Lesson 11 of 12
Turnaround case interview: framework and worked example
Turnaround cases ask how to save a struggling business. This lesson gives you a framework that moves from protecting cash to fixing the core business to growing again, then walks through a full example with real math.
Part 1 of 9
What is a turnaround case?
A turnaround case asks how to rescue a company that is in serious trouble. It has been losing money, cash is running low, and lenders, employees, or investors are losing patience. The client needs a plan that keeps the company alive in the short term and returns it to health over time.
Turnarounds combine several case types under time pressure. You will diagnose what went wrong like a profitability case, cut costs like a cost reduction case, and eventually plan for growth. What makes them different is urgency: the order of the steps matters as much as the steps themselves.
The skill being tested
Interviewers want to see that you put first things first. A business that runs out of cash does not get a second chance, so strong candidates protect cash before anything else, then fix what is broken, then grow.
Part 2 of 9
How to spot a turnaround case
These prompts describe a company in crisis. Listen for phrases like these:
- The company has lost money for three straight years
- We're running out of cash
- Lenders are threatening to pull our credit line
- The new CEO needs a rescue plan
- Sales have collapsed since the new competitor arrived
- Should we close the business or try to save it?
If the company is still profitable but less so than before, it is a profitability case. Not sure which type a prompt is? The first lesson covers how to identify the case type.
Part 3 of 9
The turnaround framework
Three phases, in strict order. Each one buys time for the next.
- How do we save the business?
- 1. StabilizeProtect cash, stop the bleeding
- RunwayMonths of cash left
- Quick winsCut spend, sell assets
- 2. FixDiagnose and repair the core
- DiagnoseWhat is losing money?
- RestructureExit, cut, or refocus
- 3. GrowRebuild from a healthy core
- ReinvestIn what works
- ExpandNew stores, channels
- 1. StabilizeProtect cash, stop the bleeding
Think in time frames
- Weeks: protect cash
- Months: fix the core
- Years: return to growth
Stabilize first
Work out the cash runway: how many months until the money runs out at the current burn rate. Then find fast ways to stretch it, like pausing spending, collecting unpaid bills, selling unused assets, or negotiating with lenders. Nothing else matters if the company runs out of cash.
Then fix, then grow
Diagnose which parts of the business lose money, often products, stores, or customers, and restructure around the profitable core by closing, selling, or fixing the rest. Only once the core is healthy does it make sense to invest in growth.
Remember the stakeholders
Lenders, employees, suppliers, and customers all react to a turnaround. A plan that makes sense on paper can fail if lenders pull credit or key staff leave. Name who needs to be on board.
Want to see how this structure compares to the others? The frameworks guide covers them side by side.
Part 4 of 9
How to solve it, step by step
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Clarify the situation
Confirm how much cash the company has, how fast it is losing money, and any deadlines from lenders or investors.
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Calculate the runway
Divide cash by the monthly burn to find how long the company can survive.
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Diagnose what is losing money
Break results down by product, location, or customer to find the parts that destroy value.
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Build the fix
Decide what to close, sell, cut, or repair, and check that the plan fits within the runway.
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Recommend with a timeline
Lay out the plan in phases, with what happens in the first weeks, the first year, and after.
Part 5 of 9
Worked example: Metro Home
Try each question on your own before you reveal the answer. Say it out loud if you can, the way you would in an interview.
Case prompt
Your client is Metro Home, a home goods retailer with 150 stores. It has lost money for two years, has $60M in cash left, and its lenders are nervous. The new CEO has asked you for a turnaround plan.
Question 1
How would you structure this problem?
A strong answer starts with the most urgent question: how long does Metro Home have? Then it lays out the three phases:
- Stabilize: how much cash is going out each month, how long the $60M lasts, and what can stretch it, like cutting inventory orders or talking to lenders.
- Fix: which stores, product lines, or costs are losing money, and whether to close, sell, or repair them.
- Grow: once profitable, where to invest, such as the best-performing stores or online sales.
A good candidate says they want to calculate the cash runway first, since it sets the deadline for everything else.
Question 2
Metro Home loses $5M in cash each month. How long does it have? Then use Exhibit 1 to find where the losses come from.
Exhibit 1: Profit by store group
| Store group | Number of stores | Annual profit per store |
|---|---|---|
| Group A | 60 | $1.0M |
| Group B | 50 | $0.2M |
| Group C | 40 | -$1.5M |
| Headquarters and other costs | -$70M in total |
Case data is illustrative.
