A strong business turnaround requires creating a plan your creditors will use; then, you must prioritize whose debts you will pay. It is your responsibility to apprise your creditors of your business turnaround plan and company forecasts so they can extend loans, grant more, or even forfeit some of the debts.

Be Forthcoming with Creditors
The goal of creditors is simply to make back their investments in some form, and they understand that this objective may not be reached should you be overly burdened with their debts. If you provide current updates on your business turnaround plan and methods for turning your company around, then they will be more apt to help you on your way or at least alleviate some of your burdens. Business turnaround plans often depend on creditor concessions.

For your business to become profitable, your creditors may have to make certain concessions and financial sacrifices or else their investment may go sour. However, you must look at the situation from their perspective. If they don’t receive any information about your company’s financial well being, forecasts and benefits of turnaround plans, then they may not put their full trust in you and they may refuse these concessions. That is why an open and honest relationship with your creditors is so key, which your business turnaround plan should note.

Show your books. Prove how extending certain loans or forgoing some debts will result in their receiving back their investment. Keep them regularly updated. Make your own concessions in order to appease your creditors. A business turnaround depends on this open and trusting relationship – it is very unlikely that you will achieve financial success otherwise.

Prioritize your Creditors
That is not to say that all creditors are the same. The reality of business turnaround plans is that you will have to prioritize your creditors and sort out which ones are important to your business. If they don’t like your business turnaround plan, then everyone loses; thus, your business turnaround plan will require that you choose which creditors get paid and which will not.

You must separate creditors into two groups, the former of which include individuals and companies integral to your business. Those are the people you need to impress, to share your plan with, and to have an honest relationship. You should personally meet with these specific creditors and sell them your business turnaround plan. Be honest and show them how they will be repaid.

The people and firms in the second group, however, are simply not a priority and you should make every attempt to get out of those debts – hiring a debt negotiator is a common practice for such situations. It is very important that you separate these firms and people into the two groups, and you must act carefully. Before you potentially end a relationship with a creditor whose business isn’t essential and thus whose loan isn’t a priority, you must be absolutely sure that you can negotiate a good settlement.

Keep the Goal in Mind
The goal is redeveloping your business so your company becomes profitable again. Additionally, most firms price in the chance of their debts being vitiated; in other words, this is a practice that companies understand, expect, and factor in with their prices.

Thayne Carper spent 4 years of college competing in student business plan competitions. He’s never won a business plan competition and was ultimately dropped from his college’s entrepreneurial program for lacking potential. Today, he is one of the youngest published experts on the topic of business turnarounds and cost reduction.