Author
Domenic CalabrettaChief Executive Officer & ASIC Registered Liquidator
Hundreds of Australian companies collapse every year, and most businesses end up in liquidation rather than returning to trading. With disruptive forces like technology and competitive market conditions, companies can quickly find themselves in financial trouble.
So what are the signs you need to engage restructuring experts to bring your company back from the brink? How can you ensure a smooth process and that your teams are cohesive afterwards? If you want your business restructure to achieve its stated aims, you need to prepare for what’s involved.
What is company restructuring?
Restructuring is the process of making significant changes to a company’s financial, operational, legal, or organisational structure to improve performance, reduce financial difficulty, or respond to major challenges. It’s often used when a business is under stress, facing insolvency, or needs to pivot for future growth.
Types of restructuring include:
- Financial restructuring: changing the capital structure to manage debt and cash flow.
- Debt restructuring: renegotiating loans with lenders or creditors.
- Legal restructuring: altering the legal framework, such as entity structures or ownership.
- Small business restructuring: a formal insolvency process allowing eligible small businesses to restructure debt while continuing to trade.
- Turnaround restructuring: implementing urgent changes to stabilise and return the business to viability.
- Cost restructuring: reducing or realigning expenses to improve profitability.
- Mergers and acquisitions: combining or acquiring businesses to achieve growth, efficiency, or strategic advantage.
Businesses often engage financial and legal advisors to help negotiate and implement restructuring plans. Where a restructuring involves creditors, negotiations may be required to agree on new terms or repayment strategies while the company deals with its issues.
10 signs your business needs to be restructured
Restructuring a company can involve various measures, including performance improvement, informal restructuring, voluntary administration, or even liquidation.
If you can recognise the top signs, you can act quickly to seek expert advice. This will give your business the best chance of staying afloat and trading while you work your way back to financial health.
1. Poor competitiveness
A clear sign your company may need restructuring is consistently falling behind your competitors. You’re no longer number one or two in your industry, and the other market players are crushing your prices and surpassing you in everything from customer service to product quality.
Poor competitiveness is an opportunity to reassess your:
- Business model
- Organisational structure
- Market positioning
Repositioning restructuring can help refocus your offerings, enter new markets, or shift customer perception so your business can rise instead of falling further behind.
2. Growth is stagnating
If you want to expand your business but you’re finding it impossible to achieve growth, it’s a sign that your business could be due for a corporate restructuring. Your business might be maintaining a decent market share and enjoying a decent profit margin, but you can’t seem to expand and scale up in the way you want.
Restructuring can help you uncover efficiencies and allow you to leverage the resources – from product and brand name to your team – you need to scale up and become a dominant player.
3. Dramatic revenue drop
Poor financial metrics are an obvious warning sign that your business needs a restructure. Declining revenue can be a key indicator that your business is no longer profitably structured. An abrupt, unexpected decline in revenue can set up a chain of events and cause non-payment of debt, tax, and even employee wages.
A restructuring process can identify the causes and address them, helping you first break even and then return to profitability.
4. Cash flow shortages
If cash flow shortages are a regular occurrence in your business, it’s time to consider restructuring. Your sales could be going up, and you might be enjoying profitability, but the business is failing to collect revenue or has poor working capital.
Impacts of poor cash flow include:
- Threaten solvency
- Affect credit ratings with suppliers
- Compromise competitive advantage
- Drag down your operations
5. Lacking responsiveness
Beyond your financial metrics is dynamism and responsiveness. Poor management decision-making and ineffective internal communication with employees can lead to slow or failed attempts at responsive action. Your business might recognise there’s a need for change, but your managers/staff lack the initiative to execute the large-scale changes you need. This can set off a vicious cycle where your high performers leave the organisation in frustration.
To resolve manager and employee aversion, you can involve external parties like restructuring experts. They can lead your business out of the danger zone and back to profitability in the most efficient and effective way.
6. Runaway expenses
Runaway expenses are a top indicator that your business is in trouble. If you’re spending more than you make, you can be both cash flow-constrained and unprofitable. From there, it’s only a matter of time before you’re unable to pay suppliers, creditors, and other partners.
Restructuring can identify your unnecessary expenses, implement cost-cutting measures, and improve your overall financial position.
7. Debt dependence
Businesses heavily dependent on debt are burdened by the servicing of their borrowings. In turn, this restrains growth, cash flow, and the ability to invest in sources of competitive advantage like product research and development.
Through a business restructure, you can develop a more sustainable strategy to manage liabilities, including refinancing debt to secure better terms. This approach can reduce financial harm and free up profits to reinvest in growth.
