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Advantages & Disadvantages of Restructuring Your Business

Restructuring a business is a big step, but plenty have taken the plunge with positive results. Click here for more.

Advantages & Disadvantages of Restructuring Your Business

16th December 2022

Thinking of restructuring your business, or just interested in finding out more about those supposed benefits? In either case – and, as you can imagine – there are some clear advantages and disadvantages to making drastic change. No two businesses will realise quite the same benefits from a restructure, although plenty do look back on the move as a positive change for the company.

Below, we look at some of the most significant pros and cons you should consider before you commit to restructuring your company.

Con: Focus can be shifted too far from ‘business as usual’

Sometimes, directors can be too focused on the restructure, and lose focus on the day-to-day running of the company. When restructures take months – or even years – to be completed, this can be very damaging – particularly if employees are already feeling unsettled by the news.

Pro: Better tax efficiency

Some company structures are significantly more tax efficient than others. Restructuring can be an excellent way to improve the business’s finances without significantly reducing the workforce or growing the margins.

Remember that some businesses are better suited to particular structures than others, so talk things through with corporate solicitors before you draw any conclusions. They can then help you to manage the process of restructuring, and getting the business healthy in its new form.

Con: Restructuring can suggest that the business is struggling

While plenty of successful businesses make the decision to restructure the business, it remains the case that restructuring tends to suggest that a business is struggling, and in need of more drastic change in order to survive. Openness and communication with your employees and customers can help to dispel this, but it’s important to be aware of the potential message a restructure sends out.

Pro: It can make employees more involved in the business’s success

If you choose to embrace a structure that allows for employee ownership, you can embrace a much more engaged, committed, and enthusiastic workforce. Share schemes like this have brought numerous companies strong success over recent years, including John Lewis.

Con: Employees can start to feel unsettled

When a business goes through any significant change – and particularly something as disruptive as restructuring – employees can feel worried for their job security. Reassurance and openness is paramount, but all too often overlooked by busy directors.

Pro: It can be a solution to shareholder disputes

By restructuring the business’s share distribution or reversing a merger made some time ago, a growing problem between two or more shareholders can be resolved. It is, of course, a drastic action to take, but may be the best solution for all involved.

Con: Restructuring isn’t a guaranteed fix

Business restructuring is often focused on cost reduction, and boosting efficiency and profitability. It can work wonders for companies, but not every issue can be fixed in this way, so it is important you do not pin all your hopes on this change.

Pro: Better efficiency (and lower operating expenses)

Companies with reduced workforces can realise plenty of benefits, particularly if they invest in technologies that make working at a reduced capacity feasible. Reduced chains of command and more technological innovation can make a business significantly more efficient, while reducing operating expenses at the same time.

Categories: Articles, Franchise

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