How to Reorganize a Company

If your company becomes financially troubled, take prudent steps to modify your business practices and reorganize.

Instructions

Difficulty: Easy

1. Identify the source of the company's problems. Is it the general economy or that part of the market in which the company operates? Or is it the company's costs?
2. Analyze the past three years' operating statements, looking for trends.
3. Identify chronic and acute problems. Undercapitalization tends to be a chronic problem; hassles with a customer or two can be shorter-lived.
4. Develop strategies and plans for dealing with the chronic problems.
5. Come to terms with operating losses as soon as possible; for example, start cutting needlessly high overhead costs such as luxury cars and costly leased space; find ways to reduce labor costs; and gradually increase prices.
6. Weigh the pros and cons of selling some assets.
7. Build capital by bringing in investors or a partner.
8. Try to renegotiate terms with suppliers, bankers and other creditors. Be sure to mention the costs and heartaches of litigation, assuring creditors you are doing all you can to make changes and restore the business to health.
9. Consider filing for Chapter 11 bankruptcy protection from creditors.
10. Hire a bankruptcy attorney to review the work you have done thus far and advise you as to the next step.
11. Keep suppliers, bankers and other creditors apprised of your plans and your progress.

Tips & Warnings

• If you are going to file for bankruptcy protection from creditors, don't wait until you are behind on the rent and in trouble with the Internal Revenue Service to take action. Get legal advice before the business is on the brink.