How to Fix a Plan That’s Drifted in 100 Days | EP23

1,000 days. That's enough time to transform a company, but not enough time to waste. Welcome to The 1,000 Day CEO, the podcast about decisive leadership, sustainable growth, and building a business that thrives beyond any one leader. Your host is Bill Canady. Let's make every day count.

When a plane drifts, everybody reaches for the same instrument. Take the leadership team offsite, bring somebody in, 3 days in a hotel conference room and a new 3-year plan. I've run those offsites. I've paid for them. Here's what they produce: a document describing a business you'd like to have and not $1 of different arithmetic. A drifted plan is not a strategy problem. You don't fix it with a replan. You fix it with 1 page in 100 days. 4 gates, 4 documents. And hear this first: the day you pick the plan is your day 1. It does not matter that you've been in the chair for 3 years or 11. One thing first, all of this hangs off a single number, the one your sponsor calculated before you ever even took the job, and it has moved since. Run your own number at billcanady.com/lbocalculator. It's free and it takes about 9 minutes, and you'll walk away with your own 7-page report. Now here's why the offsite fails, and it isn't because the strategy's bad. Your plan didn't drift because you picked the wrong strategy. It drifted because the arithmetic under it has moved and nobody reran it. 3 things changed while you were working. Your remaining hold got shorter. Nobody says that one out loud. The multiple environment has changed and typically not in your favor, at least recently. And the model your sponsor underwrote is 3 years old, which is in a 5-year hold and makes it history. And nobody has said anything to you. That's the dangerous part. Boards don't get hostile with a 10-year CEO. They get polite. Polite gives you nothing to work with. The honest feedback stops a while back, and you're flying on instruments. Everyone has quietly agreed not to recalibrate. Well, so let me name the position because naming it is most of the work. You're at day zero. Something's going on in your business. You can feel it, and you're not sure what to do about it. Day zero is not a verdict on you. It's a position. Some of the best operators I've met in 30 years are standing on it right now, working 60 hours a week. Let me take a couple of things off the table here. You don't need an offsite. You don't need 6 months of consultants in your building. You don't need clean data. You're under 20%. You're guessing, waiting for 80%, and everyone's past you. 60% moved. If you got it somewhere in the middle, time to get going. Ambiguity can kill you. You don't need a new team. 1 or 2 people need to change, not 8. This is not a transformation. It's 100 days and 4 documents. Okay, it's the quarterly review time. It's year 3. You're presenting. And somewhere in the middle, you notice something that you decide not to think about. You're showing the same 5 initiatives you showed 18 months ago. 2 of the dates have moved twice. One has quietly become somebody else's job title. Nobody says anything about it. Somebody compliments the team. And what you feel walking out isn't fear exactly. It's flatter than that. The sense that this meeting and the next one are interchangeable. Here's what had actually happened. Nothing. That's the whole event, and nothing is what the drift is made of. The drift didn't start with the number slip. It started the last time somebody in that room looked at your slide, formed a private opinion about whether it added up, and decided it wasn't worth mentioning to you. The only thing that reverses that is arithmetic, is you bring before them before they bring it to you. Here's the foundation. Before day 1, there's one thing to do about it, and it takes an afternoon. Get the sim and the underwriting model back out. Not the budget, the original documents. You're not doing this to relive it. You're doing it to date it. Somebody told their own limited partners in writing how they make their money on this deal. That's the job description nobody handed you, and it's written for a company in a market both 3 years gone. And find the clock, not your fiscal year, the funds. How many months of holds are actually left? Okay. The first 15 days, one deliverable. Reconstruct the numbers with today's input. Put it on one page. Get your chair to acknowledge it. Step 1, rebuild the model. 5 inputs. Entry EBITDA, entry multiple, debt at close, target MOIC, hold period. $50 million of EBITDA at a 10 multiple. $500 million of enterprise value, $250 million of debt, equity at $250 million, and 2.5 times, it has become $625 million. Pay the debt down to $125 million and require every enterprise value at exit is $750 million. Divide by 10, $75 million of EBITDA. They bought it at $50 million, a $25 million build. Now the mid-hold question. 3 years into a 5-hold, 3/5 of your time is gone. Is 3/5 of the build done yet? Hmm. Might wanna ask yourself that. Might wanna be hard on it. Be honest because nobody else is going to be. And if it isn't, for most people it isn't, the build you have left has to happen in the time you have left, and it's completely different plan than the one on your wall. Step 2, let's rerun the 2 assumptions that move the multiple. The 75 assumed you'd exit at 10 when you came in at 3 years ago, that was reasonable. Well, maybe now it's a 9, and 9 isn't a disaster. 