When finances are stretched, businesses often turn to restructuring as a strategic way to weather the storm. For business owners, restructuring can mean reorganising debt, renegotiating contracts, or implementing operational changes to ensure long-term stability.
While restructuring is designed to secure future stability for the business, it can unsettle stakeholders if not communicated carefully.
Business owners must communicate restructuring with clarity and empathy. To help you navigate this process, we’ve outlined a strategy for effectively sharing your restructuring plan — helping you retain credibility and strengthen stakeholder relationships.
Who is Involved in the Small Business Restructuring Process?
At its core, restructuring aims to create a more sustainable financial framework that enables a business to continue operations, retain employees, and work effectively with creditors and suppliers.
One specific type of restructuring is Small Business Restructuring (SBR), which offers a proactive alternative to Voluntary Administration (VA) — enabling companies to tackle debt without losing operational control.
Introduced in Australia in 2021, SBR is structured to help financially distressed small businesses manage debts without losing control of operations. Unlike other insolvency procedures, SBR allows directors to remain in control throughout the process, provided they work closely with a Small Business Restructuring Practitioner (SBRP).
Stakeholders often play a central role in the success of an SBR plan. Here’s who is typically involved:
Small Business Restructuring Practitioner (SBRP)
The SBRP is a registered professional who oversees the restructuring process. They work with the directors to create a viable restructuring plan, which is then presented to creditors. The SBRP acts as an intermediary, balancing the business’s and its creditors’ interests while ensuring the plan meets legal and regulatory requirements. One significant role of the SBRP is to certify that the company is eligible for SBR and that the proposed plan is feasible.
Creditors
Creditors, especially those holding significant debt amounts, are critical to the approval process. For a restructuring plan to move forward, creditors holding at least 50% of the debt value must approve it. Effective communication with creditors is vital to gaining their trust and buy-in, as their support determines whether the plan can proceed.
Employees
For any business, employees are its backbone, and in restructuring, maintaining morale is vital to continuity. Employees need clear information on how the restructuring may impact their roles and job security. Transparent communication can help reduce uncertainty, boosting their confidence in the company’s future.
Investors and Shareholders
Investors and shareholders have a vested interest in the outcome of the restructuring, as it directly affects their returns. Providing updates and outlining how the restructuring plan will create a path to recovery can help reassure these stakeholders of the business’s commitment to regaining stability.
Suppliers and Customers
Maintaining solid relationships with suppliers and customers is vital for business continuity. Communicating the restructuring plan and any expected changes in operations or timelines can help mitigate disruptions. Reassuring these stakeholders of the company’s dedication to fulfilling obligations fosters long-term loyalty, which is critical for a successful restructuring process.
By understanding and involving each stakeholder group, businesses can improve their chances of gaining the support needed for a successful restructuring, ultimately setting the stage for a more stable and prosperous future.
Develop a Thoughtful Communication Strategy
Before reaching out to stakeholders, prepare a clear communication strategy that addresses your restructuring plan’s goals, objectives, and key messages. Ask yourself: What are the main points each group of stakeholders needs to know? What are their primary concerns?
By addressing these questions upfront, you can shape a message that is honest and reassuring, providing clarity and building trust. Ensure your strategy includes specific points of contact and a timeline for updates. For instance, frequent updates early on will ease initial concerns, while regular progress reports keep stakeholders informed as the plan progresses.
Four Steps to Communicating Proactively
When a business is struggling, communication delays and reactive messaging often fuel fear and speculation. Get ahead of the curve with a confident, proactive message that shares your vision, your restructuring plan’s benefits, and the concrete steps you’re taking to protect their interests.
Consider beginning with direct communication from top leadership — either in person or through a carefully prepared letter — to convey authenticity.
1. Tailor Your Messaging for Each Stakeholder Group
Different stakeholder groups are impacted by restructuring in unique ways. Employees might worry about job security, while creditors are focused on repayment plans, and suppliers on maintaining business continuity. Tailor your message to each audience to show empathy and understanding. For example:
- Employees: Use meetings or video conferences to address questions and reiterate the importance of their roles during this time.
- Investors: Share regular financial updates and offer reassurances of business stability and future profitability.
- Creditors: Outline how the restructuring plan will secure their payments over time and invite them to participate in feedback sessions.
By aligning your message with each group’s priorities, you can address concerns directly and maintain confidence in your leadership.
2. Allow for Open Communication and Feedback
Transparency during restructuring can be a stabilising factor, but it’s essential to make room for two-way communication. Hosting Q&A sessions, holding regular check-ins, and opening channels for stakeholders to ask questions directly can alleviate much of the anxiety surrounding restructuring.
For instance, research by Edelman shows that businesses with transparent, two-way communication are more likely to retain stakeholder trust during challenging times. Therefore, open forums should be planned where stakeholders can ask questions and voice concerns. Listening to feedback helps you fine-tune the restructuring plan and gives stakeholders a sense of agency in the process.
3. Consider the Timing and Medium of Your Communication
Timing is critical during restructuring. Stakeholders need time to process information and adjust to new realities. Schedule communications strategically to avoid last-minute surprises and give stakeholders ample time to provide feedback.
You should also consider the suitable medium for each message. Sensitive information may be best delivered face-to-face or via video calls, while updates and confirmations can be shared through emails or newsletters. Choose channels that make it easy for stakeholders to revisit important details or ask follow-up questions, ensuring clarity.
4. Reinforce Your Message with Empathy and Reassurance
Restructuring often brings heightened emotions. Stakeholders may feel uncertain, and it’s essential to acknowledge their concerns. Frame your communications empathetically, focusing on what matters most to each group and providing reassurances where possible.
Remind employees of their value to the company’s future, show creditors you’re committed to fulfilling obligations, and share the company’s future vision with investors.
The goal is to foster resilience and calm, positioning your team and stakeholders as partners in a challenging yet necessary process.
Build Trust Through Effective Restructuring Communication
Clear communication is vital when sharing a restructuring plan with stakeholders. Focusing on four key principles can make a big difference:
- Tailor Your Approach: Each stakeholder group has unique concerns and priorities. Customising your message will ensure you address these appropriately.
- Embrace Transparency: Sharing information early and allowing stakeholders to ask questions will build trust and prevent the spread of misinformation.
- Encourage Open Dialogue: By creating open forums for feedback, you empower stakeholders to feel involved in the process.
- Empathise and Reassure: Recognise the emotional impact of restructuring and acknowledge stakeholder concerns.
Understanding how to communicate your restructuring plan can make a profound difference in retaining stakeholder trust. Proactively sharing information with empathy and transparency sets the foundation for a smoother restructuring process and shows stakeholders that their trust and support are valued during challenging times.
If your business is facing financial challenges, download our eBook: Guide to Small Business Restructuring to learn whether the process could help you towards recovery.
At SALEA Advisory, we’re here to support small businesses through the complexities of restructuring. Our team of experts can guide you through the steps needed to maintain stability and build a strong foundation for future success. If you’re preparing for a restructuring process or need advice on your communication plan, contact SALEA Advisory today. Together, we can help secure the future of your business.