Group A profit: 60 x $1.0M = $60M
Group B profit: 50 x $0.2M = $10M
Group C loss: 40 x -$1.5M = -$60M
Stores in total: $60M + $10M - $60M = $10M
After headquarters: $10M - $70M = -$60M per year, or -$5M a month
Metro Home has 12 months. The losses come from two places: 40 Group C stores lose $60M a year, wiping out everything the Group A stores earn, and headquarters costs of $70M a year are far more than the stores can support.
Question 3
Closing a Group C store costs $0.5M, after selling off its inventory. What happens to annual results and to cash if Metro Home closes all 40 Group C stores and cuts headquarters costs by 20%?
Headquarters savings: $70M x 20% = $14M per year
New annual result: -$60M + $60M + $14M = $14M profit
One-time closing cost: 40 x $0.5M = $20M
Cash left after closing: $60M - $20M = $40M
The plan turns a $60M annual loss into a $14M profit and uses $20M of cash to get there, leaving $40M. That is enough, but only if the closures happen quickly. Every month of delay costs another $5M.
A strong candidate also flags a risk: closing 40 stores could hurt sales at nearby stores or the brand overall, so the actual improvement may be smaller.
Question 4
The CEO walks into the room. What is your recommendation?
"Metro Home can be saved, but it has about 12 months of cash, so we need to act in the next quarter.
We're losing $5M a month. The losses come from 40 stores that lose a combined $60M a year and a headquarters that costs $70M a year. I recommend closing all 40 of those stores and cutting headquarters costs by 20%. Closing costs about $20M in cash, but it turns a $60M annual loss into a $14M profit and leaves us with $40M in the bank.
In the first month, I'd share the plan with lenders to keep our credit line open, since their support buys us time. Over the next six months, we'd close the stores and cut headquarters. Once we're profitable, we can start investing in our 60 strongest stores and online. The main risks are delays and losing sales at nearby stores, so I'd track cash weekly and sequence closures fastest where the losses are largest."
Why this works: it leads with urgency, fixes the specific sources of loss, checks that the plan fits within the cash available, and lays out a clear sequence with the stakeholders who matter most.
Part 6 of 9
Common mistakes
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Jumping to growth
A growth plan does not help a company that runs out of cash in six months.
Instead: calculate the runway first and protect cash.
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Cutting evenly everywhere
Trimming every store by 10% keeps the worst stores open.
Instead: find the parts of the business that lose money and act on them.
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Ignoring the timeline
A good plan that takes two years fails if the company has one.
Instead: check that every step fits within the cash runway.
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Forgetting one-time costs
Closing stores or plants costs cash up front, right when cash is scarcest.
Instead: include one-time costs in the cash plan.
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Leaving out stakeholders
Lenders, employees, and suppliers can make or break a turnaround.
Instead: say who needs to be on board and how you would keep them there.
Part 7 of 9
Variations you'll see
The same three phases apply to every version below. What changes is how much time you have.
- Cash crisis
- The classic form, like the Metro Home example. Runway decides the pace.
- Declining core business
- A business losing ground to new technology or habits. Decide what to keep, what to shrink, and where to grow next.
- Unprofitable division
- One unit is dragging down the company. Decide whether to fix, sell, or close it.
- Recovery after a shock
- A company hit by a one-time event, like a recall. Focus on stabilizing and winning back customers.
- Public sector or nonprofit
- A hospital or school system in financial trouble. The same phases apply, with more stakeholders to manage.
Part 8 of 9
Practice what you learned
Reading a framework is not the same as using it under time pressure. Put this lesson to work:
Try a full case
More ways to practice
Part 9 of 9
Frequently asked questions
What is the turnaround framework in a case interview?
It has three phases in strict order. Stabilize the business by protecting cash, fix the core by finding and addressing what loses money, then grow from a healthy base once the company is profitable again.
How do you structure a turnaround case?
Clarify the cash position and deadlines, calculate the cash runway, diagnose which parts of the business lose money, build a plan to close, sell, cut, or fix them within the runway, and recommend the plan with a clear timeline.
What is cash runway?
Cash runway is how long a company can keep operating before it runs out of money. Divide the cash on hand by the amount the company loses each month. A company with $60M that loses $5M a month has a 12-month runway.
Why does the order of steps matter in a turnaround?
Because a company that runs out of cash does not get to finish its plan. Protecting cash buys time to fix the business, and fixing the business creates the base for growth.
How is a turnaround case different from a cost reduction case?
A cost reduction case looks for savings in a stable business. A turnaround involves a company in crisis, where cost cuts are one part of a bigger plan that also protects cash, restructures the business, and manages lenders and other stakeholders.
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