Financial distress rarely announces itself clearly. More often it accumulates — in missed forecasts, in tightening vendor terms, in a line of credit that keeps getting drawn and never quite gets repaid — until one day the business is operating with almost no margin for error and the founder is trying to solve a liquidity crisis while simultaneously running the company.

A turnaround engagement is not about dramatic restructuring or mass layoffs. In most cases at the companies I work with — founder-led businesses between $5M and $50M — it is about three things: getting visibility into where the cash actually is and where it is going, stabilizing the business enough to have options, and building a credible plan that gives lenders, investors, and vendors a reason to stay patient.

"The first thing I do in any distressed engagement is build a 13-week cash flow. Not a budget — a cash map. Where is every dollar going, and when. Everything else flows from that. Strategy without liquidity visibility is just wishful thinking."

LJ Govoni — Principal Consultant, Split Oak Advisory Group

Week One: Stop the Bleeding

Before anything else can happen, the business needs visibility. In most distressed situations, the financial reporting is either delayed, unreliable, or both. Management is making decisions based on bank balance and intuition rather than actual cash flow data. The first task is building a 13-week cash flow forecast — a week-by-week projection of every anticipated cash inflow and outflow, built from actual invoices, payroll schedules, vendor payment obligations, and committed customer receipts.

This exercise almost always surfaces surprises. There is typically a significant gap between what management believed the cash position was and what it actually is. Payables that have been deferred are often larger than recognized. The 13-week forecast makes these realities visible — uncomfortable as that may be — and creates the foundation for every decision that follows.

Weeks Two Through Four: Triage and Communication

With a cash picture in place, the work turns to triage. Not every obligation is equal in urgency or consequence. Payroll is non-negotiable. Key supplier relationships that would be impossible to replace quickly need to be protected. Obligations to creditors who have leverage need to be actively managed rather than ignored.

In distressed situations, the worst thing a management team can do is go quiet. Lenders and vendors who are not hearing from you assume the worst. The businesses that navigate distress most successfully are the ones that communicate proactively, early, and honestly. A lender who hears from you before you miss a payment is in a very different frame of mind than one who discovers the problem when the check does not clear.

Weeks Four Through Twelve: Build the Plan

Once the business is stabilized, the work turns to building a credible path forward. This typically involves three parallel workstreams: operational improvements to restore profitability, structural changes to right-size the cost base, and a financing plan to address the balance sheet.

The operating plan needs to be grounded in honest assumptions rather than optimistic ones. The most credible turnaround plans are built on conservative assumptions and show a clear path to positive free cash flow even in a downside scenario.

The financing plan is often the hardest part. Options typically include renegotiating existing credit facilities, bringing in new equity, finding alternative lenders, or some combination. Evaluating these alternatives clearly — without the emotional distortions that come with being inside a distressed business — is one of the most valuable things an outside financial advisor brings to this work.