Where a turnaround is necessary, minor adjustments are no longer sufficient to stop your business from collapsing, painful cuts are needed. The main aim of restructuring is to improve profitability fast. A properly thought-out crisis concept is needed to return a company back to its road to success.
Step 1: Analyse performance factors within and outside the company
For a company to make clear decisions, it must first identify the risks it faces. Internal factors (such as working processes) and external conditions (such as partners along the value chain and the competitive environment) are analysed in great detail.
Since process flows and interrelationships are frequently multi-faceted, sufficient time should be allowed for the analysis. Symptoms that appear as problems from the outside can have complex and interlinked causes.
Step 2: Make decisions
Having identified weak points inside and outside the company, appropriate decisions must be made. Such decisions may include the outsourcing of costly or non-profitable business areas, a change of market position or an entirely new business model. Since change leads to insecurity for employees, restructuring must always be accompanied by a communication concept that explains the reason and purpose behind forthcoming changes to staff members.
Step 3: Implement the measures taken
As part of many realignment programmes, business models are thoroughly overhauled; processes are revised and new partnerships and cooperation agreements are initiated. To implement these measures, it is essential to appoint responsible people and define interim targets. Effective monitoring and controlling mechanisms should also be prioritised during restructuring. To ease cash flow and profits quickly, steps to bring about rapid results should be introduced alongside the medium- and long-term measures.
Step 4: Secure financing
Sufficient financial scope is required to achieve operational and strategic objectives. In many cases, factoring is the most suitable financing tool in a phase of restructuring. In addition to gaining sufficient liquidity, a company can improve its equity ratio by converting outstanding receivables into cash and cash equivalents. With a full-service factoring solution, companies also benefit from several other advantages. (Link to advantages of factoring).
Step 5: Introduce an early warning system
A sophisticated early warning system helps to monitor risks and prevent further business crises. Such a system uses warning indicators to alert management to a need for action and thereby defuses potential risks at an early stage.
advantages of factoring