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

Bill Canady: When a plan drifts, everybody reaches for the same instrument. Take the leadership team off-site, bring somebody in. Three days in a hotel conference room and a new three-year plan. I've run those off-sites, I've paid for them. Here's what they produce: a document describing a business you'd like to have, and not one dollar of different arithmetic. A drifted plan is not a strategy problem. You don't fix it with a replan. You fix it with one page in a hundred days, four gates, four documents. And hear this first. The day you pick the plan is your day one. It does not matter that you've been in the chair for three 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 forward slash LBO calculator. It's free and it takes about nine minutes, and you'll walk away with your own seven-page report. Now, here's why the off-site fails. And it isn't because the strategy is bad. Your plan didn't drift because you picked the wrong strategy. It drifted because the arithmetic under it has moved and nobody re-ran it. three 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 under wrote is three years old, which is in a five-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 tenured 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 off-site. You don't need six 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% move. If you got it somewhere in the middle, time to get going. Ambiguity can kill you. You don't need a new team. One or two people need to change, not eight. This is not a transformation. It's a hundred days and four documents. Okay, it's the quarterly review time. It's year three, you're presenting. And somewhere in the middle, you notice something that you decide not to think about. You're showing the same five initiatives you showed 18 months ago. Two 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 has 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 one, there's one thing to do about it, and it takes an afternoon. Get the CIM 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 three 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 one, rebuild the model. Five inputs, entry EBITDA, entry multiple, debt at close, target MOIC, hold period. 50 million of EBITDA to 10 multiple, 500 million of enterprise value, 250 of debt, equity at 250, and two and a half times it has become 625. Pay the debt down to $125 and require every enterprise value at exit is $750 million, divide by 10. $75 million of EBITDA. They bought it at $50, a $25 million bill. Now the mid-hold question. Three years into a five-hold, three-fifths of your time is gone. Is three-fifths of the bill done yet? Hmm. Might want to ask yourself that. Might want to 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 two, let's rerun the two assumptions that move. The multiple. The 75 assumed you'd exit at 10 when you came in at three years ago, that was reasonable. Well, maybe now it's a nine. And nine isn't a disaster. Nine is a normal Tuesday in a soft market, which many of us have been living through. Their number goes to 83 million same company, same hold, $19 million of difference, and you don't control the variable. and the debt three years in, debt pay down isn't an assumptive anymore. It's a fact that you can look up. Two thirds of the return comes from EBITDA growth and one third 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 three, run the MoIC conversion with your chair. Everybody thinks the same thing here. If I raise this three years in, it reads as a confession. It doesn't, if you bring the math. You're not walking and saying you're lost. You're walking 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 four, one page and sign. It's the target. The timeline dated to the sponsor's clock. Theirs, not your fiscal year. Five assumptions named and owned, three unknowns declared up front. You sign it, your 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 three, because you've built three 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 three years into a five-year hold. You hit plan in two of the last three quarters, and there's one thing you can't say out loud. The business feels heavier than it did in year one. 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. Five inputs. And a 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 one. It moved, the multiples 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/LBO-calculator/ It's free. It takes about nine minutes and you walk away with your own seven-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 the profit lives. You're looking for where it moved because three 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 is 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 cost, what you make and 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 eight quarters. The absolute number tells you almost nothing. The trend tells you everything. If it's been deteriorating for two 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 ourselves. 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 looked. 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, five levers, one page, price and mix, cost, organic growth, M&A, working capital. Every dollar of the gap comes out of one of those five. There is no six. Each one size, sequenced, and carrying exactly one name, a human being. Not a committee. And the sequence for the time you actually have. Price and mix starts day one and needs no capital. That's your fast money. Slow costs takes six to eighteen 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 wish list. Days forty six to seventy, 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 one, 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 of the board sizes in January. Which means you spent three 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, three 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 team has three visionaries and no profits. 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 eight, 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, an 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 off everyone, he brought no one with him. His pace was wrong. I had to let him go. Now 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 three and not year one? I only knew because I went there and I asked, and I ask as someone who just arrived. That's the one window where everybody 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. Day 71 to 100, install the rhythm, and you've already had a rhythm. And that's the trap. A monthly meeting that's been running for three 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. Four rules to hold it together. First rule, no surprises. Bad news, relatives and fish all stink after three days. Your chair never hears something bad in the first board meeting. Number two, be on pace. Every quarter has a gate, and you know by day 30, not day 85 when you're building the deck. Three, be data driven. Under 25%, you're guessing, waiting for 80% of the information, well, you're going to be late. And the fourth, and I think this is the one that's the most important, results matter. Somebody's going to say, we did the best we could. Well, 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 setting 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 three years ago. Now let's do the math. Say your gap is six 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 two and a half times is somewhere between three and nine million dollars 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 three 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 off-site and a new three-year plan. You don't need a new three-year plan. You need a one pager in a hundred 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 one. Three years in, eleven 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 going to do over these hundred days? Days one to fourteen, 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. Day 71 to 100, turn your narrative review into a bridge review and go run it. Four gates, four documents. And starts where it starts. Run your own number at the billcanady.com/LBO-calculator/. Or use the link below. It's free and it takes about nine minutes, and you'll walk away with your own seven-page report. Fair warning, a lot of people don't like when it comes back. That's the whole point. Better you find out today than 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 going to stop describing that number and just show you. A real deal, five inputs, and I've constructed a CEO's board number live on screen in about nine minutes. That's the one coming up right after this. Thanks everyone. Let's go make some money.