Every company, throughout its life-cycle from inception to maturity, experiences the need to adapt and restructure existing systems, processes and even teams. It is 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.
Important discussion points will normally include why restructuring might be needed, what is required and how to implement the resulting strategies.
Reasons for Corporate Restructuring
One of the most common reasons to restructure a company is the desire to prepare it for a sale, merger or employee buyout. Another common motivation involves reorganizing the business for transfer to family members. With a challenging economy, a third reason for possible restructuring is the difficulty of keeping sales results above a financial break-even point. An additional key reason to review a business reorganization is in preparation for major growth involving new products or services. In some other cases, legal and financial reasons might dictate a restructuring alternative.
The business restructuring process typically involves diagnosis, planning and implementation. The diagnosis phase is similar to a feasibility study and includes assessing a variety of possible business scenarios. The planning stage requires the formulation of detailed operational and strategic plans. Implementation will be closely tied to the business restructuring plan that was approved by business owners and all other important stakeholders. Anticipate that the diagnosis and planning parts of the process will require a minimum of several months and often more than a year.
Company Restructuring Process
Three of the most important parts in any business restructuring are the participation of corporate stakeholders, adherence to any legal restrictions and flexibility during implementation. While there are no specific laws or government regulations stipulating what needs to be included in a business restructuring plan, it is not unusual for legal challenges to occur. In particular corporate lenders and any other parties with a vested financial interest in the company likely will have questions and legal concerns regarding their involvement in the restructuring.
Implementing a New Business Plan
When a corporate restructuring plan is developed and approved, the resulting plan effectively supersedes the company’s original business plan. This is likely to be more detailed and time-sensitive than a traditional plan. One key to success is how effective business owners and managers are in adapting to changes during the implementation phase. As a business owner contemplating even the most basic restructuring plan, you should be prepared for the challenges ahead.