If your business is in trouble, it’s important to look to a wide range of solutions when putting together a much-needed business rescue plan. Formal processes like administration or a Company Voluntary Arrangement (CVA) will likely hold some or all of the answers, but these will typically be most effective in aiding business recovery when implemented alongside some form of business restructuring.
Business restructuring involves the reorganisation and reshuffling of priorities with a view to making the business proposition more stable and viable. Those considering it in light of financial difficulties or challenges will look to one of three types of business restructuring. But what are they, and how can they aid business recovery? Read on to find out…
Operational Restructuring
The first of the different types of business restructuring to consider as part of a business rescue plan is operational restructuring. This process involves identifying underperforming areas of the business to implement strategies to address inefficiencies and make the day-to-day running of operations more effective. It may require a number of actions to be taken, including selling or shrinking underperforming areas, rationalising processes, and addressing skills shortages to ensure that employee resource is best utilised across the business. All of these activities ultimately work together to create a more efficient and sustainable framework from which the business can operate.
Operational restructuring does not technically involve business finances, but it’s important to note that the money saved from streamlining operations can significantly enhance overall profitability and therefore help to turn a failing business back into a successful one.
Financial Restructuring
Business owners can also look towards financial restructuring to aid business recovery. Financial restructuring involves a complete or partial overhaul of business finances through various methods, including:
- Debt Restructuring – This process involves renegotiating existing debts to make repayments more manageable, often by extending repayment periods or reducing interest rates. This type of business restructuring can be particularly beneficial for those struggling with cash flow problems, particularly when used alongside a formal insolvency solution like a CVA to make monthly payments more manageable.
- Cost Reductions – Financial restructuring can also involve the identification and elimination of unnecessary expenses for immediate financial relief. For example, renegotiating supplier contracts and downsizing office space may cut business costs without compromising output.
- Mergers and Acquisitions – In some cases, financial restructuring may involve merging with or acquiring another business. This can provide access to new markets, enhance economies of scale, and create synergies that drive growth and stability.
Each of these approaches plays a crucial role in aiding business recovery, particularly when implemented in conjunction with a formal insolvency process. Overhauling the way your business deals with its debts and costs can ensure the business not only survives immediate financial difficulties but also emerges stronger and more sustainable in the long run.
Organisational Restructuring
The final type of business restructuring is organisational restructuring. This involves restructuring the internal hierarchy and management framework to create a more efficient and effective organisational structure. For example, unnecessary layers of management may be removed, roles and responsibilities redefined, and the chain of command simplified so that the business can respond faster to challenges.
However, the impact of organisational restructuring on employees must not be overlooked. Significant changes to structure and roles may create redundancies and these must be managed carefully to minimise disruption and ensure morale remains intact. Clear communication, proper planning and achievable goals are all crucial steps to take to ensure that this type of business restructuring can be utilised as a successful business rescue tool.
With this in mind, seeking professional advice is strongly recommended if you are considering implementing any of the types of business restructuring within your business. The scale of such changes should not be underestimated and it is paramount that any restructuring efforts are implemented at the right time and in the right way.
If you require any assistance putting together a business rescue plan and undergoing the process of business restructuring, do not hesitate to get in touch with the team here at Ballard Business Recovery. Our business rescue experts are on hand to advise on the best strategy for moving forward and recovering your business.
