Business restructuring is a significant change in a company’s business model, often necessitated by financial instability or the need for growth. It involves altering how a business operates, including changes in its financial structure, operations, or even its corporate structure. This article discusses when restructuring should be considered and its benefits.
Recognizing the Need for Restructuring
Recognizing the need for restructuring is often the first step in the process. Here are some signs that it might be time to restructure:
- Financial Distress: If a company is consistently underperforming financially, it may be time to consider restructuring. This could be due to high operating costs, low profitability, or significant debt.
- Market Changes: Changes in the business environment, such as new competitors, technological advancements, or shifts in consumer behavior, can necessitate restructuring.
- Organizational Inefficiencies: If the company’s operations are clearly inefficient, restructuring can help streamline processes and improve productivity.
- Growth and Expansion: Sometimes, restructuring is necessary for positive reasons, such as preparing for growth or expansion into new markets.
Why Restructure?
Restructuring can bring about several benefits, including:
- Improved Financial Performance: By addressing financial issues and improving efficiency, restructuring can lead to improved profitability and cash flow.
- Increased Competitiveness: Restructuring can help a company adapt to changes in the market, compete more aggressively, and better meet customer needs.
- Enhanced Focus: Restructuring can help a company refocus on its core competencies and areas of competitive advantage.
Methods of Restructuring
There are several common restructuring strategies used by businesses, depending on their specific circumstances:
Operational Restructuring involves changes in the business’s day-to-day operations. It could include streamlining processes, implementing new technologies, or reorganizing departments to improve efficiency.
Financial Restructuring: This strategy is often used when a company is facing financial difficulties. It might involve debt restructuring, equity restructuring, or a combination of both. The objective is to enhance the company’s monetary health and ensure its long-term viability.
Strategic Restructuring: This involves changes in the overall business strategy. It could include entering new markets, exiting unprofitable markets, or changing the product or service offerings.
Organizational Restructuring: This strategy involves changes in the company’s organizational structure. It could include downsizing, upsizing, or reorganizing the company’s hierarchy to better align with its strategic goals.
Asset Restructuring: This method involves selling or acquiring assets to improve the company’s financial position or strategic capabilities. It could include selling off non-core assets or acquiring new assets to support growth or diversification strategies.
Each of these strategies has its own benefits and challenges, and the company’s goals and circumstances will affect which strategy will be more useful. Businesses should consider their options carefully and seek professional advice when choosing a restructuring strategy.
The Role of Restructuring Consulting Firms
Hiring a restructuring consulting firm can provide several benefits:
Expertise and Experience: These firms have the expertise and experience to guide companies through the restructuring process. They can provide valuable insights and strategies that may not be apparent to those within the company.
Objective Perspective: An external firm can provide an objective perspective, free from internal biases or politics.
Resource Allocation: Restructuring can be a complex and time-consuming process. Hiring a consulting firm allows the company’s management to focus on running the business while the consultants handle the restructuring.
Business restructuring is a strategic tool that can help companies navigate financial distress, adapt to market changes, and prepare for growth. Recognizing the need for restructuring and understanding its benefits are crucial first steps in this process. Hiring a restructuring consulting firm can provide valuable knowledge and experience to ensure a successful transformation.
JACO Advisory Group specializes in restructuring consulting services for middle-market companies. Our team has experience creating and executing actionable plans to address the immediate issues causing distress and get your organization back on track. We understand that every business is unique, so we focus on creating tailored solutions that address the specific challenges faced by each company.
Our restructuring advisory services give stakeholders peace of mind that their temporarily troubled company will receive the guidance it needs to return to sustained and profitable growth. Picking a trusted, adept financial advisor like JACO Advisory Group lets you rest assured that you are making the best decision possible for your business.
If your business is facing restructuring for growth or contraction and you are interested in working with a JACO strategic advisor, Give us a call, or drop us an email today for an in-depth consultation.
About Jeff
Jeff has over 25 years of strategic planning, business development, and business transformation leadership experience. Having worked with mid-market, closely-held and family-owned businesses his entire career Jeff has a unique understanding of how these enterprises operate and the challenges they face.
He is passionate about working with business leaders to build strong cultures while developing and executing strategies that deliver exceptional results that benefit all the company’s stakeholders. Jeff’s hands-on approach to working with companies begins with a commonsense approach to strategy development.
With extensive experience in organizational turnaround and growth Jeff follows a defined process (disciplined, focused, intentional) to guide clients from strategy to execution. His experience covers a multitude of industries, with an in-depth understanding of automotive manufacturing.
Jeff holds a Master’s in Business Administration from the Capital University School of Management and earned a Bachelor of Arts in Business Administration and Management from Ohio Dominican University.
