How do you restructure a corporate company that is failing?

A company restructuring plan is the blueprint to saving a failing company. The plan needs seven key ingredients for the turnaround plan to work well:

Crisis stabilisation - restructuring

Perform a diagnostic review and then evaluate the turnaround options. Choose one option and get started on the immediate crisis actions. It’s important for the business to first deal with cases of short-term, unforeseen financial distress before implementing a more comprehensive turnaround process.

Establish a trusted turnaround team so they can develop a plan. While it’s imperative to choose the most able team players, it’s crucial to be consistently compassionate with them because the stabilisation and turnaround processes will be long and complex.

Corporate Leadership

It’s important to display calm, methodical leadership during a business turnaround. Do things step by step.

First, trace back and identify the root cause of each business problem. Taking caution and setting a manageable working pace will define the effectiveness of the entire plan to turn the business around and will also probably define management’s tenure as company leaders.

Stakeholder support

Inform stakeholders such as the tax authorities and the bank if the business cannot fulfill its financial responsibilities. Provide them with all relevant information about why it cannot do so, especially if it cannot pay taxes and/or attend to loans or line of credit responsibilities.

However, be confident and show them you are still in charge and will turn things around. It is vital that you work with the authorities and your bank when your company is facing difficulties—especially financial difficulties.

Company restructuring and strategic focus

Prepare the company leadership and employees for the turnaround. This involves both the immediate plan to fix the situation and the long-term strategy to keep the business from relapsing into its old problems.

The turnaround plan must be practical, time-bound, and thorough. Outline a clear time frame to tackle specific issues on time and track progress, and address specific problems by order of urgency or importance.

The clearest signs of financial hardship are:

• Being over leveraged: Unable to make payments and having too much debt.

• Poor cash flow: There’s not enough cash flow to maintain daily operations.

• Low sales: The sales team is consistently failing to meet quotas.

• Reduced profitability: The business cannot maintain its profitability.

• Lower customer retention: The company spends money to attract new customers despite retention declining.

• Outstanding receivables: Suppliers refuse to work with the business due to unpaid invoices.

The business must keep accurate financial reports to assess these issues as best as possible.

Corporate organisational change

Have a company meeting to acknowledge what’s wrong with the business and discuss how management will fix it. Ask employees for input on relevant parts of the business plan.

For established firms, this shows management has given careful consideration to developing the business.

Critical process improvement

A successful business requires optimum efficiency in its backend operations, and a business restructure can help streamline business operations.

Work with employees to identify inefficiencies in operational processes and overcome them with operation redesign, staff training, and tools such as IT equipment software, for maximum operational efficiency.

Financial company restructuring

Boosting revenue is a common solution for getting business back on track, but it’s not always workable to pivot to new product and/or service lines. Instead, find quick hit ways to make money.

Eliminate the least profitable product lines and focus on getting more core products onto the market. Consider reducing surplus stock as holding high, unnecessary levels of stock reduces the company’s working capital.

List all expenses and eliminate what the business doesn’t need. You must buy time to fix your problems, and cutting expenses will buy “financial” time. You may create a break-even analysis or even a proforma income statement to help you determine the viability of your business.

Do you need one of our turnaround consultants to look at your business and advise you on a business turnaround? Call 1300 004 404 or email info@byronvaleadvisors.com.