Recognizing when Restructuring is Necessary

Infrastructure, News, Performance Improvement, Restructuring

The right team can make the difference between distress and success!

Determining the right time to involve a restructuring specialist in business operations can be a complex and emotionally charged decision. It is important to note that restructuring specialists do not work alone. They often team with expert legal counsel, lenders, and more. In this article, we will shed light on key indicators that show restructuring is needed and the crucial role the restructuring team plays in helping businesses navigate operational and financial distress.

Subtle yet crucial signs indicating the need for restructuring support. 

  • Reduced Margins
  • Escalating Inventories
  • Increasing Executive Exits
  • Lack of Adequate Working Capital

These signs, often misconstrued as typical entrepreneurial stress, may signal the necessity of involving restructuring specialists at an early stage – before a business reaches the point of critical distress.

The restructuring specialists’ role is not solely about aiding struggling companies, though. They also help performing businesses become exceptional ones. An expert restructuring specialist can use their extensive operational experience with high-performance businesses to offer a fresh and insightful perspective and expert benchmarking on all aspects of operations, from the shop floor to the C-suite offices.

What to look for when hiring a Restructuring Specialist

A reputation for working together with clients will highlight a true restructuring partner that will help you plan and implement meaningful change and should be a key criterion when searching for a restructuring specialist. You want experts with a reputation for rolling up their sleeves, working side-by-side with all levels of the organization, and having the knowledge to collaborate with attorneys, lenders, and other experts to help turn around the business. A team that will stay the course by actively benchmarking operations and processes, planning and implementing changes, and providing the training and tools necessary for the company to continue along the path to success on its own is in order.

Address Leadership Challenges

Addressing leadership issues and performance challenges can be easier with professional external guidance. A business’s leadership team is often reluctant to make necessary changes due to personal relationships. The reality is that restructuring specialists have no such connections and, as an impartial third party, typically find it easier to make critical personnel changes faster. They will engage with attorneys regarding contracts and exit plans while looking for the best candidates within or outside the organization to fill essential positions.

Early Intervention is Key to Optimal Outcomes

Procrastination can narrow a business’s choices regarding restructuring and turnaround. The earlier a business engages a restructuring specialist to help, the broader the range of options available to help mitigate challenges effectively. Moreover, their role in fostering cooperation between clients, employees, suppliers, attorneys, and lenders, aligning interests, and facilitating proactive communication is pivotal for mutually beneficial outcomes and best handled by a restructuring specialist who is familiar with your industry.

Denial is Dangerous

There are two common and critical mistakes leaders often make in challenging situations – resistance to change and denial. What is needed are realistic assessments and proactive communication with stakeholders – areas where restructuring specialists excel.

Pulling it all together

Understanding the subtle signs, embracing change, and fostering open communication remain essential in determining when to seek expert restructuring assistance. Businesses that are proactive and seek early intervention and cooperative engagement with stakeholders realize how indispensable restructuring specialists are as partners in driving significant and transformative change. Timely intervention and proactive measures can successfully guide companies out of distress toward sustainable growth.

Want to learn more about restructuring? Check out this Cascade Conversation: Restructuring and Performance Improvement