Full Transcript for Ep 27: Signals Before the Storm - Spotting Trouble Early

00:02:07,293 --> 00:02:10,964 And the worst thing that can happen is leadership taking their eyes 40 00:02:11,005 --> 00:02:13,967 off the ball of running the business. 41 00:02:13,967 --> 00:02:17,178 So I can come in as that niche specialist, 42 00:02:17,220 --> 00:02:22,350 focus on the transitional issues, help them develop a strategy, 43 00:02:22,642 --> 00:02:26,020 help them develop an implementation plan, 44 00:02:26,020 --> 00:02:29,023 do the implementation if they so choose. 45 00:02:29,065 --> 00:02:33,444 But that way they can go back to spending 80% of their time on the core 46 00:02:33,444 --> 00:02:38,491 business, working with customers, with keeping sales and revenue going. 47 00:02:38,533 --> 00:02:38,908 Right. 48 00:02:38,908 --> 00:02:44,372 Like that's that's kind of the, you know, where most of our owners spend their time 49 00:02:44,706 --> 00:02:48,626 is, yeah, let's say making sure that things are being sold 50 00:02:48,626 --> 00:02:52,380 and produced in whatever capacity their company does that. 51 00:02:53,506 --> 00:02:55,508 And it can be 52 00:02:55,508 --> 00:03:00,054 distracting to, to do other things, and it's distracting it 53 00:03:00,054 --> 00:03:03,099 in the area of expertise that they generally have little to 54 00:03:03,099 --> 00:03:06,978 no experience and would preferably never experience again. 55 00:03:07,020 --> 00:03:08,771 Right. Right. 56 00:03:08,771 --> 00:03:10,190 So that's that's the hope. 57 00:03:10,190 --> 00:03:10,773 You come in. 58 00:03:10,773 --> 00:03:13,109 You start the project, you finish the project, and they're done. 59 00:03:13,109 --> 00:03:16,112 Right. That you repeat business. 60 00:03:16,654 --> 00:03:18,072 That's good. 61 00:03:18,072 --> 00:03:21,951 But referrals you get because you've come in and fixed something. 62 00:03:21,993 --> 00:03:24,996 I live and die on my referrals. Of course. 63 00:03:25,038 --> 00:03:25,330 You know. 64 00:03:25,330 --> 00:03:28,666 And you know, I as I tell customers, 65 00:03:28,708 --> 00:03:31,669 you know, I'm not here to bill you $2 million. 66 00:03:31,669 --> 00:03:34,672 I'm here to earn a good reference. 67 00:03:34,672 --> 00:03:37,383 So you go back and tell my referral source. 68 00:03:37,383 --> 00:03:38,593 These guys did a great job. 69 00:03:38,593 --> 00:03:41,262 I would recommend them again. Absolutely. 70 00:03:41,262 --> 00:03:45,099 So as we're looking at, you know, people 71 00:03:45,099 --> 00:03:48,728 that are listening are business owners. 72 00:03:50,313 --> 00:03:51,731 If they're working 73 00:03:51,731 --> 00:03:55,526 on their revenue, on their sales, on their what 74 00:03:55,568 --> 00:03:59,781 what signals should they watch out for that 75 00:04:00,573 --> 00:04:03,576 there might be a transition in there 76 00:04:04,577 --> 00:04:07,664 or challenging time or a challenging time. Yes. 77 00:04:07,664 --> 00:04:12,210 What what I like to regularly promote is good 78 00:04:12,210 --> 00:04:15,588 financial, administrative hygiene. Okay. 79 00:04:15,630 --> 00:04:19,467 And what I mean by that, which we'll take care of a lot of issues. 80 00:04:19,759 --> 00:04:23,179 So every company, big ones as well as small ones, 81 00:04:23,304 --> 00:04:25,974 you know, should have a 3 to 5 year strategic plan. 82 00:04:25,974 --> 00:04:30,270 Don't have to update it every week or every month or even every six months. 