Step 3: Cut Costs and Improve Operations

With Q4 2023 unit labor costs rising by 5.3%, reducing expenses and increasing efficiency are key priorities for recovery in 2025. The strategies below build on your financial and operational assessments to deliver immediate results.

Find Cost Savings

Cost savings rank as a top priority for one-third of executives in 2025. Missing cost targets can result in a 9-percentage-point drop in total shareholder return ^[7].

These savings set the stage for further efficiency improvements through lean methodologies.

Apply Lean Methods

Lean methods enhance operations by building on identified savings. Companies with a culture aligned to lean principles and agile management practices can achieve up to 11% more efficient production processes ^[7]. A focus on cost-conscious decisions ensures long-term success.

Take Nike, for example. The company reduced overhead and improved supply chain operations by outsourcing to specialized manufacturers in Asia. This move streamlined production and optimized supply chain performance ^[8].

Fix Supply Chain Issues

Improving the supply chain requires both technology and strong partnerships. Walmart’s use of RFID technology is a great example – it improved supply chain visibility and reduced inventory costs ^[8].

Key strategies include:

• Just-in-Time Inventory: Maintain optimal stock levels to lower storage costs. AI-driven demand forecasting has helped 60% of retail buyers improve inventory management ^[1].
• Strengthen Supplier Relationships: Negotiate better terms and ensure reliable delivery schedules. Skipping supplier negotiations can lead to significant drops in net income ^[8].
• Predictive Maintenance and Analytics: Use data to avoid costly equipment failures and reduce maintenance expenses ^[9].

Top-performing companies reinvest these savings into areas like digital transformation, AI, and workforce development ^[7], building a strong framework for recovery.

Step 4: Fix Financial Structure

Once operations are running more smoothly, it’s time to tackle your financial structure. This step is key to getting your business on solid ground.

Work with Lenders

Building open and honest relationships with creditors is essential for restructuring debt effectively. By engaging with lenders early, you can negotiate better terms. Here are a few strategies to consider:

After improving your standing with creditors, look into alternative funding options to boost liquidity.

Find New Funding

In today’s competitive market, diversifying your funding sources is crucial. Major organizations often provide grants that can be a lifeline. For instance:

• The Coca-Cola Foundation distributed over $1.6 billion in grants globally in 2023 ^[10].
• Bank of America’s Charitable Foundation offers grants ranging from $5,000 to $50,000 for projects focusing on economic mobility and community growth ^[10].

If you’re in the tech space, AWS IMAGINE Grants are worth exploring. These grants provide:

• Financial aid: Between $50,000 and $200,000
• AWS credits: Up to $100,000
• A focus on cloud tech and AI projects ^[10]

Once you’ve secured better terms and new funding, it’s time to focus on managing your debt repayment.

Plan Debt Payment

A well-thought-out repayment plan is crucial for long-term stability. Here are some approaches to consider:

• Debt Restructuring: Renegotiate terms to lower debt, reduce interest rates, or extend repayment periods. You might also explore debt-for-equity swaps ^[11][13].
• Payment Optimization: Use payment-in-kind (PIK) options to conserve cash by rolling interest into the principal ^[12].
• Asset Management: Sell non-essential assets to generate immediate funds ^[12].

Taking these steps can help you regain financial stability and set your business up for future success.

Step 5: Update Business Model

Once your finances are stable, it’s time to refine your business model to ensure long-term growth and success.

Focus on Key Strengths

Take a close look at what your business does best. Identifying your core strengths will help you stand out in the market and stay ahead of competitors.

“The Core Competence Model of Gary Hamel and C.K. Prahalad focuses on identifying the unique capabilities that give companies a competitive advantage.” ^[14]

By building on these strengths, you can unlock new revenue opportunities and drive growth.

Add Revenue Sources

For instance, Newegg‘s collaboration with Rokt led to an 83% boost in monthly revenue, adding $300,000 per million transactions and achieving a 375% increase in value per payment page transaction ^[15].

“When we discovered this new incremental revenue channel through Rokt, it felt like a breakthrough. The data-driven approach and ability to deliver personalized offers at critical points in the customer journey gave us a renewed sense of optimism. It provided a fresh perspective on how we could enhance our marketing strategy and more effectively reach potential customers.” – Mark Fan, Senior Business Intelligence at Newegg ^[15]

Consider these approaches to diversify your income:

• Launch subscription-based services for predictable revenue
• Offer digital products to expand into new markets
• Build partnerships with businesses that complement your offerings
• Enter international markets to reach a global audience
• Bundle your current products with new services for added value

Once you’ve explored these opportunities, ensure your systems are ready to support them.

