Business restructuring is often used by distressed businesses to overcome their financial and operational issues in order to return to profitability and growth. In challenging markets, business restructuring can help businesses overcome issues like poor cash flow, thin profit margins, and stagnating growth.
Steps to take during a restructure
1. Identify your goals with the restructuring
Clearly define what you’re trying to achieve with your business restructure. Survival in an expected market downturn, anticipating new market entrants or disruptive technology, or overcoming severe cash-flow and debt challenges could be some of your goals.
Company directors and management may need to accept at this stage that downsizing and departmental organisation could be involved. Mental readiness among the company’s leadership and ability to accept difficult challenges can pave the way for a smoother restructuring process.
2. Devise a plan
Without a clear plan for implementation, you won’t be able to achieve your stated goal. The plan should be formulated after a diagnosis of your business’s top problem areas. It should have action steps to address these problem areas, and outline how you will implement the steps, with a timeline for completion. Diagnosing your business can include assessing different possible business scenarios, while the planning process might outline operational and strategic steps for implementation.
For the company’s leadership, making big decisions can feel like a challenge, especially as major decisions like downsizing, merging departments, and cutting product lines aren’t everyday business decisions. However, if you’ve conducted an accurate diagnosis – ideally with the help of experts in business turnaround strategies – you’ll be more confident you’re pursuing the best course of action for the future of your business.
3. Anticipate the impact
As you refine your restructuring plan, anticipate the impact and possible challenges that will arise. How will your customer base by affected by the restructuring efforts? How will your team and employees respond, and what do you need to do to bring them on board with the transition? Are there any contingencies you should plan for, such as legal challenges from creditors to your restructuring efforts?
By anticipating the different impacts, no matter how unlikely some of these might be, you’ll be able to manage the announcement more effectively. You might be able to successfully involve the right people or staff and obtain their buy-in because you’ve anticipated and addressed their concerns.
Communicationis vital to involve everyone in the restructure and ensure they ‘buy-in’ to the necessary changes. Without transparency and regular communication, staff can feel fearful and uncertain during restructuring. Be proactive about providing regular updates to employees especially when key decisions are made, and invite your team to approach the leadership with any concerns or questions.
When progress has made, update your employees with the good news as you’ll build credibility with your team by sharing you’re achieving positive results with the restructuring efforts. Make sure you constantly sell the need for the restructure even as you’re explaining any changes and providing news updates.
Change is usually hard for businesses and its employees. By reminding employees of why the changes are happening, you can lessen frustration and resistance. Gain the trust and support of employees and other stakeholders and you could build the momentum necessary for rapid change.
5. Treat it like a crisis
By adopting a crisis framework, you can pull your company and its people out of complacency and speed up implementation, where necessary. For companies in strife, the crisis mindset can make the difference between a successful restructure and one that fails to achieve your stated goals. Using bold, strong terminology like “crisis” and “emergency” can drive the type of action and change you need. It also ensures everyone in the organisation understands the restructuring is a real solution to a real problem – whether you’re struggling on razor-thin margins or having issues meeting your debt burden.
6. Open up all areas of operations to scrutiny
Remember, in a restructuring plan every area of your business is open to scrutiny and review, so don’t be tempted to protect certain areas of your operations out of sentimentality or habit. Consider your restructure an opportunity to examine every element in your organisation and introduce the improvements you need to get back on track.
7. Obtain expert advice
Whether your business is going through a slump in growth or experiencing serious financial challenges, obtaining expert advice from restructuring and turnaround experts could enable you to return to growth and profitability. Restructuring is part art and part science, and you’ll want to work with financial and legal experts who have proven experience in business turnaround. Working with experts can save you from wasted time, money, and effort, while allowing you to achieve the results you want.
Having the support of experts during business restructuring – by nature a complicated process – gives you peace of mind you’re pursuing the best possible course of action for your business and staying fully compliant throughout the whole process.
8. Stay committed and understand restructuring can work
From the beginning to implementation, doubts can arise about your restructuring plan and whether you’ll achieve your goals. Work with your advisors and keep in mind restructuring can yield excellent results for even the most troubled business as long as you persist. The company’s leadership needs to stay focused on the plan as well as the outcome. Without leadership belief in the plan, employees, creditors, and other stakeholders will find it challenging to have faith. On the other hand, you stay committed, you’ll be more likely to succeed at obtaining buy-in from concerned parties and seeing the plan through to the end.
Restructuring is rarely an easy process, but clear planning and willingness to make tough changes can lead you to success. Your restructuring plan should include a communication strategy to keep everyone up to date, and consulting advisors with business turnaround expertise is essential. Although it’s often a challenging process, business restructuring can be well worth the effort and see a troubled organisation thriving again.
Craig has worked closely with businesses that are in financial difficulties and can assist in the development of a structure that deals with your business and the options available.
Craig has developed a range of solutions for businesses large and small, working to find outcomes that maximise not only the financial but the personal.
Since establishing the business in 2014 Craig has solved business issues both simple and complex and develops solutions tailor made to your situation.