What is Small Business Restructuring (SBR)?

Small Business Restructuring (SBR) is a process designed to help financially distressed small businesses manage their debts and improve their financial viability. It typically involves creating a formal plan to reorganise the business’s affairs, debts, and operations with the aim of enabling the business to continue operating and avoid insolvency.

Levi Consulting has a proven track record of assisting small businesses across various industries through the BSR process. Below are some case studies that demonstrate how we have used SBR to help businesses regain their financial footing and continue operations.

Case Study 1: Project Café Delight

Company Background

Café Delight is a café located in a bustling neighbourhood, known for its coffee and homemade pastries. The café has experienced a sharp decline in foot traffic and revenue. This has resulted in liquidity issues and an accumulation of debts, primarily owed to the Australian Taxation Office (ATO).

Steps Taken to Ensure Eligibility for SBR

To ensure eligibility for SBR, the following steps were taken:

• All outstanding employee entitlements, including superannuation arrears, were paid.
• An external accountant was engaged to bring management accounts up to date.
• All outstanding returns, including Activity Statements, were lodged with the ATO.

Business Continuity Assessment

To improve operational efficiency and financial stability, the café:

1. Hired an external accountant specialising in hospitality to manage finances and identify key performance indicators.
2. Conducted regular reviews of its trading position and maintained up-to-date management accounts.
3. Implemented cost-saving measures, including negotiating lower rent and streamlining operations.

The SBR Plan

The proposed restructuring plan involved a total repayment of $30,000. The directors committed to making an upfront payment from personal funds, paid in two instalments.

Outcome

The plan concluded with a return of 20 cents per dollar to the Company’s creditors. This outcome was significantly better than the estimated return of nil in a liquidation scenario. The successful implementation of the plan allowed the cafe to continue operations, retain its employees, and move towards a more stable financial future.

Case Study 2: Project Gourmet Dine

Company Background

A family-owned restaurant in a popular tourist destination faced severe financial distress. The restaurant faced liquidity issues and accumulated debt, mainly owed to the ATO.

Steps Taken to Ensure Eligibility for SBR

To qualify for SBR, the restaurant undertook the following steps:

• Paid all outstanding employee entitlements, including superannuation arrears.
• Engaged an external accountant to bring financial accounts up to date.
• Lodged all outstanding returns and statements with the ATO.

Business Continuity Assessment

The restaurant implemented several measures to enhance operational efficiency and financial stability:

1. Hired a contracts coordinator to streamline complex contract management processes and enhance pricing strategies.
2. Scheduled regular meetings with external accountants to facilitate informed decision-making and effective financial management.
3. Introduced new revenue streams, including takeaway and delivery services.

The SBR Plan

The proposed restructuring plan involved a total repayment of $50,000. This included a monthly contribution of $5,000 over 10 months, funded through the restaurant’s trading profits and/or loans from its director.

Outcome

Creditors received 18 cents per dollar, compared to a nil return in liquidation. The restaurant stabilised its operations, maintained its workforce, and regained financial health.

Case Study 3: Project Trendy Wear

Company Background

Trendy Wear is a boutique retail store specialising in fashion-forward clothing and accessories. The Company faced liquidity issues and accrued debt, primarily owed to the ATO.

Steps Taken to Ensure Eligibility for SBR

To qualify for SBR, Trendy Wear took the following steps:

• Settled all outstanding employee entitlements and superannuation arrears.
• Engaged an external accountant to update financial records.
• Lodged all outstanding returns with the ATO.

Business Continuity Assessment

The store implemented various measures to enhance operational efficiency and financial stability:

• Conducted regular financial reviews with external accountants.
• Enhanced cash flow monitoring and implemented cash controls.
• Hired a marketing consultant to boost online sales and social media presence.

The SBR Plan

The proposed restructuring plan involved a total repayment of $25,000. This included an immediate upfront payment followed by monthly instalments over 12 months.

Outcome

The plan concluded with a return of 15 cents per dollar to the Company’s creditors. The successful implementation of the plan allowed the store to continue operations and retain its employees.

Case Study 4: Project MetalWorks

Company Background

MetalWorks is a small metal manufacturer for the construction industry. The company faced significant increases in costs. These challenges led to liquidity issues and accumulated debt, mainly owed to the ATO.

Steps Taken to Ensure Eligibility for SBR

To qualify for SBR, MetalWorks took the following steps:

• Paid all outstanding employee entitlements and superannuation arrears.
• Engaged an external accountant to update financial records.
• Lodged all outstanding returns with the ATO.

Business Continuity Assessment

The company implemented several measures to enhance operational efficiency and financial stability:

• Hired a bookkeeper for daily data entry and record-keeping tasks.
• Increased the frequency of progress claims and invoicing to improve cash flow.

The SBR Plan

The restructuring plan proposed:

1. A total of $120,000, funded by monthly contributions of $10,000 over 12 months.
2. Debt forgiveness by the director and related parties.
3. Improved cash flow management and payroll compliance.

Outcome

The plan concluded with a return of 20 cents per dollar to the Company’s creditors. The successful implementation of the plan allowed the company to continue operations and retain its employees.

Case Study 5: Project FitLife Gym

Company Background

FitLife Gym is a fitness centre offering membership programs, regular classes, and personal training sessions. The economic downturn caused delays and increased costs during its fit-out, leading to a nine-month delay in opening while still incurring rent expenses. The gym accumulated debt, primarily owed to the ATO.

Steps Taken to Ensure Eligibility for SBR

To qualify for SBR, the gym undertook the following steps:

• Engaged a finance broker to manage and consolidate loans.
• Paid all outstanding employee entitlements and superannuation arrears.
• Lodged all outstanding returns with the ATO.

Business Continuity Assessment

The gym implemented several measures:

• Hired a business advisor to improve revenue management and reduce expenses.
• Launched a loyalty program and targeted marketing campaigns.
• Conducted regular financial reviews and maintained accurate records.

The SBR Plan

The restructuring plan involved:

1. An initial lump sum of $15,000, followed by weekly payments over 12 months, totalling $40,000.
2. Debt forgiveness by related parties.
3. Strategies to increase revenue and reduce costs.

Outcome

The plan concluded with a return of 15 cents per dollar to the company’s admissible creditors. The successful implementation of the plan allowed the gym to continue operations, attract new members, and reduce overheads.

How can we help?

Levi Consulting is dedicated to supporting small businesses through the SBR process. If your business is facing financial distress, we can assist you in navigating the complexities of restructuring, ensuring compliance, and developing a plan tailored to your unique needs.

Read more about how Levi Consulting supports small businesses through the SBR process: Small Business Restructuring SBR