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Posted by Revive Financial on Jan 13, 2020 1:19:00 PM

Operating a business in Australia comes with benefits and risks. Occasionally, businesses can run into financial and operational difficulties, which may lead to Voluntary Administration and Company Liquidation. In the 2017-18 financial year, 11,057 companies were reported as being in external administration.

One way to avoid corporate insolvency is through business restructuring, which reduces the level and severity of a company’s financial losses, and aims to return it to profit. If your business is experiencing financial distress, it’s vital to recognise these 5 signs so you know when to restructure your business to ensure its future survival.

What is Business Restructuring?

Business restructuring involves changing a business’ organisational, financial and operating structure to address serious financial and operational issues that may lead a business to corporate insolvency. Essentially, restructuring the business is an act of in-depth reorganisation conducted to increase the business’ profitability and productivity.

The business restructuring process requires:

  • An analysis of the business’ financial situation,
  • Determining the chances of the business’ survival,
  • Exploring relevant strategies, and
  • Developing and implementing an action plan to get the business’ finances back on track.

If your business is experiencing any of the following signs and you address these signs early enough. You can minimise its effect and may even be able to achieve a successful turnaround.

1. Poor Industry Competitiveness

No matter the industry you’re in, there will almost always come a time when you need to make changes to your business to accommodate market shifts. If an analysis of your competitors determines they are excelling when it comes to product innovation, pricing and quality, this may indicate your company is no longer competitive in its chosen industry. Knowing this sign provides you with the opportunity to reevaluate all components of your business, from your business model to its organisational structure. Developing an industry competitiveness strategy will create a process for your business to sustain its competitiveness and increase its growth.

2. Cashflow Shortages

Money is the lifeblood of any business. A cashflow shortage can occur when more money is flowing out of the business than is flowing in. During a cashflow shortage, you might not have enough money to cover payroll or other necessary operating expenses.

A cashflow shortage can:

  • Affect credit ratings with suppliers,
  • Compromise competitive advantage,
  • Drag down operations, and
  • Leave you vulnerable to insolvency.

If cashflow shortages are a regular occurrence in your business, take it as a sign you need to look at business restructuring.

3. Major Drop in Revenue

If your business experiences an abrupt decline in sales and revenue, it may be a sign it’s time to look at restructuring your business.

A major drop in revenue can:

  • Halt business operations,
  • Damage your competitive standing in the industry, and
  • Keep you from meeting important financial obligations.

Restructuring your business can help identify the causes of the revenue decline, address them and return to profitability. Some strategies that can be used during a business restructure to increase sales revenue include:

  • Increasing staff productivity,
  • Developing new product lines,
  • Finding new customers,
  • Increasing sales to existing customers,
  • Increasing your product prices, and
  • Considering price discounts.


4. Weakening Customer Base

A significant decline in your customer base with clients buying less from you and showing less interest in your services is a sign your business may benefit from restructuring. Restructuring your business offers you the opportunity to take a step back and work out a strategy to bring your customers back. This could be by:

  • Introducing new product lines,
  • Looking at value through pricing,
  • Focusing on a new advertising strategy,
  • Improving the overall customer experience, and
  • Exploring innovative ways to market your offering.

5. Too Much Debt

Taking on debt can be a critical action for your business to improve its cash flow, financial growth or expansion – and can provide the leverage your business needs to grow. However, one of the easiest ways for businesses to get into financial trouble it to take on too much debt, or taking on debt with high interest and short repayment terms.  If your business is experiencing financial distress due to having too much debt, restructuring allows you to replace or reduce debt to help improve cashflow and profitability.

Turn Your Business Around with Revive Financial

Restructuring your business provides the opportunity to turn your business around and increase profitability while avoiding corporate insolvency. If your business is showing any of the above signs, it’s time to get in touch with a professional at Revive Financial. We can help you understand ways to improve your business, help with finance options and give your business its best chance for survival. Get in touch with us today on 1800 861 247 for a free 30-minute consultation.

See how we can help with our Instant Online Assessment.

Topics: Turnaround & Restructuring, Business Debt, small business restructuring

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