Businesses can run into trouble for many reasons, including rising costs, shrinking sales or unexpected market shifts. Restructuring the business may offer a way forward.
That might include changing how teams are organized or renegotiating debt payments to ease financial pressure. Such strategies can help companies work more efficiently and stay afloat during difficult times.
What Does It Mean to Restructure a Business?
Restructuring means making big changes to how a business works. Team roles often shift, processes are updated and debts are addressed in new ways.
The goal is to help the business run more smoothly and to reduce costs. A business may also use restructuring to recover from financial trouble.
A company does not have to be in a crisis to use restructuring. Sometimes, it’s a way to adapt to new technology, meet customer needs or grow in a different direction.
Whether focused on operations or finances, restructuring may help a business stay competitive and stable.
When to Consider Organizational Restructuring
Organizational restructuring focuses on how a company is set up internally. It might involve changing management roles or combining departments. Some companies use restructuring to overhaul business processes.
These changes are usually made to solve problems or improve how the business runs. Common reasons to consider restructuring include:
- Falling profits or rising costs: Restructuring may be helpful when the current setup no longer supports financial goals.
- Changes in the market: New competitors or shifting customer needs may require a faster, more flexible structure.
- New technology: Tools that automate tasks or improve communication may allow for a leaner team.
- Mergers or acquisitions: Two companies joining forces often need to align roles and systems.
Restructuring isn’t just about cutting costs. Done carefully, it can help teams work better together and respond more quickly to changes.
Steps to Restructure Your Organization
Restructuring a business takes planning. These steps can help guide the process:
- Review the current setup: Look at how teams are organized, who reports to whom, and where bottlenecks or overlaps exist.
- Set clear goals: Decide what the restructuring should accomplish, such as faster decision-making, lower costs or better customer service.
- Make a plan: Outline the changes needed, including roles that might shift or processes that could be simplified.
- Communicate with your team: Let employees know what’s changing, why it matters and how it could affect them.
- Put changes in place: Roll out the new structure step by step. Offer support as people adjust to their new roles or responsibilities.
- Check progress and adjust: After a few months, review what’s working and where more tweaks are needed.
Restructuring can be disruptive. However, with a clear plan and strong communication, it can help the business run more effectively.
What Is Debt Restructuring and Why Do It?
Debt restructuring means working with lenders to change the terms of your company’s debt. This might involve extending payment deadlines, lowering interest rates or changing how the debt is paid back.
Businesses often consider this option when:
- Cash flow is tight: For example, payments are coming due, but there isn’t enough money to cover them.
- Bankruptcy is a concern: Restructuring may offer a way to avoid formal insolvency.
- Long-term stability is the goal: Adjusting debt terms could give the business more breathing room to recover and plan ahead.
Lenders may be willing to negotiate if they believe the business can stay afloat with different terms.
Debt restructuring isn’t a quick fix, but it can be one way to deal with financial strain while keeping the business running.
How the Debt Restructuring Process Works
If your business decides to pursue debt restructuring, you might want to include the following steps:
- Review finances: Take a close look at cash flow, outstanding debts, and payment schedules. This helps identify which changes are needed.
- Talk to creditors: Reach out to lenders to explain the situation. Propose new terms that could make repayment more manageable.
- Reach an agreement: If creditors agree, the new terms should be written into a legal agreement. This might include adjusted payments, interest rates or timelines.
- Follow the new plan: Once a new plan is in place, it’s important to stick to the new schedule and stay in communication with lenders.
Restructuring debt doesn’t erase what’s owed, but it may make repayment more realistic. It can be one way to regain control over a business’s finances during a tough period.
Which Type of Restructuring Might Fit Your Business?
Every business faces different challenges, so the right approach depends on the company’s situation.
If the main issue is how the company is organized — such as unclear roles, duplicated work or slow decision-making — organizational restructuring might help.
If the problem is mostly financial, debt restructuring could provide relief.
In some cases, both may be needed. For example, a business struggling with cash flow might also benefit from a leaner team structure or updated processes.
Before making changes, take time to:
- Identify what’s not working
- Pinpoint the most urgent problems
- Think through how changes might impact daily operations
Working with outside experts, such as legal or financial advisors, may also be helpful. That’s especially true when a company is dealing with debt or complex business structures.
Moving Forward With a Restructuring Plan
Restructuring can feel like a big step, but it may give a business the chance to reset and move in a stronger direction.
Whether the goal is to improve how teams work together or to ease financial pressure, the key is to act with a clear purpose.
Careful planning, open communication and ongoing review can help the changes take hold. And while results aren’t guaranteed, restructuring may offer a path toward greater stability.
The content provided is intended for informational purposes only. Estimates or statements contained within may be based on prior results or from third parties. The views expressed in these materials are those of the author and may not reflect the view of SmartSpending. We make no guarantees that the information contained on this site will be accurate or applicable and results may vary depending on individual situations. Contact a financial and/or tax professional regarding your specific financial and tax situation. Please visit our terms of service for full terms governing the use this site.