Changing market conditions, shifting consumer trends, and increased competition can all impact your business’s operating environment and make restructuring necessary. Business restructuring can consist of organisational and financial restructuring, with the former focusing on employees and processes, and the latter addressing the balance sheet. When done right, a business restructure makes your business more dynamic and innovative by reorienting it to the market. Above all, it can improve your business’s profitability. Use the following strategies to guide you as you carefully plan your business restructure.
1. Avoid waiting too long
A common mistake is waiting too long to restructure, even through the signs of trouble are there. Delaying restructuring not only reduces the options available to your business but it can also raise the risk of business failure. By acting quickly, you might be able to avoid drastic actions and end up creating more impact and value from the restructure.
2. Conduct an honest assessment
Successful restructures are based on accurate assessments, so take the time to identify what’s happening in your business. Your business might be overleveraged or it could be experiencing poor customer retention. You might be finding it a challenge to achieve profitability targets with low margins. Accurate financial statements are the best tool for determining what’s happening in your business and what’s causing your financial distress. Once you have an accurate assessment, you can refine your strategy and create a turnaround plan.
3. Review your strategy and business model
Strategic planning should inform your restructuring plan. If your business is experiencing serious challenges, your strategy and business model could be the reason. Are your products still serving your demographic, or have market preferences shifted? Is the low-margin, high-volume business model still right for you? Are you operating in an area with increased competition? Review and update your strategy and business model so you can align your restructuring plan to a new strategy that gives your business the best chance of success.
4. Look for ways to achieve quick results
If your business is in serious trouble, look for opportunities to increase sales and revenue immediately. You can continue working on medium and longer term plans, such as changing your product or service offerings, but identify ways to boost income right away. Ceasing unprofitable product lines, liquidating unused equipment, and negotiating with suppliers are easy ways to generate quick revenue boost.
5. Aim to reduce complexity
Look to streamline your operations and structure as you implement your restructure. Complexity in your business, such as in your order processing, managers’ roles and responsibilities, or rules and levels of authorisation. can hinder performance and must be eliminated.
6. Determine your core activities and processes
If your business restructure involves restructuring roles, firstly identify the core activities in your business as you plan your turnaround. Removing duplication is vital, but you’ll want to preserve the key activities. By familiarising yourself with the top value-adding activities and the core processes, you’ll ensure no critical roles are eliminated.
7. Realistically assess workloads
Role restructures can result in overloading positions, so be realistic when you’re assessing and planning your personnel restructure. With a realistic assessment, you can avoid “heavy” or “light” roles and maximise productivity and performance in your team.
8. Match leaders with specific tasks
Your senior and line managers could be critical partners during restructuring, since they deal with your team directly. They can be drivers or they could end up slowing down progress. One thing you can do to support your leaders is to avoid overburdening them. If you give them time to focus on leadership tasks, they’ll have more time for coaching, mentoring, guiding, and engaging with staff members to support a successful restructuring.
9. Manage uncertainty and resistance
Proactively manage uncertainty and resistance in your team through regular communication. Clarify roles, activities, and tasks from the beginning and anticipate resistance from specific teams, departments, or team members. If you act proactively to reduce resistance, you can pave the way for a less stressful restructure.
10. Stay flexible
Stay flexible during the restructure. Whether it’s realising elements of your restructuring plan could be updated as you implement and learn, or recognising your staff capacity could be further reduced, avoid being locked into the mindset of a perfect organisation. Instead, approach it as if you only need to build a business that will be successful for the next 6 or 12 months. This way, you can stay flexible and responsive to change.
11. Seek expert advice
Talk to trusted experts, and keep in mind there’s a variety of professionals who can support you throughout the entire process. Whether it’s advice on turnaround finance, restructuring, or external administration, obtain advice as early as possible so you can explore your options and work to the best possible plan.
Start planning your restructure now
Business restructuring can be an essential process that helps your business evolve in response to a changing environment. It’s often a challenging, uncertain time, but with a plan aligned to your strategy, commitment to flexibility, and communication, you can give your business a chance at survival and return to profitability.
Mackay Goodwin is Australia’s leading registered insolvency practice. Our team are experts in specialist restructure, turnaround, and insolvency advice for Australian business of all sizes. Explore our full suite of services here, or contact us today to find out how we can can help your business recover from a difficult situation before it’s too late.