What Does Business Turnaround Cost?
Directors rarely ask this question early enough. By the time cost becomes a concern, the real question is whether the business can survive. Here is an honest breakdown of what turnaround actually costs — and why the most expensive decision is usually to do nothing.
Key Figures at a Glance
£5k–£15k
Initial options review
£20k–£150k+
Full turnaround support
8–18% pa
Turnaround finance rates
Equity stake
K2's investment model
The Real Cost: What Happens If You Do Nothing?
Before looking at the cost of turnaround support, directors need to understand what inaction costs. In our experience at K2, by far the most expensive decision a distressed director makes is to wait and hope.
When a company continues to trade while insolvent without a reasonable prospect of recovery, directors expose themselves to wrongful trading claims. Under the Insolvency Act 1986, a liquidator can apply to court to make directors personally liable for the increase in net deficiency during this period. That is not a theoretical risk — it happens.
Costs of Inaction
- • Personal liability for wrongful trading (post insolvency)
- • Calls on personal guarantees (full face value)
- • Loss of company equity — value destroyed, not preserved
- • HMRC enforcement action: liability orders, bailiffs
- • Creditor winding-up petitions and court judgements
- • Director disqualification proceedings
- • Reputational damage affecting future employment or ventures
Cost of Acting Early
- • Options review: £5,000–£15,000 (usually one-time)
- • Access to the full range of turnaround tools
- • Creditors are more willing to negotiate
- • Better chance of preserving equity value
- • More time = more options = better outcomes
- • Personal guarantees may be negotiated or released
- • Director remains in control throughout
Our experience across 30+ years of turnaround work confirms a consistent pattern: directors who engage professional support early — even before they are certain there is a problem — consistently achieve better outcomes than those who wait until crisis forces their hand.
Types of Turnaround Support — and What They Cost
Business turnaround is not a single product with a fixed price. The cost depends on what your situation requires, who provides it, and how they structure their fees. Here are the main categories.
Initial Options Review / Crisis Assessment
A structured review of your company's financial position, trading performance, and options. A qualified turnaround professional assesses viability, identifies root causes, and outlines the realistic paths forward — from informal restructuring through to formal insolvency procedures.
This is the starting point for most turnaround engagements. The cost is low relative to the value: directors get an honest picture of their situation and a clear map of their options before committing to a course of action. Many boards use this review to decide between competing approaches.
Ongoing Advisory Support
For businesses that need hands-on management support alongside advice, turnaround specialists typically charge daily rates. Senior turnaround professionals with CTP accreditation or relevant experience command £1,500–£3,000 per day. For defined project engagements — creditor negotiations, working capital improvement, CVA preparation — project fees of £20,000–£100,000+ are common.
Many advisors also offer success fee structures: a base retainer plus a percentage of debt restructured, cash released, or equity value preserved. This aligns incentives but can result in high total costs if the turnaround delivers significant results.
Equity Investment Model — K2's Approach
K2 Business Partners operates a fundamentally different model to fee-based turnaround advisors. Where we invest, we take a minority equity stake in the business in exchange for capital injection and hands-on management support — typically two K2 principals working directly in the business.
This means there are no daily advisory fees and no consulting invoices. K2's return is tied entirely to whether the business recovers and grows. We only make money if you do. This shared-risk structure creates a fundamentally different dynamic from paid advisors who receive their fee regardless of outcome.
The cost to existing shareholders is dilution of their equity stake. For a business that would otherwise fail, this is invariably the best available outcome: a smaller slice of a recovered business versus total loss.
Formal Procedure Costs (CVA, Administration, Restructuring Plan)
When informal restructuring is insufficient, formal insolvency procedures provide legal protection but add significant cost.
| Procedure | Typical Cost | Notes |
|---|---|---|
| CVA (Company Voluntary Arrangement) | £15,000–£35,000 | IP fees + supervisor costs over 3–5 years |
| Administration | £25,000–£150,000+ | Varies by complexity and duration |
| Pre-Pack Administration | £20,000–£60,000 | Faster than full administration |
| Restructuring Plan (Part 26A) | £200,000–£1m+ | High Court process; suitable for larger businesses |
| Informal Restructuring | £5,000–£50,000 | Advisory fees only; fastest and cheapest if creditors agree |
What Does Turnaround Finance Cost?
When a business needs capital to survive and restructure, turnaround finance fills the gap left by mainstream lenders. The cost reflects the elevated risk lenders accept. Here is what to expect.
Asset-Based Lending (ABL)
Secured against debtors, stock, plant, or property.
Typical rate: 2–5% above base rate
+ arrangement fee 1–2% + monthly admin fee
Best option when assets are available. Generally cheaper than unsecured turnaround finance.
Bridge Finance
Short-term funding to bridge a cash flow crisis.
Typical rate: 1–3% per month
+ arrangement fee 1–3%
High cost reflects high risk. Should be a short-term bridge to refinancing, not a permanent solution. Watch total cost of funds carefully.
