Private equity investors and entrepreneurs: How to keep companies on the right path


Originally published in American City Business Journals

By Jay Tankersley

Among private equity investors, few articles of faith are as entrenched as the “100-day plan.” But despite becoming such an established tenet, 100-day plans often fail and lead to sleepless nights for investors.

The reason: Many (maybe most) entrepreneurs are vastly better at vision than execution — and that’s a fact we all seem to forget.

This disparity raises the question of what to do about this unfortunate Groundhog Day of disappointment.

Conventional wisdom holds that the first few months following an equity infusion must be the subject of a focused drive to achieve quick wins, shake up the culture, make strategic hires and set ambitious goals. A PE firm frequently will help lay the groundwork for that opening sprint, only to realize, six months or a year in, that the company has somehow fallen off the rails.

It’s not what makes up your 100-day plan that needs a fundamental rethink. It’s the 100-day plan itself.

Many portfolio companies don’t execute well because they’ve never had to do it before. The muscle memory of many entrepreneurs is built around scrappy adaptation and “MacGyver”-like innovation — not building an execution engine and Jack Welch-like process steamroller.

Which means the creation of a 100-day plan is all well and good, but some kind of execution oversight and assistance is a necessity.

More often than not, PE investors bring copious amounts of strategy and industry insights to their portfolio companies, even though most entrepreneurial companies are long on those skills already. But rarely do investors show up with tangible insights and tools that enable their portfolio companies to become execution masters.

Expecting entrepreneurs to leverage outside investment and grow as quickly as possible is a great way to destroy value. Companies need clear accountability and an execution strategy to help them transition from a scrappy bootstrapped company to a highly efficient and scalable organization.

There’s a way to turn the vaunted 100-day plan into a long-term strategic approach to transforming a company, and it starts with four key points:

Change the cadence

The big mistake investors and management make is thinking of the 100-day plan as a course reset and that the ship then sails to its destination. But to extend the nautical metaphor, if you are not constantly checking your course you can easily get lost.

As a business, it is far better to think about where you want to go and then break it down into bite-sized increments. Running a company is not a sprint; it’s a marathon.

After establishing a 100-day plan, why not re-program yourself to ask: “What do I have to do in the next 90 days to start making progress on that? And then what do I have to do in the next 90 days after that?”

Measure what you’re aiming for

Say you want to build a $100 million business that was bought for $50 million. If you are not measuring activities or the leading indicators for the results you want, you are not going to get there.

You don’t want to get to the end of the third quarter and discover you’re off track. But if you’re measuring the activity consistently, then you can self-correct before you see the reflection on the scoreboard.

Focus on what will actually grow the business, whether that’s sales calls or units of production.

Create a real partnership

The investors and the management team have to get together in a constructive way to monitor how they’re doing and track progress. These plans are not just tools with which to beat the management team over the head. There need to be regular meetings each quarter after the first 100-day plan where the investor group and leadership team reconnect and reflect on what has been learned in order to set the next 90-day plan.

Keep checking for alignment

I know it sounds simple, but so often these 100-day plans simply get ignored, and then the company starts to drift. Or maybe the head of sales has a different vision from the CEO, whose ideas are a little bit different than the CFO’s.

So, once you make that 100-day plan, it’s important to continually reflect on that strategic direction and remind ourselves, how are we going to get there? It’s a living, breathing document of which you as an investor group or you as a leadership team must take ownership.

Achieving those objectives takes sharp delineation of duties and accountability, and internal communications and collaboration that closely measures progress.

It’s the investors’ job to encourage the management team to consistently put such systematic measures in place to ensure that the rigor of the initial 100-day plan stays in place right through the exit some number of years later.

Private equity firms, obviously, don’t need to manage the operations of their portfolio companies. But they should be a full partner to ensure that there is a consistent focus on execution to hit agreed-upon targets.

Jay Tankersley is the Chief Investment Officer of TF Investors and a Professional EOS Implementer in Denver.