When considering Small Business Restructuring (SBR), many company directors naturally worry about the costs involved. It's a significant decision that requires careful consideration.
While the upfront investment might seem significant, especially when facing financial pressure, it's crucial to weigh these costs against the potential benefits. Most companies achieve debt reductions of 60-75% through SBR, creating substantial savings that far outweigh the initial investment.
Understanding the complete cost structure helps you make an informed decision about whether SBR offers the right solution for your situation. Let's explore what's involved and how to assess the value for your company.
Understanding SBR fee structure
Small Business Restructuring practitioners typically structure their fees in several components, aligning with different stages of the process. The total investment usually ranges from $15,000 to $30,000, depending on your company's size and complexity.
This investment often represents less than 10% of the total debt reduction achieved through successful restructuring, making it a cost-effective solution for many businesses. The staged approach also helps manage cash flow during the process.
Initial assessment phase
The first stage involves a thorough review of your company's situation to confirm SBR suitability. This crucial groundwork, with many SBR practitioners, costs between $2,000 and $4,000 and includes:
Financial position review
Eligibility assessment
Initial strategy discussions
Preliminary creditor analysis
Viability confirmation
Future trading potential assessment
At Business Reset we do not charge you for this phase. We invest the time and energy up front to first ensure your SBR proposal will have a high likelihood of success, before we invite you to appoint us. We take the risk, not you.
Proposal development
The second stage typically costs $8,000 to $15,000, reflecting the detailed work required. During this phase, your practitioner will:
Conduct thorough financial analysis
Prepare creditor proposals
Develop implementation plans
Create necessary documentation
Manage stakeholder communications
Structure payment arrangements
Address creditor concerns
Implementation and monitoring
The final component, usually costing $5,000 to $11,000, covers ongoing support to ensure success. This includes:
Managing the creditor voting process
Overseeing plan implementation
Providing continuous monitoring
Ensuring compliance
Delivering progress reports
Supporting business improvements
Addressing emerging issues
Real-world value example
Consider a manufacturing company that recently completed the SBR process. Facing $400,000 in debt, they invested $22,000 in total fees. The business had struggled with historical ATO debt but maintained strong underlying operations.
Through successful restructuring, they achieved:
70% debt reduction ($280,000)
Net benefit of $258,000
Preserved supplier relationships
Maintained employee jobs
Continued trading profitably
Strengthened financial controls
Improved cash flow management
This example demonstrates how the initial investment typically represents less than 10% of the total benefit achieved. The company not only reduced its debt but emerged stronger and more sustainable.
Payment flexibility supports success
Most practitioners understand the cash flow challenges businesses face during restructuring. They typically offer flexible payment arrangements to support successful outcomes. This understanding helps ensure the restructuring process itself doesn't create additional financial pressure.
Rather than requiring the full amount upfront, fees often align with key milestones in the process. This approach helps manage cash flow while ensuring the practitioner can deliver necessary services.
A typical arrangement might include:
Initial appointment deposit
Proposal submission payment
Plan approval milestone
Implementation stage payments
Monthly monitoring fees
Success-based components
Your practitioner should structure payment terms that support ongoing operations, carefully balancing fee payments with daily business needs. This flexibility proves crucial for many companies going through restructuring.
Managing additional investments
Beyond practitioner fees, successful restructuring often requires related investments. Understanding these helps you plan effectively and budget appropriately.
Professional support
Some businesses need additional expertise from:
Accountants for financial statements
Lawyers for specific advice
Bookkeepers for record updates
IT professionals for system improvements
Financial advisors for planning
Management consultants for operations
Business improvements
Many companies benefit from investing in:
Enhanced financial controls
Updated management systems
Staff training programs
Improved reporting capabilities
Better inventory management
Customer relationship systems
Process documentation
These additional investments, while optional, often prove valuable in strengthening your business for the future. Consider them part of your broader business improvement strategy rather than purely restructuring costs.
Common cost considerations
Every business situation differs, but certain factors consistently influence total costs:
Company size and complexity
Larger or more complex businesses typically require:
More detailed analysis
Additional documentation
Complex creditor negotiations
Multiple location considerations
Extended implementation support
Industry factors
Different industries present unique challenges:
Regulatory requirements
Seasonal considerations
Supply chain complexity
Customer contract implications
Industry-specific compliance
Maximising return on investment
Success in SBR requires more than just paying the fees. Companies that achieve the best results take a proactive approach throughout the process.
Preparation matters
Before beginning the process:
Organise financial records
Understand your numbers
Document key issues
Plan potential improvements
Gather essential information
Review operational systems
Active engagement
Throughout the process, successful companies:
Respond promptly to requests
Implement recommended changes
Maintain open communication
Address issues quickly
Support the restructuring plan
Monitor progress regularly
This engagement often leads to additional benefits beyond debt reduction. Many businesses report improved financial management practices, stronger supplier relationships, and better operational efficiency after completing the process.
Making an informed decision
When evaluating the cost of Small Business Restructuring, consider both the immediate financial investment and the potential long-term benefits for your company's future.
Contact our team for a confidential discussion about your specific situation. We'll help you understand:
Likely costs for your situation
Available payment options
Potential benefits
Implementation timeline
Next steps forward
Support available
Remember: While SBR involves significant investment, the return through debt reduction and business preservation typically far outweighs the initial costs. Understanding these costs in context helps you make informed decisions about your company's future.
Read next: Managing relationships during SBR: How to minimise disruption
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