4 Tips When Restructuring a Small Business

There are several reasons a small business owner might consider restructuring. Factors can include financial difficulties or disputes. People restructure their businesses to help them navigate challenges and new situations, such as cash flow issues, debt and evolving market conditions. A restructure can be a positive step that prepares a business for change. This article will explain some essential tips business owners should remember when restructuring their businesses. 

Restructuring a Small Business 

Restructuring a business means reviewing and altering certain aspects of the organisation, including its ownership and legal, operational and financial structures. 

For example, modifying operating procedures and making them more time-efficient and cost-efficient can significantly impact the business’s bottom line. This change can pave the way for the company to become more profitable. Improving profitability is often a key motivator behind restructuring. 

The Types of Restructuring 

Different types of restructuring are available. Understanding your options and ensuring compliance with relevant laws and regulations is essential, no matter which type you choose. 

The following table outlines several types of business restructuring. 

1. Plan

Thorough planning is the most critical step for any business owner looking to restructure. 

Think carefully through the organisational aspects of your business and its overall strategy. You can begin by reviewing the business’s costs, including monetary expenditures and workflow efficiency. During this evaluation, look for areas where you can reduce costs without compromising quality. 

Following an assessment of costs, the next step in identifying potential areas to change involves considering liabilities. You should look at your company’s debt to determine the business’s position in terms of its debt. 

You can explore different restructuring options and consider the potential implications of each approach. Whether you choose financial or legal restructuring or want to make operational changes or realign the business’s strategic direction, pick the option that best fits the business’s goals.

Before formally beginning the restructuring phase, you should generate a clear and comprehensive restructuring plan and set clear objectives within it. Your detailed plan should outline the necessary steps for restructuring and establish timeframes for achieving those goals. Having a well-thought-out plan can help minimise disruptions and ensure a smoother transition. 

2. Seek Advice 

Drawing upon the expertise of seasoned advisors familiar with restructuring can be invaluable as you navigate the planning and restructuring phases. For example, consider consulting professionals such as accountants, lawyers and business consultants. 

You can tailor your approach based on your expertise and the specific needs of your business. Whether you need nuanced financial insights from accountants, lawyers’ legal advice, or business consultants’ strategic guidance, seeking advice can equip you with the information you and your business need. 

3. Communicate Effectively 

While executing the restructuring plan, you should inform your employees and relevant stakeholders about the process and the potential impact on them. Transparent communication can alleviate their concerns and build trust during the transition.

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4. Evaluate Results

After completing a restructuring, you should assess the outcomes, measuring the process’s impact on your business’ performance. This assessment can be instrumental in informing future decisions and continuous improvement efforts. 

Key Takeaways 

This article has outlined several essential tips small business owners can use to navigate the restructuring process more effectively. In particular, planning before taking action and assessing progress following completion can position a business for sustainability and long-term success. 

There are many different restructuring strategies available to business owners. These include the following: 

• financial restructuring, including divestment; 
• legal restructuring; and
• alterations following merger or acquisition.

To prepare for restructuring, business owners should create a detailed plan and enter the process with clear objectives. Effective planning involves a comprehensive assessment of the business, which will include evaluating the business’s operational processes, costs, liabilities, legal structure, and ownership. 

Seeking advice from experienced professionals can significantly impact the ease of the restructuring process. The earlier you seek a lawyer’s advice in restructuring, the more likely you are to mitigate risk and ensure compliance. 

If you need legal advice about restructuring your business, our experienced startup lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.