How to Take Command of a Company in 100 Days

Bill Canady: Every book written about taking a new job tells you the same thing. Spend the first 90 days listening. Don't change anything yet. Do a listening tour. If you're a private equity backed CEO, that advice will cost you the seat. Because while you're listening, there's a clock running that you can't see. 70% of private equity backed CEOs are replaced before their company exits. And the decision that ends most of them gets made around month six in a room you're typically not in. So I'm going to do the opposite of the listening tour. I'm going to walk you through exactly what I would do in the first hundred days if I took over a $200 million company on Monday morning. There's four gates, four documents, a hundred days. And it works the same whether you took the seat last week or you've been sitting in it for 11 years. You're at day zero today. The day you start working on this becomes day one for you. One thing first all of this hangs off a single number. One year sponsor calculated before you ever took the job. And most CEOs have never seen it. There's a free tool that reconstructs it from the five inputs off your own CIM. Go to my website, billcanady.com/LBO-calculator, or just look below in the links of this and you'll find it. Nine minutes, no cost, seven-page report. Run it after this, and everything I say next will land differently. Here's why the listening tour fails, and it isn't because listening is bad. You will not be replaced for missing the 30 years in this, and I've run middle market businesses from 500 million to over a billion and a half, and I've gotten 10,000 people across 50 countries a day, and I've almost always never seen a CEO fired for a bad quarter. They get replaced when the board stops believing the plan will get there. Two companies, completely different events. Missing a quarter is loud. You'll know. Losing belief is silent. It happens on a phone call after a board meeting where one director says some version of, I still don't understand how he gets from eight to fourteen, and nobody writes it down, and nobody tells you. The listening tour is dangerous precisely because it produces no evidence. A hundred days of relationship building leaves nothing on the table the board can audit. You come out of it well liked and undefended. What you need instead is one document. The number, the bridge, the owners, the rhythm. That's the whole thing. Let me take some things off the table right now. You don't need clean data. Here's my rule. If you have less than 20% of the data, you're just simply guessing. And if you're waiting for 80% or more, you've taken so long, everybody's already past you. 60%, you can move. Even if you got a little bit different, believe me, you'll get there. Better to move quick. You don't need a new team. One or two people need to change, not eight. And you don't need your board's permission to start. You need their acknowledgement at the end. This is not a transformation. It's a hundred days and four documents. And look, you can't fall out of a basement. So whatever shape the basement is in, it's the floor. There's only one direction from here. First, let me put you somewhere. It's Tuesday morning in month four. You're in a board meeting and it's going fine. Nobody raised their voice. you've handled every question that's come at you. And somewhere around minute 40, a director asks you something perfectly reasonable. He asks where the margin improvement in the back of the half is coming from. And you answer him. You answer him well because you know your business. You talk about pricing work, the cost initiative, the customer that ramping. You walk out of that room and you think it went fine. Well, here's what actually happened. Three of them get on a call afterwards, and one of them says, I still don't understand how you get some eight to 14. That's it. That's the whole event. Nobody writes it down. Nobody tells you. from that Tuesday forward, things change in ways you can feel but you can't name. Your requests take longer. Somebody from the fund starts showing up at your op reviews. The operator partner walks a weekly call instead of a monthly one. You start getting help you didn't ask for. You think you're being micromanaged. Well, you're not. You're being audited. I've been on both sides of that table, the CEO presenting, the board member listening. And the difference between the two versions of the meeting was never capability. Every CEO I've watched lose that room was good at his job. The difference is whether one page on the table that answers the question before anybody asks. Before day one, there's one thing to do, and it takes an afternoon. Read the CIM, not the budget, the CIM and the underwriting model if you can get your hands on it. read them the way the investor who wrote the check, read them. That's the thesis behind every deal. Somebody sat in a room and told their own limited partners in writing, here's what's going to do, and here's how we're going to make our money. Usually they're looking for two to four times the equity they put in. Three is what I see most. Put in 50 million of equity, expect 150 million back. The document job, that document is the job description nobody handed to you. First 14 days, one deliverable. Reconstruct the number, put it on one page, get your chair to acknowledge it. Step one. Rebuild the model. Five inputs, entry EBITDA, entry multiple, debt close, target MOIC, hold period. Let me run it because the arithmetic matters more than the explanation. Company was doing 50 million of EBITDA when the sponsor bought it at a 10 times multiple. 