83 00:04:30,270 --> 00:04:35,149 But once a year, lay out that 3 or 5 year plan so that if you decide 84 00:04:35,149 --> 00:04:38,945 I want to be here in five years, I need to be hearing three years. 85 00:04:38,945 --> 00:04:40,780 I need to be here in one year. 86 00:04:40,780 --> 00:04:43,908 And it really comes down to what do I need to start doing tomorrow morning? 87 00:04:43,950 --> 00:04:44,826 Right. Okay. 88 00:04:44,826 --> 00:04:47,912 And the second thing is, you know, 89 00:04:47,954 --> 00:04:51,791 retaining a senior financial officer, that can be your comptroller. 90 00:04:51,791 --> 00:04:55,503 It can be a CFO who's who? 91 00:04:55,545 --> 00:04:57,380 You really have confidence. 92 00:04:57,380 --> 00:05:03,386 They you know, you need to treat that CFO or a controller as a non-equity 93 00:05:03,636 --> 00:05:09,350 partner, junior partner in the business who's not afraid to speak truth to power, 94 00:05:09,684 --> 00:05:10,184 you know, 95 00:05:10,184 --> 00:05:11,269 because they may not 96 00:05:11,269 --> 00:05:14,272 be the hero of the business because they're not producing a product. 97 00:05:14,522 --> 00:05:16,482 They're not selling and booking orders. 98 00:05:16,482 --> 00:05:19,819 There are a lot of overhead, but they're the one who 99 00:05:20,153 --> 00:05:24,866 they're the ones who are going to bring and highlight issues and problems to you. 100 00:05:25,033 --> 00:05:30,246 And they need to have credibility, and they need to have the confidence 101 00:05:30,246 --> 00:05:34,042 that they can speak to you about truth of what's going on. 102 00:05:34,208 --> 00:05:38,880 So if you're if you have the discipline to do that 3 or 5 year 103 00:05:38,880 --> 00:05:43,176 strategic plan once a year, as well as producing an annual budget, 104 00:05:43,176 --> 00:05:46,804 including a balance sheet, you know, running a small business, 105 00:05:46,888 --> 00:05:48,306 not just how much cash 106 00:05:48,306 --> 00:05:51,559 comes in the right pocket and how much cash goes out the left pocket. 107 00:05:52,268 --> 00:05:54,729 But it really is a budget and a balance sheet. 108 00:05:54,729 --> 00:05:57,815 And then looking at it monthly to say. 109 00:05:57,857 --> 00:06:00,610 Am I on track or off track? Yes. 110 00:06:00,610 --> 00:06:06,324 And if I'm off track, how am I remediating right, what I need to do? 111 00:06:06,324 --> 00:06:08,326 And while you, Mr. 112 00:06:08,326 --> 00:06:12,288 CFO, may be out selling or

developing the next product iteration 113 00:06:12,288 --> 00:06:17,627 and and carrying the flag, you want your CFO to be in the skunkworks 114 00:06:17,752 --> 00:06:21,297 saying, oh, salesman number two in region. 115 00:06:21,339 --> 00:06:22,090 You know, right. 116 00:06:22,090 --> 00:06:25,093 23 is a problem. You know, has your 117 00:06:25,259 --> 00:06:28,513 has the district manager or the VP of sales mentioned it to you? 118 00:06:28,638 --> 00:06:30,139 And the answer is likely no. 119 00:06:30,139 --> 00:06:30,598 Right. 120 00:06:30,598 --> 00:06:33,267 Well, and you know, we we talk about that. 121 00:06:33,267 --> 00:06:38,856 And for whatever reason within our company it's become a gas guy and a breaks guy. 122 00:06:39,107 --> 00:06:42,068 Right. So you need one of each. 123 00:06:42,068 --> 00:06:45,238 You need somebody that's go go go go go go go go go. 124 00:06:45,238 --> 00:06:49,075 And somebody that stops and says, but wait, 125 00:06:49,784 --> 00:06:52,245 have you thought about did you see that? 126 00:06:52,245 --> 00:06:54,956 Like, there's got to be to. Yes. 127 00:06:54,956 --> 00:06:58,835 You can't just guy has to be able to speak truth. 