Restructuring occurs when a business or company decides to institute significant changes to its operational and financial structure. Although it is often due to a misfortune – such as bankruptcy – there are other reasons why restructuring may be in the best interest of a business. Below is an in-depth look at business restructuring.
Reasons for restructuring a business
Businesses tend to restructure due to an urgent need to amend their business model or organizational structure. However, the need to make financial adjustments to your company’s liabilities and assets can also warrant a restructure. A company may restructure to:
- Incorporate new technology
- Merge with a different company
- Improve competitive advantage
- Reduce costs
- Better leverage existing talent
- Concentrate on specific accounts and products
Understanding the benefits of restructuring your business
A corporate restructure can have several benefits for your business. These include the following:
- Increased efficiency
- Expansion of operations
- Financial gains
- Competitive edge
- Increased value
Although restructuring is a means to help most companies survive, it can also help others succeed. For instance, restructuring may provide you with a more solid footing if your company isn’t allocating assets properly.
Top tips for restructuring your business
Before you consider bankruptcy, consider ways to restructure company finances. Doing this might be instrumental in helping you avoid bankruptcy altogether. Below are the top tips for business restructuring to get you started:
Assess your business
Many business owners make certainn assumptions when it comes to different business elements. This is because they think they know which are working well and which aren’t without making an assessment. Ensure you conduct a thorough assessment of all business elements and involve your employees in the decision-making.
Settle your debt
Most businesses file Chapter 7 bankruptcy to erase debt by liquidating assets. However, doing this means you give up control over your business assets or property. With restructuring, you can negotiate terms for settling your debt, effectively avoiding asset forfeiture and bankruptcy.
Make tough cuts
Although making tough cuts seems like a broad solution, it is certainly the most important. It may mean cutting down on employee perks or laying off some employees. However, it will also help to look at areas in your budget where money might be leaking. Do not forget to eliminate elements that aren’t increasing your cash flow.