Secondary / Distressed Lenders
Lenders specialising in distressed situations.
Typical rate: 8–18% per annum
+ arrangement fee 2–4% + monitoring costs
Significant covenant burden and reporting requirements. Many distressed lenders also profit from enforcement. Read terms with care.
Invoice Finance / Factoring
Release cash from unpaid customer invoices.
Typical cost: 1–3% of invoice value
+ monthly service fee + discount charges
Particularly useful for businesses with strong debtor books. Can unlock significant working capital without new debt.
The Real Cost of Secondary Lending: A Warning
The total cost of secondary turnaround finance is frequently underestimated. At 15% per annum plus 3% arrangement fee plus monthly monitoring costs, a £1m facility can cost £200,000+ per year in finance charges alone. Directors who use expensive turnaround finance to buy time — without a credible plan to refinance onto cheaper terms — often find the finance cost itself becomes a barrier to recovery.
K2 structures turnaround finance as part of a complete turnaround plan: capital in, operations improved, refinancing arranged once trading has stabilised. Finance cost is a tool, not a destination.
HMRC Debt: The Cheapest Restructuring Option
Many directors underestimate how flexible HMRC can be in genuine distress situations. A well-structured Time to Pay (TTP) agreement with HMRC — negotiated with professional support — can defer significant tax arrears over 12–36 months, often without interest on the deferred amount.
A TTP arrangement costs nothing beyond the professional time to negotiate it (typically £3,000–£8,000 in advisory fees). For businesses with substantial HMRC arrears, this can unlock more breathing space than expensive commercial finance — at a fraction of the cost.
The catch: HMRC will not agree to a TTP if they do not believe the business is viable and the directors are serious about compliance. Credible financial projections and a clear recovery plan are essential. This is precisely where professional support pays for itself.
Factors That Affect Turnaround Cost
Costs More
- • Late intervention — fewer options, more urgency
- • Multiple creditor classes requiring negotiation
- • HMRC as a significant creditor (now preferential)
- • Complex group structures
- • Formal procedure required (CVA, Administration)
- • Contentious creditor relationships
- • Personal guarantees creating director-specific risk
Costs Less
- • Early intervention — more time, more options
- • Cooperative creditors and lenders
- • Strong asset base (reduces finance cost)
- • Clear, identifiable root cause
- • Viable core business (not fundamentally broken)
- • Committed management team
- • Equity investment route (K2 model)
Frequently Asked Questions
How much does a business turnaround cost?
Turnaround costs vary significantly. An initial options review costs £5,000–£15,000. Full operational turnaround support ranges from £20,000 to £150,000+ depending on complexity and duration. Formal procedures (CVA, Administration) add further practitioner costs. K2's equity investment model eliminates upfront advisory fees — instead K2 takes a minority equity stake in exchange for capital and hands-on management support.
Is business turnaround worth the cost?
Almost always yes, compared to the alternative. Business failure costs directors their company, often their personal guarantees, and sometimes significant reputational damage. A successful turnaround preserves jobs, equity value, customer relationships, and the director's ability to trade. Professional turnaround costs are typically a fraction of what would be lost in liquidation.
What do turnaround practitioners charge per day?
Senior turnaround professionals with relevant accreditations (CTP, MICAS) typically charge £1,500–£3,000 per day. The right practitioner is rarely cheap, but the cost of the wrong one — or none — is far higher. Look for practitioners who have operated businesses, not just advised from the outside.
Can turnaround happen without external cost?
Some elements — operational improvements, internal restructuring, management changes — can be driven by existing management without external advisors. However, creditor negotiations, finance restructuring, and formal procedures almost always benefit from professional support. The cost of getting it wrong (failed informal restructuring leading to administration) typically far exceeds advisory fees.
What does turnaround finance cost compared to normal business lending?
Significantly more. Normal business lending (bank term loan, overdraft) costs 4–8% per annum at current rates. Turnaround finance from secondary lenders costs 8–18% per annum plus fees. Bridge finance costs 1–3% per month (12–36% annualised). The premium reflects the elevated risk lenders accept. This is why minimising the duration of turnaround finance dependency is critical to the economics of recovery.
Get an Honest Assessment of Your Options
Before committing to any turnaround approach, the right first step is an honest conversation about your situation. K2 Business Partners offers a no-charge initial consultation — no obligation, no fee. We will tell you the truth about your options.
30+ years turnaround experience · Hands-on operational approach · Equity investment model available
Related Guides
Explore our comprehensive guides on turnaround strategy, finance, and restructuring options.
Company Restructuring
How to save your company from insolvency through operational restructuring
Turnaround Finance Guide
Emergency funding options for distressed businesses — a complete guide
Turnaround Methodology
How K2's structured approach to business recovery works in practice
Turnaround vs Alternatives
CVA vs Administration vs Liquidation — choosing the right path