restructuring-guide skill

---
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

1. **Structure follows strategy** - Decide what you're doing, then organize for it
2. **Minimize layers** - Fewer layers = faster decisions
3. **Clear ownership** - Every important thing has one owner
4. **Right-size functions** - Match resources to priorities
5. **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:**
- [ ] Consult employment lawyer
- [ ] Review investor agreements
- [ ] Understand creditor obligations
- [ ] Check director duties
- [ ] Review contracts for termination provisions

**Financial:**
- [ ] Calculate total wind-down cost
- [ ] Prioritize creditors
- [ ] Plan for final payroll
- [ ] Handle benefits termination
- [ ] File final taxes

**People:**
- [ ] Severance plan
- [ ] Communication plan
- [ ] Reference policy
- [ ] WARN Act requirements

### 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 tactics
- **`references/winddown-checklist.md`** - Complete shutdown checklist