| name | Restructuring Guide |
| description | This skill should be used when the user asks about "company restructuring", "organizational restructuring", "turnaround", "cost cutting", "runway extension", "burn reduction", "bridge financing", "winddown", "shutdown", "acqui-hire", "selling the company", "company sale", "M&A from sell side", or discusses major organizational changes to save or restructure the company. |
| version | 0.1.0 |
Restructuring Guide
Overview
When a company faces financial distress or needs major organizational change, founders must navigate complex decisions quickly. This skill provides frameworks for restructuring, turnaround, and when necessary, winddown.
Assessing the Situation
The Financial Health Check
| Metric | Healthy | Warning | Critical |
|---|
| Runway | 12+ months | 6-12 months | <6 months |
| Burn multiple | <2x | 2-3x | >3x |
| Revenue trend | Growing | Flat | Declining |
| Cash conversion | Positive | Break-even | Negative |
The Severity Scale
Level 1: Optimization Needed
- 9+ months runway
- Business model works, needs efficiency
- Response: Optimize spend, extend runway
Level 2: Restructuring Needed
- 6-9 months runway
- Need meaningful cost reduction
- Response: Cut costs, possibly reduce team
Level 3: Turnaround Needed
- 3-6 months runway
- Business model may need change
- Response: Major restructuring, pivot consideration
Level 4: Survival Mode
- <3 months runway
- Need immediate action
- Response: Emergency measures, consider all options including winddown
Cost Reduction Playbook
The Cost Reduction Hierarchy
Cut in this order (least painful to most painful):
Level 1: Easy Wins
- Unused software subscriptions
- Over-provisioned infrastructure
- Unnecessary contractors
- Travel and entertainment
- Office perks
Level 2: Optimization
- Renegotiate vendor contracts
- Rightsize infrastructure
- Consolidate tools
- Reduce marketing spend
- Defer non-critical projects
Level 3: Structural Changes
- Hiring freeze
- Compensation adjustments (salary cuts, deferred bonuses)
- Office space reduction
- Reduce contractor/temp workforce
- Pause matching on 401k
Level 4: Workforce Reduction
- Targeted layoffs (underperformers, non-critical roles)
- Across-the-board reduction
- Department elimination
- Executive team reduction
Cost Cutting Quick Reference
| Category | Typical % of Burn | Reduction Potential |
|---|
| Payroll | 60-80% | High (layoffs) |
| Office | 5-15% | Medium (sublease, go remote) |
| Software/Tools | 5-10% | Medium (audit and cut) |
| Infrastructure | 5-15% | Medium (rightsize) |
| Marketing | 5-20% | High (can cut quickly) |
| Travel/Entertainment | 2-5% | High (easy to cut) |
| Contractors | 5-15% | High (easy to cut) |
The 20/20/20 Rule
For companies in trouble, consider:
- 20% payroll reduction (thoughtful cuts)
- 20% non-payroll cost reduction
- 20% revenue increase focus (or at least protection)
Runway Extension Options
Without Cutting Costs
| Option | Pros | Cons |
|---|
| Bridge from existing investors | Fast, friendly terms | May be hard to get, dilutive |
| Revenue acceleration | No dilution | Takes time, may not work |
| Collect receivables faster | Immediate cash | One-time benefit |
| Defer payables | Preserves cash | Can damage relationships |
| Sell assets | Non-dilutive | Limited options for most startups |
Bridge Financing Considerations
From existing investors:
- Usually convertible note or SAFE
- May come with conditions (cost cuts, milestones)
- Signals they still believe
- Can bridge to next round
From new investors:
- Harder to get in distress
- May have aggressive terms
- Can provide fresh perspective
- May complicate next round
Bridge terms to watch:
- Discount (20-25% typical)
- Valuation cap (may be aggressive)
- Interest rate
- Conversion triggers
- Pro-rata rights
Organizational Restructuring
When to Restructure
Restructure the organization when:
- Strategy has changed significantly
- Current structure doesn't fit the work
- Too many layers/complexity
- Duplication of effort
- Key functions under-resourced
- After significant team reduction
Restructuring Principles
- Structure follows strategy - Decide what you're doing, then organize for it
