Most Corporate Restructure Methods Don’t Work
Corporate restructure is an art … no doubt about that. There is only one corporate restructure approach that works, while the other approaches never address the problems with your business. Let’s first cover those methods that you shouldn’t consider.
Corporate Restructure Methods That Don’t Work
Across-the-board cuts based on some percentage – I
always laugh when I read in the Wall Street Journal that another CEO is mandating
10 or 20% overall cuts to get his firm back to profitability. That just tells
me the CEO does not have the fortitude or the intellectual horsepower to find
the problems in his business and remove them. Does it make sense to cut 20%
from the profitable and the unprofitable units equally?
Chapter 11 bankruptcy – Unless your firm is in
the Fortune 500, it seldom makes sense to take Chapter 11. For one $20
million firm that filed Chapter 11, the total attorney fees and court
costs were nearly $2 million in a 14-month period of time. Fortunately
this firm had this amount of cash, so it survived the bankruptcy proceeding.
But as you might guess, most firms enter bankruptcy because they don’t
have any money left. Therefore, they cannot survive the bankruptcy, and
the judge usually orders liquidation.
Looking for More Financing
I often see CEOs and CFOs of distressed firms looking for more money to solve
their troubles. They spend months and months on the fruitless finance hunt
while their operational troubles get worse. This is craziness and a waste
of time. No one is going to give your more capital when your firm is in trouble.
Period.
A Corporate Restructure Method That Works
So what should you do. It’s simple. Rebuild your firm around currently
profitable and cash positive business units. Cut all the unprofitable units.
The best source covering this approach is Dan Betts’s Insider
Secrets to Saving Your Business Guide published by Turnaround Central.
This is a first-class corporate
restructure training manual.
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