Restructuring a business is a large undertaking requiring significant organisational and financial change. However, when carried out correctly, a business restructure offers a huge range of benefits that can open up a route back to success and profitability. For this reason, many companies in need of business rescue opt to restructure.
Why Do Businesses Restructure?
In most cases, businesses decide to restructure when faced with financial difficulties. This type of change can be undertaken as a preventative measure when directors start to spot the warning signs of insolvency, or when a business enters into administration. In these circumstances, a moratorium will be granted which provides valuable breathing space during which a suitable restructuring process can be executed to guide the business back to success.
Businesses may also decide to restructure their operations and/or finances as a proactive measure. For example, if economic conditions are challenging, the right kind of change can make this climate easier to navigate and prevent trouble from brewing.
The Benefits Of Restructuring a Business
For many businesses, the main benefit of restructuring is simply survival. While restructuring a business is undoubtedly a vital lifeline for those experiencing debt or difficult trading conditions, the process can also inspire a number of benefits that aid the long-term success of a company.
Increased Efficiency
Restructuring usually involves a process of reevaluating priorities and operations. Within this process, businesses can streamline tasks and get rid of redundant roles to ensure that resources are targeted towards areas where they are most important and productive. Consequently, one of the main benefits of restructuring a business is that it can increase efficiency as resources and time are deployed more effectively.
Improved Debt Management
A business struggling with its debts needs to act quickly to keep insolvency away from the horizon. Restructuring a business can be a financial lifeline in this situation as it provides the opportunity to renegotiate terms with creditors, refinance loans and consolidate debt. For example, a company voluntary agreement (CVA) allows a business to make an agreement with its creditors that makes repaying debt more manageable in the short term.
Reduced Costs
Cost reduction is a crucial aspect of restructuring a business and one of the main reasons why many embark on this process in the first place. When businesses are faced with growing debt or enter administration, it is likely that costs are far too high. Restructuring can involve a strategic reassessment of these costs to identify areas where spending can be minimised without compromising on the quality of products or services. An effective business restructuring may reduce costs by cutting back on employees, selling assets and changing to more cost-effective suppliers.
Refined Brand Identity
Business restructuring can also lead to a refined brand identity that resonates more effectively with customers. Restructuring a business provides an opportunity to reposition within the market or shift the market focus entirely to realign offerings with evolving customer requirements. This benefit of restructuring a business is particularly important if the decision to restructure is in response to external factors or a shifting market. Breathing new life into the brand can keep a business one step ahead of its competitors.
Streamlined Communication
Restructuring a business usually involves some degree of change to the existing organisational structure. Whether a level of the hierarchy is removed or individual roles shift, businesses can use these types of organisation changes to create a structure that is better aligned with its objectives. Not only does this kind of change make accountability clearer, but it also streamlines communication across the business which can lead to quicker decision-making and a culture of openness which boosts morale.
Things To Consider
Despite offering some transformative benefits, restructuring a business also poses challenges and risks. A poorly planned business restructure can lead to employee dissatisfaction, the loss of key talent and disruption to operations. It is therefore essential that company directors seek qualified advice and communicate effectively when considering restructuring a business.
The experienced team at Ballard Business Recovery can help if you are planning a restructure. Our team can talk you through the benefits and risks of the restructuring process and help you understand whether this is the most appropriate way for you to navigate present challenges. Simply get in touch today to speak to a business rescue expert.
