6 Reasons Startups Need Proper Internal Restructuring

Restructuring a startup involves modifying the financial and operational aspects of a fledgeling new business. It’s typically done in consultation with an accountant.

Here are six good reasons why a proper internal restructuring is often necessary for startups.

1. Not much thought was ever put into the initial business structure

Many budding entrepreneurs don’t put a lot of thought into their business structure during the startup phase. They’re more interested in developing and testing their ideas instead. A startup business structure may evolve organically in the early days as more people come on board and revenue starts to grow.

But it’s important to evaluate your business structure as early as possible and to make changes if necessary. Evaluating whether you’re better off having a sole trader, a partnership, a company, or a trust business structure can help to ensure that your startup not only survives but thrives into the future.

There are pros and cons of each type of business structure, and a good accountant will be able to advise you on which is one is best for your startup, both in the short and long-term.

2. You need to pivot

‘Pivoting’ is a term that means changing direction. In the startup context, it can mean a change in your business model so that you can better capitalise on any market opportunities or respond to any potential competitive threats.

For example, you may need to restructure by adapting your business model to better fit market conditions and to help you develop or maintain a competitive advantage. A good accountant can evaluate the ongoing viability of your current or potential business model and help you decide on the most appropriate one to achieve your goals.

3. You want to attract investors but protect your equity

You might need to attract investors to help fund the growth of your startup business. For example, attracting funds from angel investors, venture capitalists or other business partners like shareholders.

If these investors become equity (ownership) partners in your business in return for their financial contribution, it’s important to structure the new arrangement so that you retain as much control over your business as possible. A good accountant will help you to do that so that your financial interests are protected.

4. You need more formalised systems and procedures

Often you can be flying by the proverbial ‘seat of your pants’ during the startup phase. While that can be exciting, it’s usually not as sustainable as your business starts to grow. You’ll usually need to develop more formalised systems and procedures. For example, developing staff training procedures to help ensure the quality of your product or service offering, as well as implementing financial systems to help ensure your cash flow.

Again, a good accountant can help you to do these things so that you can focus more of your energy on growing your business.

5. You need to automate or outsource to help you scale

If any part of your startup business is labour-intensive, you may need to automate or outsource these processes as a restructuring strategy. Doing this can help you to scale your business more effectively as you grow. Scaling involves getting a greater return for the time, effort and resources that you’ve invested in your startup business so that you can help to ensure its long-term sustainability.

A good accountant will analyse your operations and look for automation or outsourcing efficiencies to help you minimise or eliminate unnecessary expenses.

6. You need to restructure incentives and compensation for founders

You and your startup co-founders may have been prepared to work for fairly little financial reward in the early days to help get your business established. But once you start to achieve some success, you might want to restructure to better reflect each founder’s personal contribution and their ongoing importance to your business. A good accountant can help you to do that.

CLICK HERE IF YOU ARE A STARTUP

At Qi Wealth, our experienced, expert team of accountants can help you to evaluate whether you need to restructure your startup, and if so, how you need to do it. We’ll take the time to understand your business so that we can provide you with the best possible advice. We develop long-term, trusted relationships with our clients.