5 Key Steps Towards Restructuring a Company
Nothing remains the same for long in the corporate world. To stay relevant, companies constantly review their policies and marketing strategies. Sometimes there may be need for restructuring. Corporate restructuring may be the inevitable result of a company takeover or a corporate response to dwindling or weak sales. Regardless of the reason, the general goal of corporate reconstruction is to improve a company's finances and overall efficiency. Here are five basic steps that help a company move towards restructuring.
Control the Cash Flow
A company's cash flow is its lifeblood. It is what defines how successful a company is. It also affects the decisions that you can make. To restructure your company, you must understand its cash flow. Identify how much the company currently has and how much it is expected to generate. Don't delegate this role to someone else. Putting a figure on how much cash you have to work with reduces the risk of overspending.
Identify the Company's Productive Units
Certain units or departments in your company generate the most cash flow. Find out which these are. If your company provides a wide range of products or services, find out which generate the most profit in sales. This involves a careful look at your books. Identifying this may be difficult, but it is essential that you do. For your company to survive and grow, you must differentiate between the moneymakers from the money losers.
Develop an Organized Financial Plan
Using the profitable core of your business as a focal point, develop a financial turnaround strategy to rebuild or rebrand your company. As part of your restructuring plan, you should let the weaker units go. Cut anything that is draining the company of its resources. Reorganize your business structure so that it maximizes your profit stream.
Get the Board's Agreement
Creating a sound financial plan is only half the battle. The other half is getting the approval from the board. Restructuring the company often involves drastic changes, which may meet with the board's disapproval. Sometimes it may involve cutting down the company's workforce. Those are hard decisions to make, and selling the idea will be difficult. However, if you have data and figures backing up your decision, the board is more likely to listen.
Execute the Plan
Do not deviate from the restructuring plan. Stick to the sequence that you have mapped out. Try to execute the plan as quickly and safely as you can. During a restructuring phase, it is normal for emotions to run high. Remain patient when dealing with shareholders and employees. Transparency goes a long way. Keep the relevant executives informed at each stage.
Companies must keep pace with the market and economy to survive. To do this, restructuring may be necessary. If you have never had experience restructuring a company, it is best to enlist experienced help. Specialists are familiar with the legal and financial elements that occur during the restructuring process.
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