128 00:06:58,876 --> 00:07:00,962 Correct. Correct. 129 00:07:00,962 --> 00:07:07,301 If he doesn't, then you become reactive when you look up and you wrote payroll 130 00:07:07,301 --> 00:07:09,929 and there's nothing in the bank to cover it. 131 00:07:09,929 --> 00:07:13,433 Right. Worst case scenario. 132 00:07:13,516 --> 00:07:13,891 Right. 133 00:07:13,891 --> 00:07:17,770 Like, that's that's probably worst case cases before. 134 00:07:18,521 --> 00:07:18,855 Yeah. 135 00:07:18,855 --> 00:07:22,233 I can describe one well-known situation. 136 00:07:22,233 --> 00:07:25,570 It was a chocolate manufacturer in Queens. 137 00:07:26,571 --> 00:07:27,447 I got the 138 00:07:27,447 --> 00:07:30,450 call from the bank that said I put you on the list. 139 00:07:30,575 --> 00:07:31,367 You know, the next. 140 00:07:31,367 --> 00:07:34,745 You know, I called the company the next day, went out for an interview 141 00:07:34,787 --> 00:07:38,249 the following day, which was probably Wednesday. 142 00:07:38,291 --> 00:07:41,544 And on Thursday morning they called me and said, we want to retain you. 143 00:07:41,544 --> 00:07:44,547 And I said, 144 00:07:45,131 --> 00:07:47,717 if I'm not mistaken, I was the first person you interviewed. 145 00:07:47,717 --> 00:07:50,636 Have you interviewed the other two recommendations? 146 00:07:50,636 --> 00:07:52,263 I said, no, we like you. 147 00:07:52,263 --> 00:07:55,850 I said, okay, I will send you a document request list 148 00:07:55,892 --> 00:07:58,644 because a document request list is actually interesting. 149 00:07:58,644 --> 00:08:00,438 Yes, because it provides me. 150 00:08:00,438 --> 00:08:02,899 It provides me information about your company. 151 00:08:02,899 --> 00:08:08,779 And it also shows me the tools that you have to use to run your company. 152 00:08:08,779 --> 00:08:11,991 Yes. Whether you're looking at just statutory information, 153 00:08:11,991 --> 00:08:16,537 which is necessary for your bank's, IRS and and outsiders, 154 00:08:16,579 --> 00:08:19,499 or whether you're looking at managerial information, 155 00:08:19,499 --> 00:08:23,586 which is what you should be feeding your employees so that they can evaluate 156 00:08:23,586 --> 00:08:27,507 their performance margin, profit by customer, profit by skew 157 00:08:27,507 --> 00:08:32,470 or skew, group productivity in the factory and yield factors. 158 00:08:32,470 --> 00:08:36,265 So it gives me a sense of what you are using. 159 00:08:36,432 --> 00:08:40,853 And the guy says to me, no, you don't understand. 160 00:08:41,479 --> 00:08:43,481 We can't cover payroll tomorrow. 161 00:08:43,481 --> 00:08:46,317 You need to be here tomorrow. Oh. 162 00:08:49,070 --> 00:08:50,947 That's not good. 163 00:08:50,947 --> 00:08:54,242 I called the bank, you know, told them the situation. 164 00:08:54,242 --> 00:08:56,869 I said, sign my retainer later. 165 00:08:56,869 --> 00:08:58,746 Send me my, you know, my retention later. 166 00:08:58,746 --> 00:09:01,457 Send me my retainer. I'll be there tomorrow morning. 167 00:09:01,457 --> 00:09:05,378 We put together a six week cash flow projection. 168 00:09:05,378 --> 00:09:07,547 You know that Friday. 169 00:09:07,547 --> 00:09:12,343 I don't think we left the company until about 10 p.m., and, 170 00:09:12,552 --> 00:09:14,095 well, that's not a small order 171 00:09:14,095 --> 00:09:17,890 for somebody you've never really worked with other than an interview. 