1. Change in management or ownership of the business
If you are a sole trader and you decide to take on a business partner, you will need to restructure as a partnership. On the other hand, if you buy an existing business and you become the new owner, you may have to restructure the business to meet your business goals and regulatory requirements.
2. Profit growth is stagnating
If this is the case, you will need to audit your salary-to-revenue ratio, cost of goods sold, and overall expenses. If any of these are causing your net operating income to dwindle, a restructure may be necessary to improve the profitability of your business.
3. Poor efficiency
If you do not change as your business grows, this could lead to inefficiencies in the workplace. Hiring more people may increase efficiency and allow you to service more customers, but you will also have a higher payroll cost and reduced profit. Instead, restructuring could be the answer. It could help you streamline your operations and continue to grow without having to hire new staff.
4. Poor employee management
Are your employees overworked, underutilised, ignored, or unsatisfied? If so, they could make costly mistakes or leave the company, and this will affect morale and profit. If your business is experiencing these problems, you may need to audit your existing teams and structure. You may find that restructuring is the key to reducing turnover, minimising mistakes, increasing morale, and leading your business back to profitability.
5. Poor competitiveness
As time passes, industries change and technology improves. If you’re doing business the same way you were a decade ago, you could fall behind your competitors. They could crush your prices and surpass you in everything from product quality to customer service. You’ll need to rethink your business model and structure so that you can start beating your competitors again.
6. Shifting customer base
If your customer base is diminishing or buying less, it may be time for a restructure. It could help you roll out a new product, generate revenue for the same product through licensing or subscriptions, or deliver the same for less through reduced costs that allow you to lower prices. This can keep your customers happy and coming back for more.
7. Business growth or economic downturn
Your business, goals and the economy can change over time, which could lead to an expansion or downsizing in regard to your office space requirements. For example, if you are expanding your business overseas or introducing new product or service lines, you’ll need to change the structure of your business to accommodate this growth. On the other hand, if there’s an economic downturn, you might want to downsize your business structure from a company to a sole trader to better manage your business and keep it alive.