In business, nothing ever stays the same, whether it be changing customer priorities, the competitive market, or operational difficulties. In most cases, you need to transform to re-energise your business.
Restructuring a business is a standard method of transformation. By restructuring, you can access many benefits, including refining operations, reducing costs, encouraging productivity, improving profitability, or turning around a struggling company.
We have listed the common reasons that you need to restructure your business.
- Downsizing
If you’re facing issues in your business, such as those resulting from an economic decline, the changing market, or falling revenue, it may be time to downsize. Reducing your cost base and streamlining your company to the operations that still bring in revenue are the key benefits of downsizing.
It’s worth remembering that downsizing can be temporary as it allows you to reposition and then scale back up when the time and conditions are suitable. However, if things are tough, restructuring to ensure your business’s survival is key.
- Relocation
Another common reason for restructuring is moving your operations to a new location. Most businesses will take the opportunity of relocation to restructure as it allows them to lower costs, optimise production, or access new markets.
This may require an adjustment, especially if it means working with new staff, suppliers, and processes.
- Expansion
When you are growing your business, evolution is required. This includes continuously reviewing and updating processes and introducing new functions to fuel and meet demand. You may also mean changes to your company’s hierarchy to account for new teams and personnel changes.
By restructuring effectively, you can successfully drive growth, fulfill your goals and improve profitability.
- When ownership changes
In many cases, a change of ownership is necessary to transform a business. This could be for various reasons – ranging from the existing owners being unable to take the business forward or just bringing a new perspective to the company.
When you bring in new owners, it is inevitable that things will change, depending on the vision of the leadership team and the adjustment required to optimise operations.
- When management changes
Similar to a change in ownership, new management will affect the running of a venture. This includes any new leaders or new heads of departments who seek to shake things up. How many changes will vary, depending on the changes proposed.
Part of the adjustment may include amending your company structure to incorporate new roles or shaping processes in line with the objectives of management.
- Ahead of an exit
If an owner wants to exit a company, they may choose to plan for this exit by restructuring the business to make it more attractive to prospective buyers. The aim is to maximise performance, improve profitability and optimise operations to maximise their value.
- Fund raising
When you are trying to raise finance for a business, there are specific criteria you need to meet to become more compelling to lenders and investors. This could include adding a more experienced management team at the helm, maximising profits for higher valuations, or adjusting your business model.
With the right changes, you will improve your chances of obtaining funding.
- During a merger
Another reason for a change in structure is ahead of a merger. Mergers commonly lead to challenging transitions as the two parties and staff learn to work together and share values, as well as restructuring changes that accompany them.
By restructuring ahead of the merger, you will prepare your business for the evolution to come, making the process smoother and accessing results more quickly.
If you have decided restructuring your business is the correct route forward, you must set out clear objectives of what you want to achieve.