Do you ever feel like the way you used to run your growing business no longer works? Here’s Many companies do not know when its time to restructure. Instead, they wait until its too late and it becomes a liquidation event.
Every company, throughout its lifecycle from inception to maturity, experiences the need to adapt and restructure existing systems, processes and even teams. It is an inevitability. Organizations that quickly identify that need when the time is right continue along their growth trajectory. Those that don’t, struggle, and often fail. Bankruptcy and restructuring experts may be a valuable resource to your company during the pandemic.
What is Restructuring?
Restructuring is when you change internal operations processes, positioning in the marketplace, restructure debt, modify your operations and work towards becoming a more profitable and cash-flow positive business.
There are several reasons why companies undergo restructuring. Usually, they are feeling a financial pinch. Whenever you see external or internal factors affecting your cash flow and financial performance, you need to take a hard look at them and do not wait to make changes.
Good leaders understand when the time for change has come and proactively take appropriate measures for the necessary transformations to occur. Here are nine signs to watch for as your company grows.
1. You’re Working Constantly But Aren’t Seeing Results
It is time to restructure when you and your team are working long hours and giving your best day and night for a reasonable period of time without getting results or sufficient cash flow. Restructure doesn’t mean changing everything—it could be changing your clients, the way you charge them or simply the communication process. Make sure you know why you are not being efficient before you make any change
2. Over-Leveraged
For many years, the cost of money has been cheap. Banks, asset-based lenders, and investors are all looking to place money to work. With low-interest rates and excess liquidity, companies have had access to cash in the form of debt. Debt is not all that bad if it is managed wisely and you do not exceed the amount of debt that your balance sheet can handle. The ease of acquiring debt has led to some companies having to much debt – over-leveraged.
What is too much debt? Well, it depends on your business and your balance sheet. Commercial banks have the most conservative ratios, but I would say that even some of those may lead to too much debt. If you have too much debt, then you may find yourself needing to restructure your company. If the debt is more than you can pay, then you will likely find yourself in a legal reorganization, such as court protection through a bankruptcy process.
3. Turnover is high.
This includes both employee and client turnover. Both need to be watched closely. If your customers start leaving it probably means they are no longer satisfied with your products or services and are willing to try other providers. There are many internal and external factors that come in to play. Building great relationships with your customers and constantly seeking new ways to make their lives better will ensure long-lasting partnerships.
Similarly, if your business starts turning into a revolving door where team members are coming and going, something needs to change. There could be morale issues, similar companies with more competitive compensation, or needed change going unaddressed by management. But if you start seeing a pattern, be sure to pay attention to feedback and have a comprehensive exit interview process. Employee frustration is infectious and will spread if not treated with the appropriate level of attention.
4. Old systems no longer work.
The processes that work when your company has ten employees are not the same ones that will be needed when you have fifty. It’s not to say that systems must be increasingly complex as the company grows. In fact it’s quite the opposite. As your company grows it is typical to change or at least improve upon existing processes every few years.
5. The regulatory environment is changing
The government is getting bigger and bigger. Every year, there are more and more regulations changing how the business world operates. If you are in a market that has new regulations, then this may be something that will cause you to change how you operate. You may find yourself restructuring your business to either adapt to the new regulations. Or you may find your self restructuring your business to get away from the regulated environment.
6. The industry is changing.
If you are doing business the exact same way you were ten years ago, you are probably falling behind. Technology improves. Industries change. Economies shift. Economic changes, for example, might increase your costs of doing business which means you probably need to increase your pricing or find new vendors with lower costs. Either way, good companies pay constant attention to what’s happening in their industry and the world around them.
Protect Your Company with Limitless Investment & Capital Restructuring and Bankruptcy Experts
Restructuring your company protects your company from destroyers of value; however, you should always be looking at how to improve the value of your company. These are scary times for American companies as they grapple with the hit to their businesses from the shutdown of major parts of the economy from the coronavirus. Every successful company evolves over time, and good leadership must champion these changes and communicate the reality of the situation to the team. Consult with a Limitless Investment and Capital Restructuring and Bankruptcy expert Today!
