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A Restructure Only Means A Setback To Your Business, And Not A Closure – Here’s What The Reforms Could Mean For Your Business

Posted on September 6, 2021 by admin

With the demanding conditions that have plagued the retail industry over the past twelve months, business owners need to be aware of all the restructuring options available before it is too late.

COVID-19 has unfortunately resulted in reduced foot traffic, store closures, the accumulation of legacy creditors and significant deteriorations in working capital positions.

Even with the support of JobKeeper and other government initiatives buoying business ventures from early 2021 to now, many family and small businesses are sure to continue to struggle.

The Misconceptions Of Formal Restructures

The idea of restructuring your business or reaching out for external help can appear scary and often seen as something to be avoided at all costs. However, business owners are not on their own when dealing with the difficult conditions facing them in their short-term future.

No one wants to see a business fail.

That’s why there are always options available to businesses. However, the longer a company holds off on making a decision, the more the business and its available options will deteriorate.

If companies and businesses can act early enough, their options include informal arrangements and advice, voluntary administration, and new restructuring reforms for small businesses.

With the availability of these options and the right people involved, there is no reason why a financially distressed small business cannot survive the challenging times and thrive in the future. All companies experience some form of distress from time to time and often at no fault of their own. The ones that survive focus on cash, seek appropriate advice from trusted advisors at the right time and act further on it.

How Might A Business Survive Financial Distress

Using the voluntary administration process as a restructuring tool allowed Tuchuzy (a well-known retailer in Bondi) to successfully deal with legacy creditors, refocus on high margin product lines, and ultimately, the company continued to trade profitably.

The key to Tuchuzy’s restructure was a ‘light touch’ administration to minimise costs and disruption to the business and closely working alongside the director to ensure the proposal submitted to her creditors would be acceptable than an immediate winding up scenario (of which it was).

There is a lot of flexibility and breathing space afforded in the voluntary administration process.

The administrator can quickly reset the cost base by exiting unprofitable stores, reducing the workforce, and focusing on only buying and selling favourable margin products.

Even when a liquidation becomes necessary, the process can be reasonably quick, fair and transparent if run properly.

The secret is to overcome the general stigma accompanying restructures and approach restructuring experts early who will ‘unemotionally’ explain each available option and provide an impartial recommendation that aligns best with the individual circumstances.

What Do The New Small Business Restructuring Reforms Mean For You?

For a business with few creditors and a single location, the process of voluntary administration can be expensive and unnecessary.

Indeed, voluntary administration is often not appropriate for many small businesses due to associated financial costs and the hurdle accompanying a director relinquishing control.

The government has responded to this critique and offered an alternative. This alternative comes at a perfect time as directors are, once again, exposed to personal liability for insolvent trading.

The new small business restructuring (SBR) reforms offer a lower cost and far simplified restructure process, critical for small businesses to continue to trade after government assistance such as JobKeeper ceased in March 2021. The reforms add an essential new path that will assist many retailers.

Though there have been only a handful of SBRs to date, and their effectiveness to save businesses is yet to be appropriately evaluated, it is an option to explore in the right circumstances.

Critical Questions Your Business Should Be Asking

The COVID-19 crisis has put a severe strain on many previously successful businesses. Though the government and many advisors are attempting to ensure that they do not collapse, directors and business owners need to be proactive and engage early for them to work.

Often businesses approach liquidators and advisors at the point where their financial problems have become insurmountable, and a liquidation/shutdown is often the only option left. The timing of coming and asking for help can be the difference between a shutdown and the continuation of trading.

With proper preparation and an effective plan that considers all stakeholders, any business should be able to restructure and continue to trade.

If your answer to any of the below questions is yes, you should seek immediate advice from a trusted restructuring advisor.

  1. Am I currently losing money?
  2. Am I finding it hard to pay bills on time?
  3. Have I got old debts that I am finding hard to pay down?
  4. Do I need some breathing space?
  5. Do I have my ‘head in the sand’?

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Innovation Stems From Collaboration – So How Can Your Business Get Involved?

Posted on October 17, 2021 by admin

Innovation is one of the pinnacles of good business practice. However, sometimes innovation isn’t a process that can be achieved by one person alone. In business, some of the best ideas and practices that your business might achieve could occur through collaboration.

Most businesses will have understood the impact and importance of internal collaboration between team members and already put into place tools to help promote this. However, what exactly does effective business collaboration look like?

Business collaboration is the leveraging of internal and external connections in order to generate ideas, find solutions and achieve common goals for your business. It can be done internally (through collaboration with your team), or externally (through the combined efforts of multiple businesses).

Many businesses are already seeing the benefits of remote collaboration within their teams, especially with regards to the time being saved and the increase in productivity.

Businesses may also find that learning opportunities are presented to their employees and team members through the interaction and collaboration with other businesses that could benefit them, with additional knowledge and skillsets gained throughout the process.

Even with many restrictions remaining in place that limit travel on both domestic and international scales, businesses are able to confer with remote workers and businesses through the assistance of digital technologies, thus enabling collaborative efforts to continue

As restrictions ease and businesses are able to engage with one another once again in face-to-face settings, remote collaboration tools can be used to facilitate inter-business collaboration from the ease of anywhere.

These include:

These tools allow businesses to work uninterrupted with individuals, clients and other businesses, as the distance between is no longer a major inhibiting factor to operations (if operations can be conducted away from the site). It can also potentially promote global interconnectedness for the business, as collaboration does not have to occur at a local or domestic level.

Your business might not collaborate with other businesses in exactly the same way as a business in the same industry. It’s important to know what might be the right form of collaboration for your business to benefit from it – and doing that will depend on what you may want to get out of it, and how long you may want it to last.

Alliance

This is known as the traditional type of business collaboration, usually involving two or three companies temporarily working together. They are able to reach a common goal by combining their resources and knowledge, which can be effective for businesses with knowledge/resource gaps that another business could temporarily fill.

Co-Opetition

Competitors can be great collaborators if used appropriately. Co-opettion involves collaborating with competitors so that businesses can share resources, avoid duplication of their work and generate new customers for all parties involved.

Portfolio

When one large business manages a broad collaboration with multiple smaller, external partners, this is known as portfolio collaboration. The main, central business sets the rules for the collaboration and maintains it, offering many of the benefits of an alliance but in a long-term form that generates more connections between businesses.

Community 

Simply put, community collaboration uses one of the greatest resources that a business may have at its disposal – the community. Essentially, businesses collaborate with individuals or other businesses that are within their community. This can be done via both the business community (e.g local business partnerships) AND the customer community (e.g. social media influencers).

Network

If a business knows of other businesses with similar goals and values that they want to uphold, they may instigate network collaboration. This style of collaboration means that the businesses may not necessarily be in competition with one another but, with shared interests can collaborate on mutually beneficial projects with access to one another’s resources and customer base.

Your business may choose to collaborate with other businesses through:

The rapidly changing and digitally-inclined business world means that businesses that don’t prioritise collaboration – both internally and externally – are likely to fall behind. Making the most of collaboration solutions and tools allows collaborations to be streamlined, which is beneficial to all involved.

If you are looking for advice on how to structure these collaborations or work out the best way to get involved with other businesses, you can plan out your way forward with our help. Start a conversation with us today.

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