Business restructuring and business models

Financial restructuring

Although there are several reasons for financial restructuring, it is – in the recent years – imminent when serious difficulties appear in company’s operation and a company is threatened by insolvency or bankruptcy proceedings. 

The main objective of the financial restructuring is effective management of available assets and reduction of liabilities. The goal is to set a satisfactory financing model regarding financing and covering liabilities that is a model which will allow a company to pay most of its attention to the business (operational?) part. When general economic crisis hits all entities, we believe cash flow maximisation is far more significant than solely generating profit by all means.

A company – in the middle of crisis – finds it hard to point at reasons, let alone suitable solutions credible enough to please the creditors. In BRIO, we are specialised for proposing financial restructuring for companies in unfavourable circumstances. As an external partner and according to the project, we can negotiate with creditors directly to reach the deal on paying off debt acceptable to all parties involved. We pay special attention to claims which are together with selling the unnecessary assets a source for partial settlement of liabilities as well as a source for the very much needed working capital.

In BRIO we are experienced in finding balance between needs and expectations of both creditors and debtors; in the formulation of closing – to a company – tolerable and – to creditors – sufficient deals, which in the intense circumstances of crisis guarantee, most importantly, company’s survival and maximisation of benefit to both sides.

Financial restructuring is the economic environment of today is an essential condition for business restructuring.

Business restructuring

Although the majority of long-term managements believes that a company in crisis needs financial restructuring only, this is not the case. In most instances, solely conducting a financial restructuring – without drastic measures in the operational part – simply means that patient, sick to death, is artificially kept alive.

Crisis in the company is the most important reason for business restructuring. The current, in many cases long-term management, is usually incapable of imposing drastic measures, which may shift the trend of operation. Opportunities to save are always there to be found but most importantly: they need to be implemented and strictly followed. Business restructuring is an overall process which includes rationalisation of all business processes (technological, human resources, organisational) and search for opportunities there where we have not been so far. Careful attention must be paid to the establishment of an effective controlling (experience show that many companies do not even know what controlling actually is) and an adequate IT support.
Once the company reaches the state of crisis, the severity of inevitable measures, their quantity and time spam rise with every month the restructuring processes are being postponed.

Business restructuring is a painful process due to a chain of measures costs-wise. In BRIO, we believe than an independent, objective evaluation of precisely all costs is mandatory. At the same time, the unnecessary costs must be cut completely and the ones we cannot avoid shall be reduced by all means. Our experience proves that it is possible to lower most cost in the company without major influence on the revenue. In BRIO, we also share the belief that the term ‘fixed costs’ is often just an excuse for managements and employees not to tackle the harsh measures when it comes to cost reduction.

If costs are something you may take for granted, then are the revenue something far better but not so easily achieved. What needs to be done firstly is the market analysis based on the product/service we offer. By reorganising sales and marketing we strive to form the most favourable ratio between range and profitability of operation. Reorganisation is crucial, be it in terms of communication improvement; productivity of sales personnel (most of their time and energy shall be directed in marketing and not in bureaucratic activities); the establishment of really effective system of rewarding and so on.

As part business restructuring – and in according to the agreement with a customer – BRIO builds and leads project teams which analyse and perform thorough restructuring projects of companies in crisis.

Analysis and establishment of business models

Business model is the key element in every company. It is a mixture of activities which determine whether a company is bound for failure or success.

The main purpose of every market-oriented business model is to reach a long-term positive cash flow which is the most important criterion that in reality defines company’s value. Establishing model/models that enable positive cash flow is not the goal one should go after but to create and maintain such model according to which cash flow constantly rises.

Analysing and formulating business models includes the analysis of operation - activities that generate revenue; clients and customers (current and potential), costs analysis, sources of the funds. This also includes preparation and formulation of careful overviews and evaluation of company’s value.

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