Update Systems

Emerging technologies can play a crucial role in upgrading your business model. Here are some worth considering:

Invest in tools and technologies that align with your strengths and support new revenue initiatives. This will position your business for future success.

Step 6: Build Strong Teams

Effective recovery plans rely on strong leadership and well-equipped teams. Teams play a crucial role in executing turnaround strategies. Research shows that businesses with solid corporate leadership training programs see a 71% boost in customer satisfaction and a 42% improvement in operational efficiency ^[19].

Set Up Recovery Team

Form a dedicated recovery team by selecting experienced leaders who can handle uncertainty. Focus on individuals with a track record in corporate turnarounds ^[16].

For specialized roles, consider using fractional or project-based talent. This approach offers flexibility and helps control costs during recovery ^[16].

Train Leaders

Introduce focused leadership programs to sharpen turnaround skills. Training leaders can improve work quality by 48%, reduce rework by 90%, and increase productivity by 36% ^[19].

“Leaders reported significantly improved change management skills. Our leadership team felt they had a much better understanding of change and how to lead through continuing uncertainty. You have set us perfectly for the next step.” – Fleur Yaxley, Managing Director, Australia at BayWa r.e. APAC ^[20]

Focus leadership training on:

• Developing an agile mindset to handle uncertainty
• Strengthening change leadership skills
• Building team resilience during challenging times ^[20]

Investing in leadership development also helps retain top talent.

Keep Top Performers

Retaining key employees is essential. Use a mix of financial and non-financial incentives to keep your best staff engaged ^[17].

“Emphasize employee potential and individual growth to boost retention.” – Carter Cast, Clinical Professor of Innovation and Entrepreneurship, Kellogg ^[18]

Work with HR to identify “hidden gems” – employees whose skills or connections are vital to the recovery effort. Create personalized retention strategies that align with their goals and motivations ^[17].

Step 7: Track and Update Plans

Staying on top of your recovery efforts means keeping a close eye on progress and being ready to adjust when needed.

Check Results Often

Once your recovery strategies are in motion, regular monitoring is key to staying on track. Use a KPI tracking system to measure areas like finances, customer satisfaction, and operational performance.

Assign a recovery manager to oversee these efforts, and consider using AI-driven project management tools to improve forecasting and streamline your operations. Cross-functional teams can also support the main recovery team to ensure everyone stays aligned and focused on the same goals ^[21]. These steps help you stay proactive and ready to tackle new challenges.

Plan for Problems

Having a solid backup plan is critical. Create contingency plans that outline communication protocols, essential activities, potential risks, and backup resources ^[21]. For example, AI tools have made demand forecasting and inventory management more accurate for 6 in 10 retail buyers ^[1]. This kind of preparation allows your recovery plans to shift as market conditions evolve.

Respond to Changes

Be ready to adjust your strategy when the market shifts. For instance, a fitness studio successfully pivoted to virtual coaching, adding a new revenue stream ^[22].

According to a survey, 7 in 10 retail executives plan to implement AI within the year to personalize customer experiences and respond more effectively to market changes ^[1]. Instead of simply cutting costs, focus on optimizing expenses and reinvesting savings into areas like productivity, new capabilities, or additional revenue streams ^[1]. Regular check-ins and strict cash flow forecasting are essential for staying on course ^[22]. Treat any deviations as opportunities to learn and refine your approach ^[23], adjusting plans based on hard data and current market trends.

Conclusion

The seven-step recovery framework gives companies a solid way to face today’s challenges. For example, 96% of companies with reliable recovery plans survived ransomware attacks, while 93% of those without such plans failed within a year ^[27].

Planning ahead can make all the difference. One large consumer-goods company set aside funds at the start of each fiscal year to stay responsive. This allowed them to quickly adjust to market changes with targeted advertising, timely promotions, and flexible pricing strategies ^[24].

Take another example: a mid-sized tech company saw a 15% market share increase and 20% revenue growth over two fiscal years by focusing on performance metrics and personalized marketing ^[26]. Meanwhile, an international non-profit boosted its capital investment efficiency by 30%, leading to a 10% increase in EBITDA margin ^[26].

Regular reviews like these help guide strategic updates. For instance, one contractor added cost protection clauses during the pandemic. This move helped them handle a 300% increase in lumber costs while staying profitable ^[25]. Strategic thinking like this, combined with consistent evaluations, keeps recovery efforts on track in a constantly changing market.