172 00:09:17,932 --> 00:09:19,517 That's right. 173 00:09:19,517 --> 00:09:23,896 And then, and on Monday morning, the bank funded payroll. 174 00:09:24,480 --> 00:09:25,648 Oh, good. 175 00:09:25,648 --> 00:09:30,570 Well, that's got down to a more orderly process of what was going on. 176 00:09:31,028 --> 00:09:34,865 I worked with that company for, you know, heavy, 177 00:09:34,865 --> 00:09:39,161 medium and light relationship probably over the course of a two year period. 178 00:09:39,287 --> 00:09:40,288 Okay. 179 00:09:40,288 --> 00:09:43,374 Of which their mandated transition was the bank 180 00:09:43,416 --> 00:09:47,295 asked them to find a alternative lender. 181 00:09:48,337 --> 00:09:48,963 Oh, that's not 182 00:09:48,963 --> 00:09:52,300 what you want to hear, but it's not unusual. 183 00:09:53,384 --> 00:09:53,926 Yeah. 184 00:09:53,926 --> 00:09:58,723 The bank, you know, and I couldn't tell whether it was because the company 185 00:09:58,723 --> 00:10:02,393 was underperforming or the bank was making a decision that they didn't 186 00:10:02,393 --> 00:10:05,479 like that business sector. 187 00:10:05,688 --> 00:10:08,190 Yeah. Which happens. 188 00:10:08,190 --> 00:10:10,610 Bank says I don't want to have construction. 189

00:10:10,610 --> 00:10:11,819 I don't want to have nursing homes. 190 00:10:11,819 --> 00:10:14,155 I don't want to have specialty chemicals. 191 00:10:14,155 --> 00:10:14,864 Right. 192 00:10:14,864 --> 00:10:16,699 They will ask the company to leave. 193 00:10:16,699 --> 00:10:21,037 Yes. Everybody agrees to the, you know, a reasonable amount of time 194 00:10:21,037 --> 00:10:25,249 and that, you know, that is a involuntary transition 195 00:10:25,583 --> 00:10:27,877 that the company will have to go through. Yeah. 196 00:10:27,877 --> 00:10:28,127 Yeah. 197 00:10:28,127 --> 00:10:31,088 Banks changed their appetites on industries. 198 00:10:31,088 --> 00:10:33,049 Yes they do. 199 00:10:33,049 --> 00:10:36,719 With more regularity than I think many of our owners realize. 200 00:10:37,970 --> 00:10:40,139 Look, look what happened to Webster. Yes. 201 00:10:40,139 --> 00:10:42,558 Is there an appetite on having an ABL business? 202 00:10:42,558 --> 00:10:43,559 Yes. Yeah. 203 00:10:43,559 --> 00:10:45,394 That's a fairly dramatic. 204 00:10:45,394 --> 00:10:47,813 Yeah, that that was a. Yeah. 205 00:10:47,813 --> 00:10:51,233 With all the bank roll ups in the market currently. 206 00:10:51,317 --> 00:10:54,320 Yeah. It's not surprising. 207 00:10:54,820 --> 00:10:59,241 So beyond chocolate, 208 00:11:01,202 --> 00:11:02,995 which sounds like a. 209 00:11:02,995 --> 00:11:07,833 Oh, I'm sure, I'm sure I'll say very grateful client 210 00:11:07,833 --> 00:11:10,836 that produces something that everyone eats is a good 211 00:11:11,629 --> 00:11:12,421 option. 212 00:11:12,421 --> 00:11:15,424 What other sectors have you worked in? 213 00:11:17,426 --> 00:11:19,136 In over 35 years? 214 00:11:19,136 --> 00:11:21,430 I've worked with over 150 clients. 215 00:11:21,430 --> 00:11:21,806 Okay. 216 00:11:21,806 --> 00:11:25,393 Worked in a lot of sectors anywhere from durable, 217 00:11:25,434 --> 00:11:29,897 durable medical goods, apparel, import. 218 00:11:30,981 --> 00:11:33,859 You know, top of the bed, 219 00:11:33,859 --> 00:11:39,573 gifts of merchandizing, distribution businesses, medical practices. 220 00:11:39,573 --> 00:11:44,161 And about five years ago I got involved in the education space. 