Running a successful business can be challenging in any economy and the pressure only increases when times are tough. With the modest pace of the nation’s recovery from the current economic crisis, more and more businesses in Austin, and across the country, are feeling the crunch.
Many Austin businesses facing financial difficulties are finding that they need to reorganize in order to restore or improve their financial viability. Freescale Semiconductor is one of these companies.
After its recent reorganization, Freescale dramatically reduced its net losses from $538 million in the second quarter last year to just $168 million during the same period this year. This translates to a drop in net losses from $2.73 per share to 79 cents per share. Over the same time period, Freescale’s gross profit margin increased by nearly five percentage points, and it reported net operating earnings of $31 million, compared to a previous operating loss of $18 million.
As demonstrated by Freescale, reorganization can make the difference between survival and defeat for a business facing difficult economic times. Through reorganization, a business can cut its costs without doing further damage to the business. In some cases, reorganization may be limited to “trimming the fat,” while in others, it may involve more complicated transactions such as dividing a business into separate legal entities.
Because restructuring or reorganizing a business incorrectly can be highly counterproductive, it is essential to have a detailed and carefully crafted reorganization plan that is responsive to your company’s specific needs and circumstances.
If you are business owner in the Austin area and are thinking of reorganizing, an experienced business attorney with a CPA can help you explore your options and determine which path can best serve your long-term business goals.