Restructuring your company for increased profits

Melissa Nosrati UK - Articles



"A visionary company doesn’t simply balance between idealism and profitability: it seeks to be highly idealistic and highly profitable."

James C Collins

 

If your company, regardless of size, aims to be successful on a long-term basis, it is vital that it can respond to fluctuations in the economy and endure dips in income. Being able to adapt to change and make changes even when the business is thriving is key. The hardest challenge for any organisation, in fact, is to challenge the status quo.

 

In order to operate as efficiently as possible, your company may need to alter its business processes and working methods. Corporate restructuring will enable your business to do this as well as to reduce costs, increase profits and avoid closure or even insolvency.

 

The options available when considering corporate restructuring are vast and dependent on your industry, nature of the business and specific issues your company is facing.

Here are 12 suggestions that will help you maximise your profits:

1. Anticipate change! It is essential for your company to begin a cycle of corporate restructuring before any income is lost or before damage affects your business. For example, if upcoming legislative changes will lead to increase burdens on your company and ultimately reduce income or increase costs, a strategic corporate restructuring plan can enable you to implement changes before the enactment of these new regulations. This will avoid any loss or harm to your business. The faster your business responds to unwanted or enforced change, the bigger the chances it has of surviving and increasing profits.

2. Analyse the extent of the problems. Is the profit situation suffering temporarily or is it terminally ill? Is the company's core business still financially viable? Challenge the status quo and review your processes and procedures to check if there is a more efficient way of doing things.

3. Develop a restructuring plan and present it to the board of directors, management and employees. It may also be advisable to show the plan to certain outsiders, such as bankers and other creditors, and to major vendors or investors. 

4. Start at the top. Replace weak or inefficient members of top management and the board of directors, including non-executive directors. Then reduce management layers. Unprofitable companies are often bloated with middle managers. Organisational restructuring is often the answer to this.

5. Identify your most profitable customers. Be aware that these aren't always the biggest accounts. So it is better to concentrate on buyers who make few demands on the customer-service department, seldom return products and require only minimal marketing attention to prompt repeat orders.

6. Trim less profitable product lines and increase financial and employee investment in more profitable areas. Withdraw completely from unprofitable markets.

7. Review all facilities. Consolidate divisions to eliminate duplicate administrative functions, and/or sell off those that are underperforming.

8. Consider hiring a turnaround specialist - as either an interim manager or a consultant - to give you advise and help you with restructuring. An outsider often brings objectivity and a fresh and independent point of view. In addition to providing a range of viable options and calculating the associated risks, corporate restructuring experts can assist with the implementation of changes and provide additional resources to staff during the period of restructuring.

9. Evaluate outsourcing (as an option). Paying a flat fee for certain services may reduce expenditures associated with in-house employees while at the same time improving efficiency.

10. Consider where the company is based and whether moving part - or all - of your business to another area/country to obtain lower employee wages, reduced power rates and/or special tax incentives will yield more profits. If this is not feasible, you can aim at forming a partnership with another company to share administrative services or technical expertise.

11. Review employees, asking yourself whether you need all the people you have and whether you are utilising this resource in the most effective way. Although this is one of management's most painful tasks, it is often essential for improving profit. Ask yourself whether you have the right people in the right place doing the right things in the right timeframe and in the right way. This does not mean changing all your employees but training and developing them for profitable growth or at least giving them the opportunity to grow with the business rather than be outgrown.

12. Schedule meetings with team members to deal with the questions and concerns of the remaining employees. After restructuring, the company's management will need to explain new procedures and financial projections so employees feel comfortable and motivated – this will in turn improve their performance.

Businesses are constantly subject to external and internal change. It is essential that yours is adaptable in order to survive in the long-term. Whether your business is expanding or economising, corporate restructuring will allow your company to respond accordingly and become as profitable as the market allows.

Some corporate restructuring methods such as downsizing or reducing workforce can be difficult but are sometimes the only way to ensure the business is able to continue to functioning and become profitable once again. It is therefore essential that businesses welcome corporate restructuring methods in times of difficulty as well as prosperity, in order to function at their optimum level and maximise their economic success.

 

Author: 

Steve Tarr, Founder and Chairman