8. Poor efficiency
Poor efficiency can be rooted in your costs, operations, structure – or all three areas. Roadblocks to efficiency can be identified with a restructure process and allow your business to reach its true potential.
Inefficiency often stems from outdated processes or poor resource management, leading to unnecessary hiring without real gains. Restructuring can help streamline operations, reduce reliance on new hires, and support sustainable growth.
9. Shifting customer base
Whether your customer base is diminishing, buying less or just looking for another product or service, a reduced customer base means your business could require restructuring. You might need to find a way to reduce the costs of production, introduce new product or service lines, or explore other revenue models for the same product, such as licensing or subscriptions.
10. Sales decline
A decline in sales volume is the clearest sign that you could benefit from restructuring your organisation. Dropping sales (after accounting for seasonal and other expected variations) suggest you could be at risk of becoming an insolvent company and you may need to rethink how you’re doing things.
A review of your operations and the market can help you identify the cause, and it could be your organisational structure that needs to change. In this situation, move quickly, seek advice, and implement the necessary changes to stay ahead of market and customer trends.
Legal obligations during a business restructure
Your business restructure plan should consider and address relevant legal and compliance obligations. Staying on top of your taxes is probably the most critical legal requirement, but reporting and adequate record-keeping are also essential.
Market valuation
For large enterprises undergoing restructuring, market value is an important tax issue that shouldn’t be overlooked. Your organisation should seek professional, independent marketing valuations close to the time of the restructure. Staying aware of your tax obligations prior, during, and after your restructure ensures you’re meeting all your reporting and record-keeping requirements.
Evolving legal obligations
Obligations may change as your business restructures, so staying aware of necessary legal requirements is vital. For example, your tax obligations will change if the market value of your business changes, or if the market value of a security or intangible asset in your business changes.
Restructure changes that could affect your tax obligations include:
- Change in capital structure
- Change in ownership
- Company acquisition
- Capital gains tax (CGT) rollover
For example, the disposal of a valuable asset for CGT purposes can impact your tax bill and CGT discount or CGT small business concessions. If the restructuring process involves a change in your legal structure, consider whether it will impact your CGT obligations if you plan on eventually selling your business.
How to develop your restructure plan
A formalised restructuring plan can help you communicate the changes to the rest of the organisation. It’s also a good way to maintain consistency and consensus among employees as you implement the changes, which can take weeks or months to complete.
Your restructuring goals should be SMART: specific, measurable, achievable, relevant, and timely.
Your change plan should include:
- Reasons for the restructure.
- The nature and extent of the proposed restructure.
- Goals and aims.
- Impacts on employees.
- Changes to staffing arrangements.
- How the restructure will be implemented so that employees understand the process.
- Milestones for tracking progress such as communication, timeframes and consultations.
If you’re a large organisation, you might have a special leadership team dedicated to implementing the change. If so, introduce them by name and outline their responsibilities to your employees.
How to implement a successful restructure
Effective restructuring goes beyond a one-off announcement, it requires strong leadership, ongoing alignment, and employee buy-in at every stage.
Key actions include:
- Identify potential risks or resistance and address them head-on
- Avoid ad-hoc and opaque decision-making processes
- Provide training and support to embed new processes
- Track progress to ensure objectives are being met
- Make adjustments as needed to refine the restructure
Tips for improving communication
Managing mindsets is as important as managing operations. Clear, consistent communication is critical during a business restructure. Start by aligning leadership on the reasons for change, long-term goals, and strategic implications.
Early and transparent communication with employees helps reduce anxiety, limit rumours, and build trust. Support your team through this transition by:
- Holding formal meetings to share the proposal and provide clarity
- Acknowledging the challenges and explaining the benefits of the restructure
- Offering one-on-one support to answer questions and ease concerns
- Invite feedback, even from those not directly affected
- Maintain open channels for ongoing discussions
Handling redundancy
Where redundancies are involved, ensure the process is legally compliant, fair, and compassionate. Communicate early with affected employees, outline selection criteria clearly, and offer outplacement support to help with the transition.
Once changes are in place, shift focus to post-restructure engagement:
- Acknowledge the impact on teams and outline a renewed vision
- Seek and act on feedback through regular forums and surveys
- Manage increased workloads by offering support and recognising effort
- Reinforce the value of each team member and the opportunities ahead
Sustaining momentum post-restructure means reinforcing the “why,” recognising contributions, and showing employees they have a future in the new direction. This cultural rebuild is essential to realising the full benefits of any structural change.
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