If you answer 'Yes' to these four questions, restructuring could be your solution

by Paul Gidley18.10.23

It’s not always easy to definitively know when your business is on the track to, or ready for, restructuring.

Often, it is a series of downturns, financial hurdles and range of operational difficulties that eventually lead to a realisation it’s time to bring in the professionals for support. 

When considering whether restructuring your business is the right solution, there is a way to better understand your position: when asking yourself these four questions, consider how many times you respond ‘yes’. If it’s to all, or even a significant yes to one, restructuring might be the solution you’re seeking.

Are financial challenges impacting the business's sustainability?

This means, are you finding it difficult to meet your liabilities, and/or are you going into greater debt trying to meet them?

It is the first sign of pressures mounting on your business’s sustainability. Being able to meet your financial obligations is vital to not finding yourself owing more than you can pay back, in a significant and serious way that could result in insolvency.

If you are answering yes to this, evaluate your current financial situation and assess if there are significant cash flow issues, mounting debts, declining revenues, or operational inefficiencies affecting profitability. If financial struggles are persistent and threaten the viability of your business, restructuring may be necessary to address these challenges.

Is the current organisational structure hindering growth and productivity? 

A less obvious marker of potentially needing to restructure is the slowdown of growth and productivity. You might be able to meet your financial obligations now, but this could be forecasting issues ahead. If you’re noticing growth and productivity are stagnating, analyse your company's structure and identify any bottlenecks or inefficiencies that impede decision-making, hinder innovation, or limit productivity.

If your organisational setup no longer aligns with your business goals or market demands, restructuring may help streamline operations and improve overall performance.

Have market conditions or customer preferences shifted significantly? 

Recognising and responding to influences in the marketplace can safeguard against a lack of competitiveness and relevance. External factors like new competitors, ‘acts of God’ events like natural disasters or something like the Covid pandemic can shift customer demands and accessibilities, impacting business. 

If your current structure is not adaptable to the evolving market landscape, restructuring might be essential to remain competitive and sustainable.

While you can’t predict all future instances, you can restructure your business to set up flexible and adaptable processes ready to respond to any changes that occur.

Are there redundancies or underutilised resources within the organisation? 

Evaluate your workforce, assets, and operational processes to identify any redundancies or areas of underutilisation. 

If your business is carrying excess overhead or has inefficient processes that impede growth, restructuring can help realign resources and focus on core strengths.

If you answer "yes" to one or more of these questions, it may indicate that restructuring your business could be a potential solution. 

However, restructuring is a significant decision and should be approached with careful planning and consideration. It's advisable to seek expert advice from business consultants, financial advisors, or legal professionals to determine the most suitable restructuring strategy for your specific circumstances.

If you are experiencing solvency issues contact Shaw Gidley today to speak with our expert team.