as well as growth strategies that lead to profits and reinvestments in the company for sustained growth and competitiveness. Incidentally, repairs and maintenance refer to not only traditional repairs and maintenance on plant and equipment but also repairs and maintenance into management, procurement, logistical, G&A, marketing and sales processes that more than likely have suffered from the company’s hardships and/or maladies.

Alternatively, Option B begins with an assessment of the firm’s ability to earn enough to revive its financial health. If that ability is not there, then the firm would not qualify as a good idea, which would suggest that other solutions should be considered, e.g., liquidation or bankruptcy. If, on the other hand, the ability is there, then a turnaround begins with repairs and maintenance of plant, equipment, and management processes. From there, the turnaround process moves on to growing profitable sales for, among other things, reinvesting in the company. Part of the reinvestment is recapitalizing the company properly and optimally. This takes the process back to the top of Option A. Whereby the steps under Option A lead to growing net worth, which is the definition of a healthy business.