A viability plan is not a theoretical exercise: it is the tool that determines whether an investor bets on a distressed company or passes. We detail what it should contain, what mistakes to avoid, and what the investor is really looking for.
Every year at Blue Mountain, we receive dozens of viability plans from distressed companies. Of every ten we analyse, we invest in one. The main reason for rejection is not that the companies lack potential — many do — but that the viability plans presented to us are not credible, are poorly structured, or do not answer the questions an investor needs to resolve before committing capital.
This article explains what a viability plan should contain to be taken seriously by an investor, what mistakes to avoid, and what we are really looking for behind the numbers.
A viability plan is a structured document that demonstrates that a company in financial difficulties has a viable business at its core and a credible path to restoring profitability and financial sustainability. It is not a business plan (which is forward-looking and aspirational) — it is a rescue document (which is diagnostic and realistic).
One to two pages that clearly state: what the company does, why it is in difficulty, what the proposed solution is, how much capital is needed, and what the expected return looks like. If the executive summary is not compelling, the rest will not be read.
A clear, honest analysis of why the company is in financial difficulty. This must go beyond symptoms (lack of cash) to root causes (loss of a key customer, overexpansion, margin erosion, excessive debt, management failure). Investors are experienced enough to distinguish between genuine analysis and excuses.
This is the heart of the plan. It must demonstrate that the underlying business — stripped of its financial problems — is viable. Key evidence includes: the company’s competitive position, customer loyalty, market fundamentals, operational capabilities, and unique assets.
A specific, time-bound, and measurable plan for restoring profitability. This should cover revenue stabilisation or recovery, cost restructuring, working capital optimisation, and capital structure repair. Each action should have an owner, a timeline, and a measurable impact.
Monthly cash-flow projections for the first twelve months and quarterly projections for years two and three. The projections must be built bottom-up (from specific actions and their expected impacts) rather than top-down (from desired outcomes). Sensitivity analysis showing the impact of key assumptions changing is essential.
A clear specification of how much capital is needed, what it will be used for, and what structure is proposed (equity, debt, convertible instruments). The use of funds must be detailed and credible.
An honest assessment of the management team’s capability to execute the plan. If changes are needed, they should be acknowledged rather than hidden.
Honesty. The most important quality. A plan that acknowledges problems, identifies mistakes, and presents realistic solutions is far more credible than one that minimises difficulties and overpromises results.
Bottom-up projections. We ignore top-down projections (“revenue will grow 15% because the market is growing”). We take seriously bottom-up projections built from specific actions with documented assumptions.
Quick wins. A credible plan identifies actions that can produce results within 30-90 days. If the entire turnaround depends on results that will materialise in twelve months, the cash position may not survive the wait.
Margin of safety. The plan should work even if some assumptions prove optimistic. If the viability depends on everything going right, it is not viable — it is hopeful.
Hockey-stick projections. Revenue that magically inflects upward in month six with no credible explanation. We see this in nearly half the plans we receive, and it is an immediate credibility killer.
Ignoring the causes. A plan that proposes solutions without diagnosing causes tells the investor that the problems will recur after their capital is deployed.
Omitting management responsibility. If the current management contributed to the problem, acknowledging this (and proposing remedies) is essential. Pretending that the difficulties are entirely external is not credible.
Unrealistic timelines. Turnarounds take time. A plan that promises profitability in three months for a company that has been deteriorating for three years is not credible.
A viability plan is the most important document in a distressed investment process. It is the tool that convinces — or fails to convince — an investor that the company is worth saving. The plans that succeed share common qualities: they are honest, specific, conservative in their assumptions, and built by people who clearly understand both the problem and the solution. If your company is in difficulty and you need an investor, the quality of your viability plan may be the single most important factor in determining whether you find one.
By Blue Mountain Capital
By Blue Mountain Capital
By Blue Mountain Capital
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