What needs to go right, and what can go wrong
Restructuring a business is generally a step towards the end of a period of uncertainty, creditors, stakeholders, staff and the owners are on tenterhooks, communication is generally stressed or non existent and it’s now necessary to re-engage. Often in the lead up to a restructure there has been a period of mixed communication, business owners accentuating the good often to the detriment of the bad.
We often find that businesses have failed to communicate or expectations have been constantly missed. There is a credibility gap that needs to be re-established in order for the business to have any prospect of support from stakeholders. It’s the stakeholders who are key for the survival of the business.
What businesses do badly is continuing a story that is not reflective of reality. We worked with an owner that was hopelessly insolvent, communicating with his lenders he stated that the business was on the precipice of a turnaround and that he could trade out, everyone in the room knew it was not realistic.
The narrative is important and controlling the message necessary for a successful restructure, stakeholders need to see a realistic outcome, one that is not relying on assertions or assumptions that have no reality. Promoting a rosy picture damages the view of supporters and when stakeholders have insight into the business, over-optimism can cause more harm than good.
For many businesses there has been a period where the communication may have been poor, and re-engaging with stakeholders needs to recognise that they are impacted by the position of the business. Standing in their shoes, looking for realistic outcomes and asking for their support not just making promises assists in re-developing frayed relationships.
The expectations for impacted parties needs to be carefully managed. As few restructures follow a simple plan, things change during the process and it is therefore important that any expectations are tempered against a tough reality. During this time it is often best to communicate early and regularly so that there is a consistent understanding of when things change or things don’t go to plan.
In early communication meetings a general approach is to identify who is impacted and what their reaction will be,
- Are bookings going to be cancelled and is there lead time?
- Have creditors been promised payments in short order?
- Does a location need to be shut?
- Are staff missing out?
Each of these has multiple impacted parties, so jumping in early and understanding the influence of the change means that the message can be managed. It is necessary to handle each communication in line with the expectations of the party disadvantaged and ensuring that there is a limitation on the inconvenience.
What can go wrong? As emotions are high, there are times to step back and times to be forthright. We assisted a business owner that decided to turn the attention to staff, they reacted accordingly and destroyed the business online. In a meeting with a bank representative for distressed debt, our business owner painted a picture so detached from reality that the bank asked if it was a joke, they could not reconcile the representations of the business owner with what was happening with their bank balance.
What needs to go right? The communication process is an integral component of a restructure and being a balance between emotions, practical answers and re-connecting with stakeholders. Messaging is key; clear, based in reality and not overpromising.
We’re experts in communication at C&D, so if you need someone to help you through the difficult conversations that come with restructure, we’ll be by your side the whole way. You can contact us on 1300 023 782 or email firstname.lastname@example.org to schedule a complimentary no-obligation consultation.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
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