Is Your Business Structure Holding Back Your Success?

The structure of a business is crucial to its success and often it can get in the way of growth.

If a business needs to build another factory, say, then if the funding is not in place to do so that will get in the way of growth. This should be factored into the business model.

Often, in order to correct this kind of issue a business needs to be restructured to give itself the flexibility it might need to survive and grow.

Ideally a regular look at the business structure would be part of the process of continuous improvement to ensure a business is in the best possible shape to meet short term problems,  like an economic downturn and a consequent drop in orders, and to enable it to thrive, grow and expand long term.

Restructuring more often is carried out as a consequence of a business struggling to survive and is one of the tools available to business rescue advisers called in to help a company in difficulties.

An example of what a restructuring adviser can do is the case of a company K2 was involved with that had a break-even point of £3.5 million and whose turnover had declined from £5 million to less than £2.5 million.

In this situation it was clear that, although viable, significant changes were needed. They included closing a factory, getting rid of onerous financial arrangements, terminating some employment contracts and reducing other fixed costs.  The outcome of these actions was to reduce the break-even point to £1.8 million.

A reduction of sales to just under £2.5 million then became a healthy profit rather than a significant loss.

It meant that the unit cost of production was also reduced once it was free of the burden of the finance drain on the equipment.

It might seem that this should have been obvious to those running the company, but it is possible to be too intimately involved in the day to day running of a business, especially one under this kind of stress, and to be unable, therefore to stand back and look at the elements in the structure of the business that are impeding a solution to its changed circumstances.

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