5 Signs Your Business Needs Restructuring
October 22, 2020 | Joyce Ibrahim
The business world is consistently disrupted by new technologies and increasingly competitive market conditions, and it isn’t uncommon for companies to find themselves on the brink of collapse for lack of adaptability.
For your company to strengthen its ability to keep up with changing market needs and stay ahead of the competition, the change often has to come from within your organization. This could mean that you may want to rethink your products, teams, or even your mission and business model.
If you can identify these warning signs in your own business, it may be high time to bring in restructuring experts to help you stay afloat and steer your balance sheet back to safety.
Increased sales and profitability are not enough to keep your business up and running if you’re failing to collect revenue or are struggling with poor working capital.
Apart from exposing you to insolvency and bad credit ratings with suppliers, poor cash flow can threaten your competitive advantage and stall your operations and therefore, your growth. Tesla had found itself in a similar scenario in 2018, burning through billions of dollars to increase the production rate of its Model 3 cars, before CEO Elon Musk announced a company-wide reorganization to better reach profitability goals.
Hitting the breaks on your growth will only give your competitors the green light to theirs, and if cash-flow is a recurring speed bump within your organization, time is of the essence.
2. Revenue is dramatically dropping
If your financials are significantly and suddenly out of order, it’s a clear sign that your business structure is no longer profitable. This could lead to defaulting on debts, taxes, and employee salaries, which would not only affect your credit ratings, but could also cause you a series of legal issues that are costly to settle.
A restructuring expert can help you identify the source of such a decline and address them to ensure you bring your company back to profitability.
3. Inefficiencies are mounting
If you and your team are giving your best but your efforts aren’t translating into satisfying results, it could be time to restructure.
Inefficiency is often manifested in in slow processing times, miscommunication, and increasing mistakes in the delivery of your products or services. Restructuring could help you identify processes to streamline your operations and decrease the need the need to hire new staff.
The source of your diminished efficiency could also be in your business structure or the design of your operations. Whether it’s in your operations, costs, or structure, a restructuring process helps you identify the areas you need to address to optimize your company’s potential.
4. Significant client turnovers
If you’ve noticed an alarming decline in your customer base, or if your clients are buying less or started looking for something else, you may want to seek expert help as soon as possible. Client turnovers can have a critical cost on both your financials and your reputation.
Restructuring could help you find better ways to reduce your production costs, offer new products and services, or look into new revenue models for your current offerings.
5. Obstacles to competitiveness and growth
Your profit margins are decent and you’re maintaining a good market share, but can’t seem to push beyond those limits and scale up. And on top of that, other market players are beating your prices and are offering better customer service and higher product quality. It could be that you’re not deploying your resources to the best of their ability, or your business model is not catching up to growing market needs. These are some of the considerations that led the 128-year-old Wall Street Journal to implement a newsroom reorganization in 2017, in an effort to facilitate their editorial operations’ shift from print to mobile-first publishing.
In short, seeking a restructuring expert could allow you to make the best out of your resources and redesign your business model to reclaim your competitive edge and scale up.
Corporate restructuring gives your business a chance to return to profitability and drive more sustainable growth. But it’s also an opportunity for you to identify financial and operational weaknesses and roll out the adequate strategy to have you thriving once again.
Need a hand turning your business around? Here’s how we can help.