Published: Nov 01, 2019
Focus:
Insights
Mike Collis, Head of Portfolio at Maven, explains the importance of working to a 100 day plan in helping to identify key value drivers and create a sustainable road map for growth.
Many business owners will be familiar with the 100 day plan concept and may have used such a plan whilst working with an investor in the past. It is the blueprint which outlines the most urgent value-creation steps a business should take following investment by a private equity backer and provides an effective way for an investor to quickly establish a working relationship with management and ensure that expectations are aligned.
Plans can vary widely, but investors mainly use them in order to:
- Mop up various outstanding tasks and conditions which arose during the investment process. These can include practical actions such as the appointment of new auditors, changes in insurance arrangements and amendments to banking mandates.
- Implement agreed actions and improvements identified during the commercial, personnel and financial due diligence processes. Typical examples include making new appointments to key positions, changes in accounting policies or improvements in the provision of management information reports.
- Start the process of implementing the agreed growth strategy, which would cover critical commercial points such as the establishment of an overseas presence, major investment initiatives, closure of locations or divisions, new product development or the redeployment of resources.
It would be easy to view the 100 day plan as merely a glorified to do list following an investment. However, for most venture capitalists, experience tells them that these such plans play a much more important role in achieving target returns, where an investor will typically be looking for step changes in processes, efficiency, strategy and controls. It is an integral element in helping to deliver operational improvements which give the best chance of achieving a positive investment return.
Crucially, implementing the plan immediately after the deal has concluded provides the greatest likelihood of these positive changes being embraced as employees will be more receptive to change; the first 100 days following an investment can set the tone in terms of where attention should be focused. The 100 day plan can also provide an ideal forum to ensure investments start on a positive basis and set in motion a culture of urgency, change and achievement.
Raising development capital or undertaking a management buyout can be an exhausting, distracting and time-consuming process for any management team. Businesses can often be caught off guard as to how intense the process can become, which can cause the business to suffer due to a drain on time and attention. The 100 day plan is an important framework to help the management team refocus their efforts into managing the business and delivering on the plan.
More specifically:
- The plan provides focus to the senior management team to ensure tasks are allocated and delivered.
- It lays down the expectation that changes will be made and makes clear that all senior managers are signed up to playing their part in delivering those changes.
- From the outset the plan helps to determine the tempo and momentum for the business, laying out where actions are required, where changes need to be implemented and when the strategy should be put into motion.
- It is common practice for a private equity investor to appoint a new non-executive chairman to the board to assist with the direction and delivery of the strategy. The 100 day plan provides a useful basis for the new chairman to begin working with the senior management team in setting tasks, establishing expectations and installing a culture of delivery within the business.
In summary, the achievements of the first three months in the life of an investment can have a significant impact on the future development of the business and the success of the investment. Regardless of whether the plan is executed to the letter, it is the process of setting out clear objectives and goals which focus minds following the intensive investment and due diligence process. The 100 day plan is a powerful tool to establish expectations, affect change, create momentum and set the course and direction of any business. If designed and implemented effectively, it is much more than a “to-do” list.
