When is it time to restructure your business? Many businesses wait until they’ve run out of time or have reached a point where they simply can’t continue. By waiting too long, they risk digging themselves an even deeper hole. In reality, restructures should be done before they become a necessity. Here are some warning signs that your business needs a restructure: declining profits, high turnover among managers and employees, operations slowing down, and your industry entering an evolutionary phase.
A broad perspective on restructuring a business is key for companies looking to compete in the emerging economy. The Covid-19 pandemic has changed the environment in which businesses operate. Customer behaviors, regulatory factors, and capital markets have all changed, and companies must adapt. Restructuring is about embracing change and changing the archetype of a company. Here’s an example: Microsoft reorganized its org chart around functions in 2013.
Restructuring has many purposes. In some cases, it’s time for a new name. While most restructuring scenarios don’t affect a company’s name, trade registry identification, or commercial brands, others may require that divisions be incorporated into different companies or two or more separate companies. In any case, business numbers and trademarks will likely change. The key is to find the right people who are experienced in restructuring and can help you get there.
The first step to restructuring a business is defining your future vision. It’s critical to embrace the new vision. Be aware that current leaders may not adopt it quickly. For those who do, be prepared for a bumpy ride. The vision needs to be unique from the past. It can be communicated through financial targets and business strategies. A strategic vision can help you make a strategic decision that’s best for the company.
Restructuring your business is an effective way to de-risk areas of your business and protect new product lines. Restructuring your business can help you take advantage of tax relief by enabling you to de-risk certain areas of your business. You can also consider grouping different aspects of your business into separate entities. In the long run, you’ll be better able to manage your business and still make your payments.
Performing an adverse impact analysis is essential when planning for a restructuring. A thorough assessment of the rationale and objectives of the restructuring will provide you with a complete picture of how it will affect people. In particular, the analysis will allow you to determine if the restructuring will negatively impact certain protected classes. For example, if a merger has been announced, a company may have to cut a significant amount of jobs or employees. Age disparity is another risk to consider.
When planning a restructure, it is important to consider the views of employees. Employees are often reluctant to give their honest opinions about the change, so you should cultivate an environment where all employees are willing to provide feedback. If possible, use a survey to ask employees what they would change, and how they approach the change. You may also be surprised at what you discover! This method of consultation is a proven way to get valuable insights.