The 100 day plan is an important business process that is central to several specific business situations-- and broadly relevant to others. It is a key step executed by private equity (PE) firms immediately after a close of a transaction. In a very different context, a 100 day plan is also essential to turning around a company that has negative cash flow and is in danger of losing access to credit and even going bankrupt.
It may seem contradictory that largely the same 100 Day Plan process is used in such different situations. Companies in turnaround require urgent remediation-- while companies that have just been acquired by PE firms are typically healthy. But PE firms feel no less urgency about implementing an aggressive plan to grow the portfolio company’s revenue and EBITDA—so as to increase its valuation and exit the investment within three to five years. As soon as the transaction closes, the PE firm’s targets for revenue and margin growth that were built into its investment hypothesis must now be operationalized and executed by the portfolio company leadership team. The 100-day plan, which the PE firm typically starts to work on before the deal closes, prioritizes the most critical value-creation steps that the portfolio company will begin shortly after closing.
A sense of urgency and a resolve to make hard decisions are common to these very different situations.
Key Characteristics of 100 day plan
Based on many years of experience developing and executing 100 day plans for private equity portfolio companies as well as for turnarounds I have led, the key characteristics of a 100 day plan that wins support of the board, lenders and other stakeholders are:
Review of Costs
- The board of the company gives management 100 days--from close of the PE transaction or arrival of the turnaround executive/team--to prepare a plan to be presented for approval at an upcoming board meeting.
- The hallmark of a 100 Day Plan is an aggressive effort to see where money is being spent and how best to allocate resources for maximum return. The goal is to act fast and cut surgically where necessary. This effort is typically undertaken shortly after close of a transaction and is completed in advance of the 100 Day Plan.
- The hallmark of a 100 Day Plan is an aggressive effort to see where money is being spent and how best to allocate resources for maximum return. The goal is to act fast and cut surgically where necessary. This effort is typically undertaken shortly after close of a transaction and is completed in advance of the 100 Day Plan.
- Once costs to be cut or reallocated have been identified, the team must take on the responsibility for executing. Those who persistently resist this effort need to be counseled out of the organization. However, in my experience most understand and agree that these steps, while difficult, are essential to turning around the company or getting the growth plan on the right track.
- To be sure, increasing revenue is the other part of saving the company or increasing its profitability. But steps to grow revenues, such as expanding marketing channels or identifying new customers or new sources of revenue from existing customers, take time and resources. So the immediate emphasis must be on the financial model and generating the cash flow necessary to put the growth plans in action.
Market Analysis
- At the same time, a 100 day plan should go beyond the financial model and other aspects of the company’s internal operations. The team must get out and understand the landscape, underlying dynamics and trends of the company’s market and its customer base.
- A “listening tour” with the company’s top 10 customers and key suppliers is often part of the process. The company must be very transparent. In the case of a turnaround, the question to customers and suppliers should be: what are we not doing well? what can we do better? Letting them vent about your shortcomings is a way to get good ideas about what needs to be changed and new products to be developed. It also breaks down any barriers to future candid discussions.
- For a PE portfolio company, the question to customers should be: what is working well? what can we do better? The key messages to suppliers should include: you are a key part of our team, how can we better work together to increase value for both of us while enhancing value for our customers.
Road Map
- The 100 day plan should include a road map consisting of metrics and targets that the board can use to evaluate progress. These metrics and targets are outlined by business quarter going forward for three to five years. Typical of the plan is an additional contingency plan in the event metrics and targets are not met at any given time.
Review of Plan by the Board
Approval and adoption of the plan by the board is the goal of the process. In the case of a turnaround, approval of the plan will be central to its decision to continue to retain the turnaround team. There is no “wiggle room” because the bank or other lender requires definite indication that the company can meet its obligations.
In the case of PE, the board’s review of the 100 day plan will determine which members of the management team are capable and willing to embrace what’s necessary to realize the PE’s investment objectives. Those who don’t will likely not go forward with the company. Neither the CEO nor the company’s founder/s is exempt from this process or its outcome. Gaps in the management team are also identified with a timeline for filling those gaps, in priority order. The plan now becomes the basis for the PE, its operating partner and the portfolio company board to monitor the management team’s performance.
Applicable to Other Situations
While I focus above on 100 day plans for PE-owned companies and turnarounds, the gist of a 100 day plan is more broadly applicable. In all organizations costs tend to become institutionalized--through force of habit or because “it’s what we’ve always done.” All companies, especially those who are experiencing the early indicators of cash flow pressure, can benefit from a sense of urgency about evaluating their cost structure and making costs more variable with revenues. All companies, even highly successful ones, need to have regular, no-holds-barred conversations with customers and suppliers to get market intelligence and honest feedback about what they could be doing better and a plan by customer to get it done.
To be sure, most organizations and their management teams aren’t typically engaged in creating a plan for their board that could lead to a decision as to whether they will keep their jobs. But many could benefit from the sense of urgency and renewed commitment to performance and value creation that are the hallmarks of the 100 day plan process described above.
About the Author
Helen Bulwik is a Partner at Newport Board Group. She has worked with private equity for more than 25 years--as CEO of seven PE-owned consumer and retail companies and as an operating partner to eight PE firms. She has participated in the turnaround, repositioning, merger, acquisition or sale of more than 25 lower middle market and middle market consumer companies. Helen has also served as a Board Director of more than a dozen private middle market companies.
Click here to learn more about Helen Bulwik or contact her.
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