221 00:11:45,621 --> 00:11:46,122 You know, it was 222 00:11:46,122 --> 00:11:49,250 very interesting for those of us who are local. 223 00:11:49,250 --> 00:11:53,170 I was, you know, please don't put an arrow in my heart. 224 00:11:53,212 --> 00:11:57,007 I was the guy who shut down the College of New Rochelle. Oh. 225 00:11:57,800 --> 00:12:00,511 Been in business for over 105 years. 226 00:12:00,511 --> 00:12:01,345 Right. 227 00:12:01,345 --> 00:12:07,852 And, you know, it was interesting how the education lawyers at the school's 228 00:12:07,852 --> 00:12:12,940 law firm were not effectively dealing with problems. 229 00:12:12,940 --> 00:12:17,611 There were four senior secured lenders, and they finally reached over the wall 230 00:12:17,653 --> 00:12:21,741 to the Insolvency and Bankruptcy and Creditors rights group. 231 00:12:21,741 --> 00:12:24,785 And that group said you need a crow 232 00:12:24,785 --> 00:12:27,788 in there tomorrow morning. 233 00:12:27,872 --> 00:12:30,875 And I was lucky enough to win the assignment. 234 00:12:30,875 --> 00:12:34,503 So I in the past couple of years, I worked with underperforming colleges 235 00:12:34,503 --> 00:12:38,466 as well as, you know, for profit entities. 236 00:12:38,716 --> 00:12:39,091 Okay. 237 00:12:39,091 --> 00:12:42,720 What I really try to teach them is they really are there. 238 00:12:42,720 --> 00:12:45,264 There is no such thing as a nonprofit. 239 00:12:45,264 --> 00:12:46,432 No. Not really. 240 00:12:46,432 --> 00:12:50,186 Profit still has to be profitable to the extent that revenue 241 00:12:50,186 --> 00:12:54,023 right to exceed expenses and the excess of the revenue 242 00:12:54,023 --> 00:12:58,110 over expense goes back into programing, not to shareholders. 243 00:12:58,152 --> 00:12:58,611 Right. 244 00:12:58,611 --> 00:13:03,199 And when I, when I worked with a nonprofit in Yonkers 245 00:13:03,365 --> 00:13:07,036 that provided daycare services, and I went to the head 246 00:13:07,036 --> 00:13:11,749 of the daycare program and I said, what's your utilization rate? 247 00:13:11,791 --> 00:13:17,713 And he said, well, we have about 65% of our seats filled. 248 00:13:17,963 --> 00:13:20,633 And I said, Holy cow. 249 00:13:21,675 --> 00:13:24,512 You know, and I'm thinking in the back of my mind, 250 00:13:24,512 --> 00:13:28,557 do I throw the CFO under the bus, the CEO under the bus, 251 00:13:28,557 --> 00:13:31,936 or the person who's running the daycare plan? 252 00:13:31,936 --> 00:13:34,688 I mean, it could be any of them, right? Right. 253 00:13:34,688 --> 00:13:38,400 Because 65% utilization in any 254 00:13:39,151 --> 00:13:41,821 arena for profit, not profit, is terrible. 255 00:13:41,821 --> 00:13:42,363 Right. 256 00:13:42,363 --> 00:13:45,449 You know, if you told me 85, that's good. 257 00:13:45,491 --> 00:13:48,953 You know, told me 95 said you're probably stretched a little too thin. 258 00:13:48,953 --> 00:13:53,290 But 65 in a community that had high needs. 259 00:13:53,290 --> 00:13:54,500 That was. 260 00:13:54,500 --> 00:13:57,294 Something's wrong. Something's wrong. Yeah. 261 00:13:57,294 --> 00:14:01,423 So utilization seems like a good a good thing to watch. 262 00:14:01,423 --> 00:14:04,426 But, if I'm an owner going. 263 00:14:04,426 --> 00:14:07,429 Okay, how do I not need Bert? 264 00:14:08,389 --> 00:14:09,974 Okay. 265 00:14:09,974 --> 00:14:11,809 Talk to your employees. 266 00:14:11,809 --> 00:14:14,603 You have employees, know everything 267 00:14:14,603 --> 00:14:20,609 that's going on, and I often tell the CEO the only secret that really exists in 268 00:14:20,609 --> 00:14:24,071 the building is

