We are running through some questions and answers today about what actually happens during the restructure process and what to prepare for.
How long does it take?
Depending upon the situation and what is involved a restructure may be as quick as a week and we have been involved in some that have taken up to four years. There are a lot of factors that need to be considered and no restructure is like another.
At our first conference we usually have a good idea of what is involved.
How much work is involved?
A restructure relies heavily upon the business owners, and for the initial stages it is all hands on deck. Depending upon what else is needed then usually there is involvement from accountants and lawyers to bring the situation up to date.
Answering the question on how much work involved also depends on the level of preparation that has already been done, if the business is well behind in lodgements or has not been keeping good records, then we may also bring in an external bookkeeper to help with the process.
How successful is the process?
As each restructure is different there are a lot of factors that will determine how it will all play out. Sometimes the involvement of external creditors may make a simple restructure impossible, equally if there are already proceedings on foot or wind-ups in place then it may be hard to get a result.
For businesses in significant difficulties, it may be finding a solution that involves the ending of the business.
What will it cost?
Our approach has always been to fix the cost of the restructure, so there are no surprises. The answer will generally depend on the size of the work and the engagement of the third party suppliers. At our first meeting we generally are able to determine a level of fees for the project.
What if it doesn’t work?
In this process there are no guarantees. We work closely with our partners to get a result, but there are times that things are not simply going to work. Some of the decisions in the process and we find that sometimes these are the stumbling blocks in a successful restructure. In our case studies we run through two scenarios where a restructure was unsuccessful.
What information do you ask for?
We are a little different in how we do things, we ask for everything, no matter how small or insignificant. We find that it is often the little things that change the overall picture, and what may seem a nothing issue may be key to the restructure.
Should I get independent advice?
Absolutely, and we encourage you to understand the process with whatever advisors you generally use. We do, however, recommend that they are responsive and understand the time pressures. We work closely with your professional advisors wherever we can to walk you through the process.
Will you work with my accountant or bookkeeper?
Wherever it is practical we will work with your accountants in getting a result. We try as much as possible to keep them in the loop and encourage you to ask them questions during the process.
We find that some accountants or bookkeepers do not have the experience or time to run through these types of process and we often find that our professional partners are more responsive during the restructure process before handing back to your original accountant or bookkeeper.
Will I need to borrow more money?
Often times you will need to have access to additional money or funding lines. We have often inherited clients who have raised expensive money, and wherever possible we will find a solution to this as part of the restructure process.
Before undertaking the complete restructure process it is necessary to understand the level of resources that will allow the restructure to occur, this can be substantial.
Can’t I just re-brand or change the company?
Unfortunately this, whilst sounding simple, may actually create more problems for business, especially if the process is not handled properly.
Will I be going bankrupt?
Sometimes the simplest option may be to go bankrupt and move on. The stigma attached with this has reduced over time. If we feel that this is a more appropriate option we will discuss this with you and work to a solution that manages this.
Can I negotiate a deal with my creditors?
Some times you can, and we recommend this for some debts. Unfortunately there are some lenders that are unwilling to accept deals and others that are legally unable to reduce debt amounts (such as for PAYG or superannuation).
What is your role?
Our position is to manage the process, this can be as in-depth as bringing in our own management team for a few weeks, handling staff and creditors or as hands off and simply handing the external professionals during the process. It all depends on what is required and what help you will need.
Our role is to run the restructure process as smoothly as possible.
Will I end up with the same business?
Chances are, no. if your business is restructured, it is much like severe surgery, we may need to amputate in order to help it survive.
Our process is to analyse your business with you and see where things can change. This may be in staffing, product mix, supply agreements, supply terms or sales terms.
Is a restructure phoenixing?
ASIC has encouraged legal phoenixes and where the process is followed properly there is an encouragement for this type of approach. We do not offer a service that is what is referred to as an illegal phoenix, which involves re-establishing to avoid creditors or statutory obligations.
What will happen to my staff?
A fallout from the restructure process is that often staff will lose their job, this is unfortunate but some times this is the only thing that will save your business.
Where staff have statutory entitlements or payments due, we recommend that you take all steps to ensure that these are paid.
What happens after the restructure?
Depending upon the process that is followed there is a good chance that you will end up with a business that is sustainable and profitable. We do not undertake restructures that will simply kick the can, and if there is no viable business at the end of the process we will recommend that the business is brought to an end or sold.
At the end of the process we generally keep an eye on your business for the following six to twelve months to ensure that everything stays on track. We will generally have a formal meeting at the end of the first year to review the situation of the business and see if there is anything we can do to help.
Can I stop the process or change my mind?
It’s your business and we are only there to help, if circumstances change or if you feel that a different approach is better the process can be stopped. We rarely recommend this, and we find that where there has been conflicting or different advice that it may not be appropriate to your situation.
We have experienced restructures where a long standing advisor has made a contrary recommendation, only to find out after that they misunderstood the overall situation and were not aware of all the moving parts.
If you have concerns over the process or want us to explain it to a third party, we will always do so.
Do I have to rush my decision?
Unfortunately time is generally not friendly, and decisions need to be made quickly. We work with pretty tight deadlines when we undertake a restructure and time taken to run through decisions can impact on the ability to complete the project.
Am I making the right decision?
We recently worked with a small business who was part of a franchise. The business had been losing $50,000 a year for many years. The owner had been borrowing off credit cards to pay the bill. It took a year to make the decision to walk away, three days after the decision, he called and said he slept for the first time in 5 years.
Sometimes the decision to restructure or walkaway may look the hardest, often it is the best decision that you can make. The process is not easy and for many people they regret it on the way through, but throughout our history we have never had someone regret the decision.
Often the jolt in the arm to make changes are financial, but for many people the emotional aspect is overlooked, and can be the bigger part of the process.