Turnaround case interview, cash first, then the fix

Alder Outdoor, an invented retailer with 120 stores and $600 million of sales, is losing money and burning cash. A $60 million loan is due in 14 months. The board asks for a turnaround plan. Alder and all its numbers are made up for practice.

1. Runway

   5.6 months of cash

   Liquidity is $12 million of cash plus $4 million of undrawn credit, $16 million. EBITDA is minus $4 million a year ($90 million from 90 profitable stores, minus $9 million from 30 loss-making ones, less $85 million of central cost), so with $2 million of capex and $0.5 million of interest a month, the company burns $2.83 million a month. $16 million ÷ $2.83 million = 5.6 months, well short of the 14 months to the loan.

2. Stabilize

   Runway to 27 months in weeks

   Clear $20 million of excess stock at 70% of cost: $14 million of cash for a $6 million loss. Agree 15 more days with suppliers on $12 million of monthly purchases: $6 million once. Cut capex to $0.5 million a month of maintenance. Liquidity rises to $36 million, burn falls to $1.33 million a month, and runway reaches 27 months of operating cash. That only clears the 14-month loan date if the $60 million is refinanced, since about $17.33 million would be left by then.

3. Diagnose

   30 stores never pay

   The 90 profitable stores make $90 million a year. The other 30 lose $9 million. Central cost of $85 million is 14.2% of sales, nearly all of the $90 million the profitable stores make. So the problem is a mix of a weak store portfolio and an overhead base the stores can't carry, not the whole model.

4. Fix

   EBITDA from minus $4 million to $19.5 million

   Close the 30 loss-making stores: $9 million a year better, $15 million of lease exit costs paid out of the cash bridge, and $18 million of their stock moved to other stores, which then buy that much less new stock, so the closures net about $3 million once it sells. Cut central cost 10%: $8.5 million. Cut markdowns by 1 point of sales with tighter buying: about $6 million, a little less once the closed stores' sales are gone. Check that closing stores doesn't lose the online sales they drive before you commit.

5. Fund

   About 3.1 times EBITDA

   After the plan, EBITDA of $19.5 million less $6 million of maintenance capex and $6 million of interest leaves $7.5 million of free cash a year. The $60 million loan is about 3.1 times the new EBITDA, a level at which we would expect lenders to discuss refinancing, not repayment in full. Open that talk now, with the plan in hand.

6. Recommend

   Cash this month, stores this quarter

   Stand up a weekly cash view and run the three cash moves now. Close the 30 stores and cut central cost over the next two quarters. Take the plan to the lenders to refinance the $60 million loan before it falls due. The main risk: suppliers refuse longer terms, which takes $6 million out of the bridge and leaves less room before the closures pay off.

BCG's and KPMG's pages put liquidity first. KPMG's restructuring page says the first need is to quickly stabilize the liquidity position.

1. Runway

   Cash plus credit, over burn

   Liquidity is cash plus undrawn credit lines. Burn is operating losses plus capex plus interest plus debt payments due. If runway is shorter than the time any fix takes, the case starts here.

2. Weekly view

   A 13-week cash flow forecast

   KPMG UK describes a short-term cash flow forecast, prepared weekly on a rolling basis for 13 weeks, as critical for immediate stabilization: it shows how many weeks of operating cash remain and which obligations come first.

3. Levers

   Cash that comes in within weeks

   BCG's April 2020 cash guide lists measures that work in weeks or days: personnel costs, inventory (fire sales, halting new orders), receivables, payables and stopping planned investments.

4. Control

   One office owns the cash

   BCG recommends a cash management office, akin to a war room, that governs every cash release and reports to the CFO.

1. Diagnose

   Which crisis is it?

   BCG's 2016 article describes problems that unfold in three phases: a strategic crisis, then a profit crisis, then a liquidity crisis. Say which phase the client is in. It decides how much time you have for strategy.

2. Fix: cost

   Fast, but not the whole answer

   Cut what doesn't earn its keep, using the cost tree and benchmarks. BCG's 2016 article says measures to boost revenue and simplify the organization often have similar short-term effects to cost cuts and lead to more sustainable improvements.

   Profitability framework, worked

3. Fix: revenue

   Price, mix and the best customers

   The same article lists reorienting the sales force to the most attractive products, finding the most promising customer segments and improving pricing.

4. Fix: portfolio

   Close, sell or keep

   Rank units by what they earn and what they need. Sell or close the ones that never pay, unless they hold up the rest. Our BCG matrix page covers the portfolio logic.

   BCG matrix, worked

5. Fund

   A plan lenders can back

   BCG's 2016 article says improving the capital structure might require extending the terms of existing debt, stopping payments temporarily or negotiating a haircut. In a case, show the cash flow after the plan and what the lenders would need to see.

No firm we checked publishes a turnaround case for interviews. These are the pages that describe the work.

1. BCG

   Results in 3 to 12 months

   BCG's 2016 article says the measures that fund the journey, revenue increases, organizational simplicity, capital efficiency and cost reduction, typically generate results in 3 to 12 months.

2. Bain

   A real estate turnaround

   Bain's Real EstateCo client result describes a review of working capital, liquidity risks and cash flow forecasting, then asset sales and higher rents that let the company lower its debt and increase its borrowing capacity by 10 percent.

3. Deloitte

   What drives restructurings in 2026

   Deloitte's 2026 US restructuring outlook expects fewer maturity wall liquidity events but more restructurings driven by operating underperformance, event risk and capital structure mismatches.