Signs Your Business Needs To Be Restructured
There comes a time in every business’s life when change is required to remain competitive or meet new economic conditions. However, sometimes change is necessitated by a failing aspect of the business’s operational structure that is creating inefficiencies and financial issues. In both cases, business restructuring is an effective strategy to adapt, improve a business’s financial situation and ultimately grow.
What is Restructuring?
Business restructuring is the process of making organisational changes to improve a company’s profitability and efficiency. Depending on the severity of the business’s situation, restructuring can be conducted informally or formally through legal procedures such as the Small Business Restructuring Process (SBRP).
Businesses that are receptive to change and proactive about identifying when it is required will benefit most from restructuring. Alternatively, if a company is resistant to change or realises it’s necessary too late, they are more likely to stagnate and potentially become insolvent.
Therefore, it is critical that businesses familiarise themselves with some of the key indicators that a business restructure may be required:
Poor Cash Flow
While periods of reduced cash flow are completely normal in business, frequent cash flow issues may be indicative of a more serious, underlying issue. When cash flow issues become so regular that your business is unable to float day to day operations, meet payroll obligations, and suffers from issues like poor credit ratings, it’s likely your business is in need of some major operational changes. Left unaddressed, serious cash flow issues will almost certainly get worse with time until the business ultimately becomes insolvent.
Fortunately, with a thorough financial analysis, the causes of cash flow issues can be quickly identified so you can implement the necessary changes to return efficiency and profitability to your business.
Too Much Debt
Taking on debt is an important and usually necessary aspect of business. However, if your business has taken on so much debt that is unable to meet repayments, obtain further finance or is relying on short-term funding solutions, then it may be time for a restructure. The restructuring process can enable businesses to improve their efficiency, reduce costs and meet their financial obligations in a way that doesn’t inhibit their ability to grow and continue to reinvest in their business.
Lack of Competitiveness
One of the most common signs a business is due for restructuring is the inability to keep up with competitors. If you find your business is being consistently beaten by price, quality and innovation, it may be time for an organisational shake-up.
Business restructuring can allow companies to regain competitiveness by re-assessing their product or service, identifying areas of improvement and sourcing more competitive pricing.
Stagnant Growth
In some cases, businesses may not have to be in severe financial distress to benefit from restructuring. Your business may be making a consistent and reasonable profit, however it has reached its growth limit and is stagnating.
Business restructuring can help to reveal inefficiencies, allowing businesses to increase staff productivity, cut costs and increase their customer base. In turn, this enables them to push past their current position in the market and continue to grow.
Drastic Inefficiencies
If the day to day operation of your business is riddled with inefficiencies such as poor communication, unmotivated employees, slow service or deliveries and frequent mistakes, a business restructure could dramatically help.
By assessing your organisational structure, procedures and processes, you can identify areas to streamline your operations, improve communication and the overall quality of your customer experience.
Here To Help
Regularly reviewing your business’s performance in line with your business plan is the best way to identify early on when a restructure is required. Proactiveness is key to staying ahead of the competition and remaining efficient and profitable.
At Wisdom Business Consultants, we specialise in both formal and informal business restructuring. We can assess your financial situation and help your business to become more profitable, improve processes and adapt to the needs of our ever-changing economy.
