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 your staff's roles and responsibilities and identifying where efficiencies can be made.
What does the restructuring process involve?
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. Doing so will help you 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 acting early, you can give your business the best chance for a smooth transformation and set it up for success.
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