the possibility that you don't understand 269 00:14:24,071 --> 00:14:27,074 how much the employees know. 270 00:14:27,241 --> 00:14:32,580 If center floor production is slow and the guys are not getting overtime. 271 00:14:32,621 --> 00:14:34,456 They know it's slow. 272 00:14:34,456 --> 00:14:36,834 Customer service is getting too many calls. 273 00:14:38,127 --> 00:14:40,004 Accounts receivable and accounts payable, 274 00:14:40,004 --> 00:14:44,133 you know you know, are either overburdened or too slow. 275 00:14:44,216 --> 00:14:46,802 The scheduler is not very busy. 276 00:14:46,802 --> 00:14:51,390 Raw material and finished goods warehouses may not be properly stocked. 277 00:14:52,474 --> 00:14:55,686 So. And if people are concerned 278 00:14:55,686 --> 00:14:58,689 about getting terminated, 279 00:14:59,064 --> 00:15:03,027 the creativity that exists in the building will sink into the grass. 280 00:15:03,277 --> 00:15:03,569 Right. 281 00:15:03,569 --> 00:15:09,033 So it's really, really important for a CEO to regularly walk 282 00:15:09,033 --> 00:15:13,037 the building, regularly talk to the Army, 283 00:15:13,078 --> 00:15:17,666 because everybody in the Army knows who doesn't play well in the sandbox, 284 00:15:17,666 --> 00:15:19,335 what functions don't cooperate 285 00:15:19,335 --> 00:15:23,172 with each other and what departments don't run effectively. 286 00:15:23,297 --> 00:15:26,300 So so that's not always easy to do. 287 00:15:26,884 --> 00:15:29,053 I would say it's not easy to do. 288 00:15:29,053 --> 00:15:30,095 Period. 289 00:15:30,095 --> 00:15:33,098 Fair I was being nice. 290 00:15:33,474 --> 00:15:36,143 But if a 291 00:15:36,143 --> 00:15:38,812 if a CEO wants to be effective, 292 00:15:38,812 --> 00:15:43,692 no different than being the matriarch or patriarch of a big family, 293 00:15:44,109 --> 00:15:47,404 you know, you have to deal with all the family members. 294 00:15:47,488 --> 00:15:52,326 You know, in our personal lives, we have cousins who start rumors. 295 00:15:52,368 --> 00:15:54,328 We have cousins who keep secrets. 296 00:15:54,328 --> 00:15:57,748 We have ants who gossip too much with each other. 297 00:15:57,748 --> 00:16:00,376 We have uncles who don't want to contribute. 298 00:16:00,376 --> 00:16:03,337 We have kids who misbehave. 299 00:16:03,337 --> 00:16:06,674 And the matriarch of the patriarch needs to 300 00:16:08,217 --> 00:16:10,886 hurt those cats 301 00:16:10,886 --> 00:16:14,098 and make it a smooth running operation. 302 00:16:14,139 --> 00:16:17,559 And as much as many CEOs 303 00:16:17,559 --> 00:16:22,940 don't want to admit weakness or show any weakness to their employees, 304 00:16:22,940 --> 00:16:25,985 it's the reliance and communication 305 00:16:25,985 --> 00:16:31,031 to the employees that's going to improve on the identification 306 00:16:31,031 --> 00:16:35,285 of problems and symptoms, which is all makes sense. 307 00:16:35,327 -->

