7 Signs Your Business Needs Restructuring

by | Mar 15, 2021

COVID-19 was unexpected.

By the time the business sector felt the impact, things had gone out of hand for many.

Most business leaders today are still caught in an overwhelming situation and wading through unchartered waters. The journey continues for many organizations with efforts to reinvent themselves. Some are restructuring, others are still caught between the dilemma of what to do and what not, while some have become case studies for the corporate world.

The agility and inventiveness of successful companies have created a difference, not only for their business but for others, too.

From re-evaluating existing scenarios to reassessing strengths, there are a lot of activities that are happening in the corporate sector.

Business Restructuring

Restructuring is one of the key strategies employed by small- and medium-scale businesses.

What is restructuring?

It’s about reorganizing or making relevant changes to the organization’s financial, operational, or legal structures and is usually done under financial duress.

Signs of the Need for Business Restructuring

In 2021, the likelihood of firms getting liquidated meant far more than opening new firms or restarting operations again. If the pandemic was not enough, cut-throat market conditions coupled with rapid technological changes consistently acted as major disruptive forces in business.

Therefore, it is good to know the signs that show your business needs restructuring. These act as the indicator for owners, CEOs, and CIOs to start restructuring their business as fast as possible.

Here are the top 7 signs your business needs restructuring:

1. Declining sales

A decline in sales is the biggest indicator that things are not fine with your business. It is time to think of getting business restructuring services seriously. If your sales volumes are going incredibly low, it could mean that your business is sitting on the tip of an iceberg called insolvency.

A top restructuring consultancy will closely assess and review your business from close quarters and pinpoint the reason for lower sales volumes.

It’s important to move swiftly to regain lost ground and stay ahead of the competition. Through restructuring, businesses can re-strategize so that they can be profitable again.

Identifying the right restructuring experts is important; so that you get a fresh and new perspective.

2. Increasing dependency on debt

If your debts are rising without any increase in revenue, it surely indicates that your business needs to go in for restructuring.

Remember that when borrowing increases, the cost of servicing debts would increase too, impacting cash flow and profitability.

In such a situation, consult with a credible restructuring consultancy to get back on your feet again. Business restructuring services would focus on formulating a plan to reduce debt and invest a good part of the debt into building your business.

3. Runaway costs

Runaway costs are expenses that are not under the control of the business. Such impromptu costs are indicators of your business requiring proper planning. These could soon drive your business to bankruptcy as all the money would be used up in covering such costs.

In this scenario, you would typically need a financial restructuring and planning to come out of the situation. Review your historical costs, analyze the variations in cost and plan ahead to accommodate such surprises.

4. Cash-flow crisis

One reason firms choose to hire corporate restructuring firms is when the cash inflow goes down drastically.

This could even happen with a business that is registering tremendous sales and doing commendably well on paper. In reality, there could be issues with clients not paying on time or a big client going bankrupt, or with the working capital required being incredibly high. It is smart to consider restructuring at this stage as a viable option.

5. Unfavorable market conditions

Volatile market conditions are always a beckoning sign that it is time to re-strategize.

Restructuring is one strategy that has worked well with many firms, and there is no reason why it will not work for your business.

One of the market signs not being favorable anymore is losing out on your industry’s top positions. For example, if your firm has typically been ranked number one or two and has slipped down in recent years, there could be something wrong. It is time to think along the lines of restructuring.

Another sign of changing market conditions is when no growth opportunity exists in your industry; so you would want to go in for a major rehaul or restructuring. In such conditions, even if your market share is good and there are no apparent threats to your business, the scope of growing or scaling up does not exist.

6. When change is imperative, yet there’s resistance to change

Change management is key to success in many organizations. It is an inevitable truth.

Yet, when the time to embrace change arrives, the employees shirk it or lack the dynamism to adopt change.

It could be a vicious circle because resistance to change can creep up and become a demon, resulting in your valuable and performance-oriented employees leaving the organization.

Things can go out of hand pretty quickly; it is good to have an expert offering business restructuring services to come in and show the way.

7. Changing customer loyalties

Customers can shift their loyalties anytime. That is why businesses work hard to retain them.

If your business is facing a similar situation where the customer base seems to be diminishing fast, you need to develop a plan. There could be innumerable solutions to the problem, and an expert restructuring consultancy would be able to offer you the best help.

Restructure to Save Your Business

Knowing when to restructure can help save your business, especially when the pandemic’s aftermath is still being felt in many parts of the world and across multiple industries.

Consulting with restructuring experts is the best way to go about it.