9 is a normal Tuesday in a soft market, which many of us have been living through. The number goes to $83 million. Same company, same hold, $19 million of difference, and you don't control the variable. And the debt, 3 years in, debt paydown isn't an assumption anymore. It's a fact that you can look up. 2/3 of the return comes from EBITDA growth and 1/3 comes from paying debt down. And the debt only pays it down if you generated the cash. If cash conversion is run behind, the debt is higher than the model said, and every dollar that comes back out of the exit, EBITDA. Now, step 3, run the MOIT conversion with your chair. Everybody thinks the same thing here. If I raise this 3 years in, it reads as a confession. It doesn't if you bring the math. You're not walking in and saying you're lost. You're walking in to say, here's what I think you underwrote. Here's what's moved, and here's what to do with my number. Tell me where I'm wrong. Step 4, one page and signed, is the target, the timeline dated to the sponsor's clock, theirs, not your fiscal year. 5 assumptions named and owned, 3 unknowns declared up front. You sign it, chair acknowledges it. He can sign it too if he likes. You don't need your board's permission to start. You need their acknowledgement at the end. An unsigned number is a conversation. A signed number is a contract, and you want to be the one who wrote it. If this number is wrong, everything downstream is fiction. More so in year 3, because you've built 3 years of work on top of it. Now, here's a case to look at. Let me take you somewhere. I've seen this same shape a dozen times. You're 3 years into a 5-year hold. You hit plan in 2 of the last 3 quarters, and there's one thing you can't say out loud. The business feels heavier than it did in year 1. And you couldn't put it in a slide if you tried. So you take an afternoon and you rebuild the number off the original documents. 5 inputs. And the number that comes back is not the number in your head. The one you've been carrying is the one you were handed on day 1. It moved. The multiple softened. The debt didn't come down the way the model assumed. And there was never a meeting where anybody said so. Nobody hid it from you. That's the part that stings. It just quietly stopped being true. And you kept running against it. Then the next board meeting, you bring the arithmetic, not the operating partner, you. Nothing about the business changed that day. What changed is who's holding the number. Quick reminder, because everything from here is run off of it. Run your own number at billcanady.com/lbocalculator. It's free. It takes about 9 minutes and you walk away with your own 7-page report. Days 15 to 45. Now you find out where the profit actually went. Notice the word went. A new CEO is looking for where the profit lives. You're looking for where it moved because 3 years ago you knew, and now you've been growing on an assumption you haven't audited since. Here's the mechanism. Growth is not selective. It scales whatever mix you already have. Adding volume to a mix that's quietly deteriorating, and you don't get a warning. You get a bigger, busier business with the same EBITDA and everybody working hard. So one ratio, material margin over total employee costs, what you make on what you sell over what it costs to actually have the people who sell it, make it, and ship it. And here's where you have an advantage a new CEO doesn't. You can run it across 8 quarters. The absolute number tells you almost nothing. The trend tells you everything. If it's been deteriorating for 2 years, you now know exactly what your plan is starting to drift. And it wasn't last quarter. Then rank every customer and every SKU by material margin, not revenue margin. Every line gets a label: grow, hold, kill. Your P&L will never show you this. A P&L reports averages, and profit does not live in averages. It lives in the intersection of a specific customer buying a specific product. Let me tell you what we found when we ran this at a billion-dollar company. We had 16,000 suppliers, 12,000 customers, and when we peeled it back, 200 customers were over 90% of our sales, and 20 customers were 65% of revenue of the entire company. 20. A billion-dollar business effectively running on 20 relationships. Can be kind of scary sometimes. And set that with the part that matters, which is not the ratio. Nobody in that building knew that. Not the sales leadership, not finance, not me. Until we look. And this is what drift looks like from the inside. It isn't a crisis. It's a large, successful, extremely busy organization where the thing that actually makes the money has gone invisible to the people making it. You have a version of that number in your company right now. You just haven't looked at it. Then the deliverable, the bridge, 5 levers, 1 page, price and mix, cost, organic growth, M&A, working capital. Every dollar of the gap comes out of one of those 5. There is no 6. Each one sized, sequenced, and carrying exactly one name. A human being, not a committee. And sequenced for the time you actually have. Price and mix starts day 1 and needs no capital. That's your fast money. Slow cost takes 6 to 18 months. And deep enough in the hold, it may not land inside the hold at all. Book it where it lands or your bridge is fiction. A plan without an owner on every lever is just a wishlist. Days 46 to 70, the uncomfortable one, and more so for you than for a new CEO. Start with the comp plan. Pull the actual document and check the date on it. I'll bet it's about as old as the plan that drifted. It was written for a strategy you had in year 1, and it's been quietly paying for that strategy ever since. Your exit is priced on EBITDA, and you'll find revenue targets, MBOs, and a discretionary pool the board sizes in January. Which means you spent 3 years asking people to deliver a number that none of them are paid to deliver. And the organization moved exactly where you pointed it. You just pointed it with a compensation document instead of a strategy document. And the compensation document wins every time. If your incentive plan doesn't pay for the mandate, you don't have a team. You have an audience. Then the structure. 