500 million of enterprise value, 250 million debt at close, five terms, completely normal. So the equity in the deal is 250 million at two and a half times MOIC over five years. That equity has to become $625 million. Over five years, you'll pay the debt down, say from $250 to about $125. Required enterprise value at this point is $625 of equity plus $125 of remaining debt. $750 million divide by 10 multiple. Now they bought it at $50. Your number is $75 and $25 million bill, 50% growth. Nobody sent you an email about that. And here's the part that should keep you up. That 75 assumes you exit at the same multiple you entered. Take one turn off, nine instead of 10, which isn't a disaster. That's a normal choosing in a soft market. And the number goes to 83 million at eight times 94 million. Same company, same hold, 19 million dollars of EBITDA difference, and you don't control the variable, which is why you build to the pessimistic case and you're delighted if the market cooperates. Most CEOs build to the optimistic case. I mean, come on, we're only human, because that's the version that makes the plan look achievable in a board deck. That's how a plan quietly becomes fiction. Step two, run the MOIC, conversion with your chair. Structured session, not a hallway chat. You bring your reconstruction. You say, here's what I think you underwrote. Here's what the two means I have to deliver. Tell me where I'm wrong. Almost nobody has this conversation. It'll be one of the most valuable hours of your tenure and cost you a calendar invite. Step three, one page, sign. I like to get it signed. Do you have to? No, but you need to know everyone's on board. There's the target, the timeline, the dated to the sponsor's clock. There's not your fiscal year, five assumptions named and owned, three unknowns declared up front. You sign it, your chair acknowledges it. That's the last part, is where everybody skips, and it's the part that matters. An unsigned number is a conversation. A signed number is a contract. And you want to be the one that wrote it. If this number is wrong, everything downstream is fiction. That's why it's first and why it's 14 days instead of 90. Now let me tell you what happens when you skip that. and every single time I've gotten it wrong, it was because I didn't go see for myself. We had a business in coal, two major locations. One was in St. Louis, one was in Ohio. I sat down with the president of that group, terrific guy, and I said, What do you want to do? And he said, Well, let's shut down Ohio and we keep St. Louis. And I said, All right, makes sense to me. The math all worked out. But I never went. I spent all my time in St. Louis because that's where he sat. I did not go to Ohio and walk that building and ask anyone anything. We shut it down and it just about killed us because nearly everything we had, all of our suppliers, were coming out of that Ohio's piece. I hadn't gone deep enough. I hadn't asked the right questions. It took us a couple years to recover from that. It made the business worse and it made everything else worse. That was a poor decision and it was totally my fault. Now I'll tell you the other thing that's true. Still today, every time I'm in the car on the way to make that big announcement, something that's going to make some people happy and some people very unhappy, I still get that moment. Holy cow, what if this is wrong? That never goes away. What changes is whether you went and looked first. Now, a quick reminder. Everything I'm walking through starts with that one number. Go to billcanady.com/lbo-calculator/ There's five inputs. it's nine minutes, and it'll be free. Now you know the number, days 15 to 45 is where you find out whether you're allowed to chase it the way you think. Because here's something nobody says to a new CEO. Half of you shouldn't be growing it. Every board wants growth. Your comp plan probably pays on growth, and growth is not selective. It scales wherever you mix, you've already had. And 20% volume to a broken mix, and you get 20% more broken mix, an exhausted team, and a flat EBITDA. Then your good customers leave because they're the ones with options and they're the first one to notice when service slips. Growing a business that's in chaos only invites more chaos. So before you grow, earn the right to one ratio, material margin over total employee cost, what you make on what you sell. Divided by what it costs to have the people who sell it make it and ship it. That's the real work. Rank every customer, every SKU by material margin, not revenue, margin. Your PL will never show you this. A PL reports averages, and profit does not live in averages. It lives at the intersection of a specific customer buying a specific product. I'll tell you what we found when we did 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 ours. And 20 of them were 65% of the revenue of the entire company. A billion-dollar business running on 20 customers. Nobody in that business realized that. And then we did something almost embarrassingly simple. I got the sales leaders in a room and I said, Tell me about our top 10 accounts. Number one was doing 40 million a year with us. It was a big deal, and it hadn't been growing, which was an even bigger deal. So I asked, In just the geography that we're already served, with just the products we already sell, no new countries, no new lines, how much is available to that one customer if we get all of it? They went and did the work, came back 250 million. Wow, and that's a number that gets your attention. We were at 40. We needed 200 million of growth for the whole company, and we had more opportunity than we needed sitting inside of our single biggest customer. So start in your own backyard. You'll be amazed at how much is already there. Then the deliverable, the bridge. Five levers, one page, price and mix, cost, organic growth, M&A, working capital. Every dollar of your gap comes out of one of these five. There's no six, each one size, sequence, and carrying exactly one name, one human being, not a committee. Now, a plan without an owner on every level is simply a wish list. Now we go to days 46 to 70. This is the uncomfortable one, so I'll be direct. Start with the comp plan. Pull the actual document. Not what you remember, the document. Your exit is priced on EBITDA. I'll bet you'll find revenue targets, MBOs, and a discretionary pool, the board sizes in January. That means you're asking people to deliver a number none of them are paid to deliver. In a Q4, you'll be puzzled why the organization didn't move. Well, it moved. It moved exactly where you pointed it. You just pointed at it. With the compensation document instead of the strategy document. And the compensation document wins every time. People tend to be coin operative. If your incentive plan doesn't pay for the mandate, you don't have a team, you have an audience. Here's the structure: every business needs three things named: a visionary, an operator, and a prophet. Visionary sets where we're going. The operators go do it every day. And the prophet's the one who teaches the process, trains the trainers, keeps the method alive when you're not in a room. Most middle market teams have three visionaries and no prophet And then the calls, let me be honest with you about their arithmetic here, because people don't believe it until they're in it. Came into one company on an August 9th, told the whole organization we'd launched a new