There is no doubt that the way in which the recent economic
crisis placed severe restrictions on cash flow has had a far more damaging
effect on small businesses than it has on large organisations. This is
illustrated by the way in which job creation has proceeded at a much faster
pace amongst larger companies than it has amongst small businesses, which are
traditionally considered a reliable source of job creation. Mark Zandi, the
chief economist at Moody’s Analytics, explains that this is largely because of
the way in which the squeeze on credit, in which it became harder to borrow and
maintain a healthy cash flow, affected small businesses to a much larger
extent, paralysing them in the process.
These issues have taken a particularly high toll on
struggling businesses, even if their future had by no means yet been decided.
In such cases, concerted efforts to restructure and turn around the business
need to be made as quickly as possible. If problems and issues are identified
at an early stage and dealt with immediately, they become much easier to
isolate, preventing their spread to other parts of the business and stabilising
the company and its operations. However, establishing exactly how a company
should restructure and turn around their organisation can be difficult and, to
a large degree, will depend on their specific circumstances.
Recognising the need for change
Possibly the hardest aspect of restructuring is identifying
the issue in the first place. Though the effects of problems can usually be
observed relatively easily, establishing exactly what is causing them is
another matter entirely. Understanding exactly how capital is moving through
your business, where it is facing resistance and at what points it is leaving
the company, are all essential to isolating the problems.
