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What are the benefits of restructuring a company?

In Australia, company restructuring engagements are a relatively fresh approach to preserving and improving business operations, particularly for small to medium businesses.

Restructuring a company involves reorganising one or more aspects of the business to increase its efficiency and profitability. Restructuring is an umbrella term that encompasses four distinct groups of activities:

● Expansion
● Contraction
● Financial Restructuring
● Organisational Restructuring

A company restructure aims to rescue a business and avoid liquidation or insolvency outcomes . If this is not possible, a restructuring may also provide better outcomes for the company, its creditors and directors.

How you restructure your company will be unique to you and your situation. However, there are four major benefits that come from the process of business restructuring.

Reduce Costs

A company may lower its operational costs if it downsizes during restructuring. For example, the business can cut its payroll expenses if it dismisses some of its employees. Outsourced operations are usually less expensive than in-house labour. Thus, the cost of maintaining operations within the retail network and company specifically decreases with restructuring. Costs would also reduce if the company could merge with another company that is very similar and use economies of scale to run more efficiently.

In this way, the company can expand its reach without adding too much to the overhead of the business. If handled correctly, the business will provide significant value for its shareholders.

Better Communication

Decision-making and communication will usually improve when a company removes or reduces layers of management during its restructuring.

By streamlining its management structure, the company reorders its organisational hierarchy, which opens the lines of communication and removes any burdens impeding productivity.

More Efficient Operations

A company’s overall operations may become more efficient if it brings in new technology during its restructuring process. For example, digital workflow management programs will help employees keep track of what tasks they need to do and how they align with those of their colleagues. Accounting software can help finance departments record all cash flows and ensure that the business leaves no transactions out.

This way, staff and management won’t get bogged down in menial work and can instead focus on tasks that help grow the business.

Increase Value of Business Units

A primary reason a company will restructure is to divide the business up for sale. If a company is trying to sell as a conglomerate, it will probably get lower offers from investors.

However, when management divides the company into separate business units, it can often get more attractive offers for those individual components. This can raise the value of the company and may secure a more lucrative sales price for the business.

When done properly, a business restructure makes your business more dynamic and innovative . It becomes more efficient, robust and profitable. However, improving and streamlining your business operations to achieve your business goals is no simple task. You may not know what to do or even where to begin.

An experienced restructuring advisor will look over your business and its circumstances with a fresh pair of eyes, and provide you with the advice and expertise you need to get on track to running your business better.

Do you need one of our restructuring advisors to help you restructure your company? Call 1300 004 404 or email info@byronvaleadvisors.com.

10 REASONS TO CALL YOUR BUSINESS ADVISOR:

  • Advice on business restructuring
  • Choose between pre-insolvency or insolvency
  • Lack of understanding of financial information
  • Analysis of profit margins and costs
  • Poor debtor collection management practices
  • A better understanding of pre-insolvency and Safe Harbour
  • Business running out of cash but has fast growth
  • Poor inventory or creditor management
  • Build a healthy and more profitable business
  • You’re a worried director dealing with financial distress