3 roles get named. A visionary. This is where we're going. Operators. They are the ones who do it every day. And a prophet who keeps the method alive when you're not in the room. Most teams have 3 visionaries and no prophets. Then the calls, stay, develop, or exit on every direct report. And here's the tenure tax nobody warns you about. You hired these people, some of them you've protected, and a new CEO makes these calls as a stranger and it costs him nothing personal. But you make them as the man who chose them. So every call is a verdict on your own judgment. It can sting sometimes. You don't need a new team. One or two people need to change, maybe not 8, but those one or two are almost certainly the people you like. Now, the smartest man in the company. Let me give you one. And the reason it's this one is that the fix isn't in the firing, it's in the asking. I take over a company and the interim CEO walks me through the team. He gets to one guy and says, that's the best guy in the building. And he was right. The man was a genius. Best plans in the company. Then I did what I always do. Location to location. Town hall and hour of questions. Did hamburgers and Cokes on the factory floor. And everywhere I went, they told me the same thing. They hated him. He wasn't a bad man. He was just so far of everyone. He brought no one with him. His pace was wrong. I had to let him go. He was devastated. Candidly, so was I. And I told him, I think this is the greatest gift I could give you. You may be the most unhappiest person I've ever met. He left the company and the temperature of that entire company went down. It felt like a relief. Now, why that belongs in year 3 and not year 1, I only knew because I went there and I asked, and I asked as someone who just arrived. That's the one window where every people will tell you the truth, and you don't have it anymore. So you get to go do it deliberately from the people who don't report to you. Days 71 to 100, install the rhythm. And you already have a rhythm, and that's the trap. A monthly meeting that's been running for 3 years, and it's almost certainly a narrative review where people explain what happened. Replace it with a bridge review where you compare each lever to what is actually supposed to produce and look for the variance. One produces a story. The other produces a countermeasure. 4 rules to hold it together. First rule, no surprises. Bad news, relatives, and fish all stink after 3 days. Your chair never hears something bad in the first board meeting. Number 2, be on pace. Every quarter has a gate, and you know by day 30, not day 85, when you're building the deck. 3, be data-driven. Under 25%, you're guessing. Waiting for 80% of the information, well, you're gonna be late. And the fourth, and I think this is the one that's the most important, results matter. Somebody's gonna say we did the best we could, but we are not a best efforts company. We have to win some. Bat .300 in baseball, you maybe get to go to Cooperstown. Bat .300 here and you probably get to go home. On day 100, you run the review, not a presentation about the plan, the first actual monthly business review against the bridge. That's the test. There's no certificate. And here's what you won't believe until it happens. The micromanagement stops. The operating partner sitting in on one of your ops reviews isn't being controlling. He's managing an information deficit. Give him variance data on a fixed cadence and it closes and he goes away. You get your calendar back, which means you get to run the company, which is what you wanted 3 years ago. Now let's do the math. Say your gap is $6 million of EBITDA at your multiple. That's about $60 million of enterprise value. That can be a big deal. That's why your board is measuring. It's not your effort. It's not your tenure. They don't care how long you've been there, how hard you work. Now put your own name on it. 1 to 3% of equity in a $500 million deal returning 2.5 times is somewhere between $3 and $9 million at exit. And it's a zero if you're replaced in month 42. 70% of PE-backed CEOs are replaced before their company exits. And 3 years in, you've already paid for the hard part. You're closer to that money than you've ever been, which is exactly why this is the worst place possible place to drift. All right, so back to where we started. When the plan drifts, everybody reaches for the offsite and a new 3-year plan. You don't need a new 3-year plan. You need a one-pager in 100 days. And I want to be straight about what this does and doesn't do. I'm not telling you the number gets easier because it doesn't. $75 million is still $75 million on day 101, and you'll just have fewer months to get there than you had in the morning. What changes is that you can defend it, and most people in that chair never can. And this isn't for everybody. If you want frameworks to read, this isn't it. There's nothing to read. There's a number to reconstruct and an audit to run, calls to make, and a review to hold. By the day that you pick the plan is your day 1. 3 years in, 11 years in, doesn't matter. Day zero was never a verdict. It's a position, and you can leave it this week. You can leave it today. Here's the roadmap. So what are we gonna do over this 100 days? Days 1 to 14, reconstruct the number against today's inputs, get it signed. Days 15 to 45, find where the profit went, then build the bridge. Days 46 to 70, one name on every lever, pay them for it, and make the calls you've been deferring. Days 71 to 100, turn your narrative review into a bridge review and go run it. 4 gates, 4 documents. And starts where it starts. Run your own number at thebillcanady.com/lbo-calculator or use the link below. It's free and it takes about 9 minutes and you'll walk away with your own 7-page report. Fair warning, a lot of people don't like what comes back. That's the whole point. Better you find out today Then your board finds out in March. We're all about progress, not perfection here. So go run that number and watch the next one after this. I'm gonna stop describing that number and just show you a real deal, 5 inputs, and I've constructed a CEO's board number live on screen in about 9 minutes. That's the one coming up right after this. Thanks everyone. Let's go make some money.

You've been listening to The 1,000 Day CEO with Bill Canady. Follow the show for more decisive leadership, sustainable growth, and strategies that build enduring businesses. Until next time, make every day count.