When is the right time for a struggling business to bring in an investor?

Struggling businesses can be opportune businesses. A loss in profits can open doors to starting afresh. This approach takes into account both strategic and tax incentives to restructure your struggling business in a way that sparks success.

Many SMEs undergo a great deal of professional and personal anguish when the months and years return losses. Markets change, costs increase, resources are lost, and assets need to be replaced. Many small business owners feel the pinch, and in an attempt to continue with the same structure, plan, and activities which once worked so well, they fear that if luck does not go their way an exit strategy is the only viable option.

But seeing the opportunity in times such as these means revaluating the business, often from top to bottom. This approach measures the value of continuing with current business practices. Tax and business advisors can inspect the financial, strategic, and asset value of your business and let you know whether or not its strengths may lie in unexpected areas. They may find opportunity for you in change, restructuring, and innovation.

A series of poor years need not spell the end of your company, but rather give you a chance to identify its pathways to improvement and success.

One of the key questions raised when looking at a struggling business and considering future opportunities revolves around investment. Do you call in a new investor to chart a new path for your business, or do you simply develop and improve your current structure?

Struggling businesses can have an appeal to investors. The assets, products, market position, brand and other features of your company could draw in investors who see an opportunity, with the proper changes, for a new business venture to rise out the ashes of the old. But the latent or inherent value of your business rests on how it stands up to financial and strategic analysis. This includes an evaluation of its tax status.

Your past losses can play a large role in the tax status of your business, which in turn impacts whether you bring in investors to take over or push on yourself. A new or restructured business can take into account the losses of a past business if it passes the similar business test. This test explores continuity between the assets, activity, and identity of an old business and its successor. If such continuity exists, then taking on such past losses can save the future endeavour a great deal in tax. This can then free up funds, which gives you more choice as to whether you look for investors or relaunch on your own.

Restructuring, whether to change or improve your current business activity, is full of weighty decisions. Even if you do partner with investors, it is best to understand the state of your struggling business and your future opportunities from the point of view of a restructuring expert. Calibre Business Advisory has a team of experts who have helped numerous business successfully restructure their tax, financial, and business practices. Get in touch with a tax specialist and business advisory team who will spend more time than most on understanding your company and finding unique solutions.

Calibre Business Advisory invests more time than most firms into finding solutions for our clients. Contact our business advisors and tax accountants to discover new options for your business in Australia and beyond.

Important Disclaimer: Readers should not act solely on the basis of the material on this page. Items herein are general comments only and do not constitute or convey advice. Legislation and proposals of legislation are also subject to constant change. We therefore recommend that formal advice be sought before acting in any of the areas. This news article is issued as a guide to the readers. Calibre Business Advisory Pty Ltd and its associated entities disclaims any losses that may be incurred as a result of the reader undertaking any action based on this article.