When should I consider a restructure of my business?

08 February 2022


Expansion & Improvement

While you can’t predict the future for your business, you can make sure you’re in the best position to succeed. One of the most commonly overlooked areas for protecting your business is the way you structure your organisation. In practice, restructuring is a flexible tool that enables your business to evolve with your plans, the market and the commercial environment.

Ben Loveday explains the key scenarios you should bear in mind for restructuring and how it can reduce risk, improve granular control and give you the flexibility you need to stay competitive.


When should I consider restructuring my business?

For entrepreneurs, change is the only constant and restructuring helps you meet those changes on your own terms. Just as your goals, competitors and needs will evolve with time, the best businesses are those that can adapt.

There are certain points in a business’s evolution where there will be potential step changes. These include:

  • Change in ownership or management

  • New business lines or acquisitions

  • Change in financing arrangements

  • Change in size or brand

  • Move into other geographical or business sectors

  • Planning for a sale or exit

In any of these scenarios, having the right structure within your business can give you commercial advantage or reduce risk.


How can restructuring help my business?

‘Restructuring’ involves reorganising the legal, ownership, operational, or other structures of a company to help make it more profitable, or better suited for its present or future needs. Varying the structure of your business is a highly flexible method that can apply to a wide range of scenarios to deliver major benefits.

Reducing Risk

Pursuing new opportunities in your market is key to remaining competitive, however it also brings a measure of risk. By using the right structure, you can protect your core assets while creating more flexibility to follow potential other business lines.

For example, when entering a new market or launching a new product that carries some risk, you could create a new trading company to manage and provide this service. In this scenario your original business is protected from debts and liabilities, even if the new venture fails.


Tax management

In the above scenario, losses in the new venture could actually be an asset for the core business. By creating a holding company over the two main businesses, losses in one business can be offset against the profits of the other.

In the event of turning a profit, one of the trading companies can pay dividends to the holding company to protect cash and ring fence capital. This gives owners more flexibility in how they manage their tax burden, as well as their timings on tax payments.


Incentivising Teams

When preparing your business for a sale or succession planning, the structure of your business can be an essential tool to manage talent and continuity.

One of the key questions for a new buyer is how the business will run without the original founder. By creating a beneficial share structure that grants equity to your key employees, you can ensure that essential team members stay with the business and are rewarded for it. For example, by granting share options that vest with certain conditions such as profit margin, growth or time.


How early do I need to consider restructuring?

When a change is anticipated, you need to review whether the existing structure is suitable or whether it could be improved. Getting the right advice makes a significant difference in this scenario. Working with an experienced accounting professional can help you:

  • Plan ahead in a structured manner

  • Check your goals against realistic targets

  • Decide if the current structure is still the right structure

The earlier you start planning for the next stage of your business, the more time and control you will have in how you approach it. The exact timelines involved will depend on the complexity of the restructuring in question.

A restructure could involve:

  • A holding company or new subsidiary being incorporated.

  • Adjusting the share capital between owners and management

  • Refinancing loans and other borrowings

All of these have commercial and tax implications which need to be considered and balanced against other business priorities. Every change you make will have consequences for other parts of your business, from increasing administration time to sharing equity.

In these scenarios, working with a professional can be invaluable to determine the best course of action and ensure that both short and long term goals are taken into account. This relies on regular communication between you and your advisor to update planning and goal setting.


How can we help with restructuring?

The best business plans are based on collaboration, working closely together to match your specific goals with the right strategies and structures to help you achieve them. At Haines Watts, our team in Reading have helped thousands of businesses evolve with time, from owner-managed startups to thriving organisations with multi-company structures and international ambitions.

Find out more about how restructuring can support you and your business.