Restructure or sell, and how owners tell the difference too late
Small business restructuring made up 20.1 per cent of all initial insolvency appointments in the year to 31 May 2025. Here is the honest test for which side of that line a business is on, and why the window closes quietly.
General information only, not financial, legal or taxation advice. Tony Pope holds Queensland Office of Fair Trading licence 4963575.
The short version
- Small business restructuring accounted for 20.1 per cent of initial insolvency appointments in the 12 months to 31 May 2025, second only to creditors voluntary liquidation at 41.6 per cent.
- 72.2 per cent of appointments in that period were director driven, so the decision is usually made by the owner rather than forced by a creditor.
- A sale needs time and a going concern. Both are things a stressed business runs out of in that order.
- The question is not which option is better. It is which options are still open, and that changes month by month.
There is a moment in a struggling business where two doors are open, and a later moment where only one is. Most owners cannot see the difference between those two moments while they are living through them.
What the numbers say about how owners are choosing
In the 12 months to 31 May 2025, 13,413 companies entered external administration or had a controller appointed, up 34.2 per cent on the 9,993 in the same period a year earlier.
The breakdown of how those appointments started is the more interesting part. 72.2 per cent were director driven. Creditors voluntary liquidation was 41.6 per cent of initial appointments, small business restructuring 20.1 per cent, and voluntary administration 10.5 per cent.
One in five of those appointments was an owner choosing a process designed to keep the company trading and keep them in control of it. That is a real shift, and it says something about owners acting earlier than they used to.
The test that actually separates the two
Not profitability. Not how tired you are. The test is solvency, and then time.
Can the business pay its debts as and when they fall due. If the answer is no, or you are not confident it is yes, that is a question for a registered liquidator or a restructuring practitioner, and it is urgent. It is not a broking question and anyone who treats it as one is doing you harm.
If the answer is yes, how many months of runway. A confidential sale campaign takes time. Preparation, appraisal, marketing, qualifying, due diligence, contract and settlement. Six to nine months from appraisal to settlement is the realistic shape of it, of which three to six is the campaign and the contract. A business with four months of cash is not in a position to run that process well, and a buyer can smell a forced timeline from a long way off.
Why the window closes quietly
Because nothing dramatic happens on the day it closes.
Stock gets thin because there is no cash to replace it, so sales soften. A key person leaves and is not replaced. A supplier moves you to cash on delivery. The BAS goes on a payment plan. Each one is survivable and none of them is the end. Together they change what the business is: a buyer looking at it now sees declining revenue, thinner stock, a gap in the team and an ATO arrangement, and prices all four.
The business did not become unsellable. It became a different business, and the one that was sellable was the one that existed eight months earlier.
What to do if you are somewhere in the middle
Get the solvency question answered by somebody qualified to answer it, this month. That answer determines everything else and it is not a judgement call an owner should be making alone at the kitchen table.
If the answer is that you are solvent and the problem is performance, then you have a real choice: fix it and sell later, or sell now at what it is worth now. Both are legitimate. What is not legitimate is a plan that assumes you will have the same choice in six months, because that is the assumption the numbers above are made of.
The part I will say plainly
A free appraisal will tell you what the business is worth today and what is dragging the number down. It will not tell you whether you are solvent, and I will say so rather than guess.
If the appraisal turns into a conversation that should be with an insolvency practitioner, I will tell you that too, and it will cost you nothing to have found out.
Common questions
Can you sell a business that is in financial difficulty?
Sometimes, and more often than owners assume, but the requirements are strict. The business has to still be trading, the numbers have to be capable of being explained, and there has to be enough runway to run a confidential campaign and reach settlement. What kills it is usually not the difficulty itself, it is leaving the decision until there is no time left.
What is small business restructuring?
It is a formal process introduced in 2021 for eligible incorporated small businesses under a liabilities threshold, where the directors stay in control of the company while a restructuring practitioner helps put a plan to creditors. It is not a sale and it is not administration. Whether a business is eligible and whether it is the right path is a question for a registered practitioner, not a broker.
Should I talk to a broker or an insolvency practitioner first?
If you can pay your debts as they fall due and the problem is performance, start with the broker and the accountant. If you cannot, or you are not sure, the insolvency practitioner is the first call and the more urgent one. A broker who takes a listing from a business that needed a practitioner three months earlier has not done that owner a favour.
Keep reading
All notes on selling a business · All seller guides · What is my business worth?
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