strategy December 16th. I had 14 people reporting to me. At the end of a hundred days, four were still there. A year later, two. And it's not that one of the twelve were bad people. Most of them were good people. They just couldn't make the pivot fast enough. Across everything I've done, fewer than 25% of a leadership team makes it through the full process. Not because we don't want them to. They just can't pivot fast enough. Now I used to give people much longer to find themselves. I really don't do that anymore. And here's why. For that individual, more time is a great outcome. For the company, it's a terrible one. Because if that person is a cancer to the culture, if they say what you want to hear in the room and then walk out and tell everyone else how horrible it is, well, that spreads, especially if they're well respected. You're going have to make those calls either way. The only question is whether you make them before the plan ships or after it fails. Let me give you one here. I take over a company and the interim CEO walks me through the team. He gets to the one guy and says, that's the best guy in the building. And he was right. The man was a genius. Genuinely, best plans in the company. Then I did what I always do. I went location to location, shook hands, ran a town hall, took questions for about an hour. Then we cook hamburgers or play bags and have a Coke on the factory floor. And everywhere I went, they told me the same thing. They hated him. People were emotional about it. He wasn't a bad man. He was just so far ahead of everyone that he brought nobody with him. His pacing was wrong. I had to let him go, and he was devastated, angry. Couldn't believe it. And I told him, I think this is the greatest gift I could give you. You may be the most unhappiest person I ever met. It was kind of shocking, actually. Well, he did leave, and the temperature of that entire company went down. People instantly felt better. The smartest guy in the building was at the wrong pace. That's a talent call, and it's one nobody wants to make. The last 30 days, install the rhythm. Four rules. I call them the four commandments, and they define whether you actually have commands. Rule number one, no surprises. Bad news, relatives and fish all stink after three days. Your chair never hears something bad first in a board meeting. You want to tell him beforehand. Two, be on pace. Too fast, you leave everyone behind you and you're doing it alone. Too slow, you're the bottleneck. Every quarter has a gate. And you know by day 30 whether you're through it, not day 85 when you're building the deck. Number three, be data driven. Under 25% of the data, you're guessing. waiting for 80, you're probably too late. The work lives in the gray middle, the ambiguity, and that's the job. Get comfortable with it. Number four, results matter. Someone's going to say we did the best we could, and we are not a best effort company. Bat 300 in baseball, and you're in Cooperstown. Bat 300 here, you're probably gone. And the mechanism that holds all four, a monthly business review run against a bridge, not against a narrative. A narrative review is where people explain what happened. A bridge review is where you compare each lever to what it was supposed to produce and look at the variance. One produces a story, the other produces a counter measure. Here's what nobody expects: the micromanagement stops. That operating partner shows up with your operating reviews, isn't being controlling. He's managing an information deficit. He can't see inside the company, so it comes closer to look. Give him variance data on the fixed cadence and the deficit columns, and he goes away. You get your calendar back, which means you get to run the company, which is what you wanted anyway. Now let me put a number on it. Let's do the math. Well, here's what the 100 days is worth. Say your gap is six million of EBITDA. At your multiple, that's about $60 million of enterprise value. That's what your board is measuring, not your effort. They don't care about the effort, they care about results. And if you hold one to three percent of equity on a $500 million deal returning two and a half times, your stake is somewhere between three and nine million dollars at exit. Now put your name on it. If you hold 1 to 3% of equity on a $500 million deal, returning two and a half times, your stake is somewhere between three and nine million dollars at exit. And it's zero if you're replaced in month 14. The 70% isn't a statistic about other CEOs. It's a coin flip on your number. So back to where we started. The books say spend 90 days listening. I understand why that advice exists. It's polite. It's low risk, and it's never once produced a document the board could audit. That doesn't mean you shouldn't go listen. It just means you don't need 90 days of listening. You need a hundred days and four documents. 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 by day 101. What changes is that you now can defend it. You understand it. You can walk into a room full of people who do this math for a living and show them arithmetic instead of a story. And most people in that chair never can. One more thing, and I mean it. An excellent plan nobody follows is useless. An okay plan that everyone buys into, you can conquer the world with it. The hundred days isn't really about the documents. It's about whether the people in your building believe into them. Do they buy in? Are they going to follow it? Here's the roadmap to the 100 days. Day 1 to 14, reconstruct the number and get it signed. Days 15 to 45, earn the right to grow. Then build the bridge. Days 46 to 70, one name on every lever and pay them for it. Days 71 to 100, install the cadence and run the first review. Four gates, four documents, that's the roadmap. If you want to start it, start it where it starts. Run your own numbers at billcanady.com/lbo-calculator/. Or use the link below. Five inputs off your CIM, about nine minutes, free, and you'll get a seven-page report with your required exit EBITDA — the gaps today. fair warning, a lot of people don't like what comes back. That's the whole point. Better you find out today than your board finds out in March. Okay, we like progress over perfection here. Now go run the numbers. Don't forget to watch the next episode in this series. Most people assume everything I just described is for the person who took the seat last week. the bigger problem and the one I get caught about most is the plan that was fine two years ago and has drifted quietly. That's next.