Posted: 9 August 2023 

When your small business faces uncertainty, taking action can feel daunting. To plan the path to business recovery, you need to know what challenges are standing in your way and understand your options. Restructuring your small business may be one way of ensuring its success into the future.

What is small business restructuring?

Small business restructuring — also called company restructuring or corporate restructuring — involves making significant changes to the organisation and operation of your business. Under the Corporations Act 2001, a company can restructure its debts by proposing and agreeing on a restructuring plan with its creditors. 

For small businesses, this might mean looking at the roles and responsibilities of your staff and identifying where efficiencies can be made.

What does the restructuring process involve?

An independent Service NSW Business Connect advisor has been supporting small business owners as they navigate times of financial difficulty. This can include paying back a debt or meeting repayment terms. The advisor can also provide advice to businesses facing insolvency or connect them with a restructuring support specialist. 

'Restructuring your small business can be an emotional process. It can bring up a lot of fear and doubt. I support owners to look at their business objectively and guide them through the many options that may exist for them, depending on their personal circumstances,' the advisor says.

Consider the following steps if you are thinking about restructuring your small business:

  • Assess your current financial situation: Get support from your accountant or financial advisor to help assess your financial position, your organisational structure and operations, and your existing challenges and issues. Make a list of your creditors and your debtors.
  • Set your restructuring goals: Get clear about what you want to achieve through the restructuring process and create a plan. This could include reducing your costs, finding a new competitive edge, streamlining your operations or meeting new needs in the market. Consider where you are now, where you want to go and  what steps you can take to reach your goals.
  • Explore ways to reduce your financial strain: Conduct a detailed financial analysis to identify areas for improvement. You can explore options such as renegotiating loans, refinancing debt or reducing overhead costs. You can also consider setting up new payment arrangements with suppliers or exploring new ways to generate revenue. For example, subscriptions are often a big cost for small businesses. Can you cut costs here? Or are you in a position to pay yourself less?
  • Streamline your operations: Identify opportunities to streamline your operations and improve efficiency. This may involve re-evaluating your current processes, adopting new technologies, automating tasks, or outsourcing non-core functions such as admin or IT support, advertising or accounting. 
  • Consider adapting your business: What options exist to pivot your business? Can you diversify your service or products? Is there a new target market or niche community that you could tap into? Can you collaborate with a partner or business that complements yours to build a relationship that benefits everyone?

Why is it important to act early?

Successful restructuring depends largely on acting early. It allows you to address challenges quickly to maximise your chances of success. It also enables you to put cash-saving measures in place promptly and minimise disruption to your team, suppliers and customers.

'By taking action at the earliest signs of trouble, you position your business for a more efficient and effective transformation,' added the advisor.

Case study

A short-term rental business located in Northern NSW was faced with changing legislation that would cause a 30% downturn of holiday guests. The small business owners booked a call with Service NSW Business Bureau and were connected with their local independent Business Connect advisor.

'They recognised the impact this change could have on their business and acted promptly. They have been consolidating their funds, forecasting their cash flow, testing the holiday market outside of their region and even investigating other business opportunities.' 

The advisor has worked with the owners to implement their small business restructure plan. Their plan will help to preserve their existing business’s value while they pivot into an aligned business market.

Are you considering restructuring your small business? Find a Business Connect advisor who can help you understand the process. 

Related links

Financial fundamentals webinar – City of Sydney Reboot series

Last updated: 26 February 2024