00:16:39,081 Key issue segregating problems and symptoms. 308 00:16:39,373 --> 00:16:43,043 If a CEO says to me, my biggest problem 309 00:16:43,043 --> 00:16:46,046 is I can't ship product to my customers. 310 00:16:46,755 --> 00:16:49,633 I will tell them that's not a problem. 311 00:16:49,633 --> 00:16:51,385 That's a symptom, right? 312 00:16:51,385 --> 00:16:52,636 Is the problem. 313 00:16:52,636 --> 00:16:55,556 Raw material is the problem. 314 00:16:55,556 --> 00:16:58,392 Finished goods inventory is a problem. 315 00:16:58,392 --> 00:17:01,228 Center floor production is the problem. 316 00:17:01,228 --> 00:17:03,897 Quality control or reject rate. 317 00:17:03,897 --> 00:17:09,278 You know, there can be a lot of problems, but in that kind of a situation, 318 00:17:09,862 --> 00:17:12,823 without customers, there is no company. 319 00:17:12,823 --> 00:17:16,744 So I will recommend that you need to throw resources 320 00:17:16,785 --> 00:17:21,290 at the symptom to stabilize. 321 00:17:21,457 --> 00:17:22,082 Right. 322 00:17:22,082 --> 00:17:27,087 And then begin figure out where the problem was underneath it. 323 00:17:27,129 --> 00:17:27,379 Yeah. 324 00:17:27,379 --> 00:17:31,008 You know, and sometimes that takes an outsider 325 00:17:31,341 --> 00:17:34,344 to help identify quickly 326 00:17:34,470 --> 00:17:38,849 what the what what the separation of problems and symptoms is. 327 00:17:38,891 --> 00:17:42,269 And identifying the resources that are necessary 328 00:17:42,269 --> 00:17:47,941 to put against the problems and symptoms and properly rank order 329 00:17:48,150 --> 00:17:52,654 the resources that need to be attended to and whether it's, you know, 330 00:17:52,738 --> 00:17:57,493 getting ready for a capital transaction and improving performance 331 00:17:57,743 --> 00:18:00,704 so that, you know, you know, a performance improvement 332 00:18:00,704 --> 00:18:04,792 consultant can come in and help clean up EBITDA 333 00:18:04,958 --> 00:18:08,045 and an investment banker can get a better multiple. 334 00:18:08,087 --> 00:18:08,462 Right. 335 00:18:08,462 --> 00:18:13,801 You know, I worked in a, in a where it was a family owned business. 336 00:18:13,801 --> 00:18:18,889 And there was one, let's say, errant family member 337 00:18:19,598 --> 00:18:23,852 who didn't perform as well as the other family members. 338 00:18:23,852 --> 00:18:28,482 And the company's overall results really significantly suffered. 339 00:18:28,482 --> 00:18:29,983 And we went in there. 340 00:18:29,983 --> 00:18:33,153 We did a, you know, a short assessment and said, 341 00:18:33,195 --> 00:18:37,699 we believe that we can find a million and a half dollars of EBITDA. 342 00:18:38,617 --> 00:18:42,204 You know, if, if given time to clean up the company. 343 00:18:43,330 --> 00:18:45,082 But you have to 344 00:18:45,082 --> 00:18:48,585 pull the deal from the marketplace for six months. 345 00:18:49,419 --> 00:18:50,712 So they did. 346 00:18:50,712 --> 00:18:55,300 That's worthwhile generally because that 1.5 gets a multiple applied to it. 347 00:18:55,342 --> 00:19:01,390 So if you can get performance up I can get the multiple up of course. 348 00:19:01,431 --> 00:19:04,643 And so you know we were able to make the changes within a three 349 00:19:04,685 --> 00:19:07,938 month period and prove it in the other three. 350 00:19:08,522 --> 00:19:11,525 The result of the sale transaction 351 00:19:11,692 --> 00:19:16,363 wildly exceeded expectations to the benefit of the investment 352 00:19:16,363 --> 00:19:21,243 banker who got pages bonus dollars one to the benefit of the family, right? 353 00:19:21,285 --> 00:19:26,248 Like the the family got the the increased value for the business 354 00:19:26,790 --> 00:19:31,461 as of that for, you know, the general performance improvement. 355 00:19:31,545 --> 00:19:35,924 I mean I think that that's always the case, right? 