Signs Your Business May Need Restructuring

Signs Your Business May Need Restructuring c

As much as a company’s management works hard to keep its finances going strong, there are some unpredictable situations that occur every now and then. Newer technologies appear and take over immediately, markets rise and fall, and customers’ needs constantly change and evolve. These external factors, as well as some internal struggles, can sink a business.

While it may seem drastic, financial restructuring is sometimes the option for keeping a company viable. It can steer the business back toward profitability and stability. But, what are some indicators that restructuring may be necessary? Here are a few warning signs that should not be ignored.

Too Much Debt

If a company relies too heavily on debt and credit to keep going, the servicing of those loans will be far more detrimental than the short term cash they provide will be helpful. Paying back creditors restrains investments in market research, developing new products, cash flow, and overall growth.

Restructuring your company allows you the time to devise a debt repayment strategy and frees up profits to be used to acquire more customers.

Cash Flow Issues

Restructuring can help you to alleviate cash flow issues by collecting revenue and selling stock to increase the amount of working capital that you have available. Of course, consult a securities law attorney to learn more about the best way to do this.

Having poor cash flow can seriously compromise your credit rating with suppliers, diminish any competitive advantage, and can threaten your operation as a whole. At worst, it can threaten your business’s solvency.

Extended Periods of Unprofitability

Declining revenue screams that a financial restructure is certainly in order. It shows that your overall business is no longer structured to be profitable, and it will only get worse if it is not remedied. For example, the loss of revenue can trigger other issues, such as delinquent tax payments, defaulting on loans, and laying off employees.

Far Too Many Expenses

When your expenses are ridiculously high, and you are making less than you are spending, you will become cash-flow negative and profit-free. That means there won’t be enough money to compensate partners, suppliers, and creditors, unless you restructure, identify unnecessary costs, and eliminate them.

In conclusion, there are many signs that a business may need restructuring, and it is not always a bad thing. A good CEO needs to come to terms with what is not working in order to fix the problems at hand.