- Minimize layers - Fewer layers = faster decisions
- Clear ownership - Every important thing has one owner
- Right-size functions - Match resources to priorities
- Plan for growth - Structure should scale (even if small now)
Common Restructuring Patterns
Consolidation:
- Combine similar functions
- Reduce management layers
- Shared services for support functions
Decentralization:
- Push decisions closer to customers
- Create autonomous teams
- Reduce central coordination
Function-to-Product:
- Shift from functional silos
- Create cross-functional product teams
- Embed specialists in teams
Simplification:
- Eliminate low-value activities
- Reduce complexity in processes
- Focus on fewer priorities
Turnaround Playbook
The 100-Day Turnaround Plan
Days 1-30: Assess and Stabilize
- Week 1: Cash assessment, immediate crisis management
- Week 2: Deep dive into financials, customer health
- Week 3: Team assessment, quick wins identification
- Week 4: Develop turnaround plan, get alignment
Days 31-60: Execute Critical Actions
- Implement cost reductions
- Shore up key customer relationships
- Address team issues
- Secure bridge financing if needed
- Begin strategic pivot if planned
Days 61-100: Build Momentum
- Show early results
- Reinforce new direction with team
- Communicate progress to stakeholders
- Refine plan based on learnings
- Set up for sustainable performance
Turnaround Leadership
What to do:
- Make decisions faster than normal
- Communicate constantly
- Be visible and accessible
- Focus on few priorities
- Celebrate small wins
- Be honest about the situation
What NOT to do:
- Hide in your office
- Avoid hard decisions
- Over-promise
- Blame others
- Ignore the emotional toll
Exit Options
When the business isn't working, consider:
Option 1: Pivot
- Redeploy team and capital to new opportunity
- See
/pivot-decision for detailed guidance
Option 2: Acqui-hire
- Sell primarily for the team
- Typical terms: $1-3M per engineer
- Investors usually get little or nothing
- Team gets jobs, some retention packages
Option 3: Asset Sale
- Sell technology, customer relationships, IP
- May not cover investor preferences
- Faster than full M&A
Option 4: M&A (Full Sale)
- Find strategic buyer
- Takes 3-6 months typically
- Need advisor for significant deals
Option 5: Orderly Winddown
- Shut down operations
- Return capital to investors (if any)
- Handle obligations professionally
Option 6: Assignment for Benefit of Creditors (ABC)
- Alternative to bankruptcy
- Assign assets to trustee
- Trustee liquidates and distributes
Option 7: Bankruptcy
- Chapter 7 (liquidation) or Chapter 11 (reorganization)
- Usually last resort
- Significant legal costs
Winddown Guide
If you decide to shut down:
Pre-Winddown Checklist
Legal:
Financial:
People:
Winddown Timeline
4 Weeks Out:
- Finalize decision
- Inform board
- Engage legal counsel
- Begin planning
2 Weeks Out:
- Inform leadership team
- Prepare communications
- Plan logistics
Announcement Day:
- Inform all employees
- Begin customer notification
- Handle press if needed
Weeks 1-4:
- Wind down operations
- Transition customers
- Complete employment obligations
- Settle vendor obligations
Weeks 4-12:
- Final asset disposition
- Final legal filings
- Close corporate entity
Communicating a Shutdown
To employees:
"I have difficult news. We've made the decision to wind down the company. This wasn't the outcome any of us wanted, but after careful consideration, it's the right decision. Here's what this means for you... [severance, timeline, support]."
To customers:
"We're writing to inform you that [Company] will be ceasing operations on [date]. We're grateful for your business and want to ensure a smooth transition. Here's what you need to know... [timeline, data, alternatives]."
To investors:
"I'm writing with difficult news. After careful evaluation, we've decided to wind down operations. Here's the situation... [what happened, what's left, what the process will be]."
Additional Resources
For detailed guidance, see:
references/financial-restructuring.md - Detailed financial restructuring tacticsreferences/winddown-checklist.md - Complete shutdown checklist
