No business can afford not to move forward. Growth is never by mere chance, it is the result of forces working together. Many entrepreneurs start their businesses as a sole proprietor due to low compliance requirements. Such entrepreneurs struggle hard to achieve growth, staying small or pretty much as they were when the business started. The main reason of this limited growth is that there is no legal distinction between business and entrepreneur. All assets owned are at risk, making it more difficult to obtain loans and other funding resources.

Most entrepreneurs are knowledgeable about their businesses, but have limited knowledge or experience in other areas. This lack of expertise can restrict the growth. They spend maximum time on business activities and cannot grow without adding more manpower to the business. The success of business is so closely tied to the ownership that it is incapable to survive the loss through illness or death of entrepreneur.

Today corporatization is a need of the hour. The whole world is gradually becoming a single global market. A small unincorporated business led by few people cannot think of growth on large scale without corporatizing itself. Many Entrepreneurs don’t want their business to be large to avoid sharing of profit and benefits. Corporatization brings sharing, accountability, complex situations between personnel and most important it misses the exclusiveness of the entrepreneur on the business.

In order to have significant growth, one must realize that you can’t do it on your own and will need a good team around you. Finding great people is the key to success. It frees you to keep planning where the business has to be in 2-5 years. As the business grows, there is a need to separate the bank accounts and tax filings of entrepreneur and that of the business. To achieve this separation a possible solution is to convert the sole proprietorship into private limited Company. This conversion needs an agreement between sole proprietor and private limited company (once it is formed) for the sale of business. Here sole proprietor becomes the Director in a newly formed Company.

For small companies, corporate or business restructuring is a possible solution for growth, which is a non recurring exercise but has lasting impact on the business. There are primarily two ways of growth of business i.e. organic and inorganic. Organic growth is through internal strategies and inorganic growth is through external strategies. It enhances the performance of the Company. Business expects re-shuffling of internal strategies such as effective marketing, product diversification, change in customer base etc.  It also expects external business strategies such as mergers, acquisitions, joint ventures, strategic alliances, franchising etc those results into faster pace of growth and effective utilization of resources. This reshuffling works positively for the business both during the time of business prosperity and recession.

The business restructuring involves strategic decision making based on the market study, competitor analysis, mutual benefits, expected social impacts and technical & legal aspects. It involves a team of professionals including business experts, Company Secretaries, Chartered Accountants, HR professionals, etc. who have a role to play in various stages of restructuring process. The Company Secretaries being the vital link between the management, employees, investors and government are involved in the restructuring process as co-coordinator, in addition to their responsibility for legal and regulatory compliance.

Business restructuring allows your business to lift up to the next level and keeps it going on. Don’t grow for sake of growth.


CS Vineet Paranjape

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