356 00:19:35,966 --> 00:19:39,887 If the the companies that perform better, get better multiples. 357 00:19:39,887 --> 00:19:42,764 Right. Like that's that's pretty standard to me. 358 00:19:42,764 --> 00:19:45,726 That's a you know the company was not in crisis. 359 00:19:45,726 --> 00:19:47,978 They were profitable okay. 360 00:19:47,978 --> 00:19:49,563 Nicely performing. 361 00:19:49,563 --> 00:19:53,734 But you know after a short evaluation we said yeah we can 362 00:19:53,775 --> 00:19:57,070 you know, we can help you through a transition. 363 00:19:57,863 --> 00:20:00,073 To significantly increase 364 00:20:00,073 --> 00:20:03,827 your success at the other end of this capital transaction. 365 00:20:04,036 --> 00:20:04,494 Yeah. 366 00:20:04,494 --> 00:20:08,332 That's very important sort of steps to go through. 367 00:20:09,333 --> 00:20:13,462 We hope everyone goes through that before we go to market. 368 00:20:13,503 --> 00:20:16,590 Sometimes it doesn't become real until we, you know, 369 00:20:16,632 --> 00:20:18,926 are ready to go to market, unfortunately. 370 00:20:18,926 --> 00:20:19,968 And we come to them and say, 371 00:20:19,968 --> 00:20:24,264 okay, this is this is where you're at, and this is where you want to be. 372 00:20:24,264 --> 00:20:26,308 And there's a gap here. 373 00:20:26,308 --> 00:20:29,061 So, right, we have to get from here to here. 374 00:20:29,061 --> 00:20:32,856 Do you want to do it by fixing it. 375 00:20:32,898 --> 00:20:35,067 Are you just tapped out. 376 00:20:35,067 --> 00:20:37,486 And you're too tired and you don't want to fix it, 377 00:20:37,486 --> 00:20:42,783 and you just want to be here, which sell it as is, for what it's worth now. 378 00:20:42,908 --> 00:20:47,537 You know, or put the elbow grease in. 379 00:20:47,871 --> 00:20:53,043 And that's why, you know, somebody like me relies on somebody like you to corral 380 00:20:53,085 --> 00:20:57,339 your clients to do what's best for them. 381

00:20:57,381 --> 00:20:57,631 You know? 382 00:20:57,631 --> 00:21:01,260 And sometimes somebody will say so as is. 383 00:21:01,260 --> 00:21:03,303 Where is. I don't want to be involved anymore. 384 00:21:03,303 --> 00:21:03,804 Yeah. 385 00:21:03,804 --> 00:21:06,974 Or, you know, other people will say, okay, let's hold our breath for six months, 386 00:21:07,015 --> 00:21:11,228 take it off the market, clean it up and keep moving forward. 387 00:21:11,436 --> 00:21:13,522 Well, I'd love to think it's always six months, 388 00:21:13,522 --> 00:21:16,024 but I feel like it's not always six months. 389 00:21:16,024 --> 00:21:17,693 Sometimes, as it is 390 00:21:17,693 --> 00:21:21,113 where it is, is better because the problems are more significant. 391 00:21:21,363 --> 00:21:22,864 For sure. 392 00:21:22,864 --> 00:21:25,450 So the the resources aren't available, right? 393 00:21:25,450 --> 00:21:27,619 Or the resources don't want to be committed. 394 00:21:27,619 --> 00:21:28,704 Correct? Correct. 395 00:21:28,704 --> 00:21:31,707 Or they've been doing this for 50 years. 396 00:21:32,374 --> 00:21:34,960 And frequently we walk in and people 397 00:21:34,960 --> 00:21:38,255 will say, I've owned this country for 25 years. 398 00:21:38,255 --> 00:21:41,717 What can you possibly tell me that I don't already know? 399 00:21:42,134 --> 00:21:45,637 And then we come up with surprising things. 400 00:21:46,013 --> 00:21:46,638 Yeah. 401 00:21:48,640 --> 00:21:50,434 Do we have time for a short funny thing? 402 00:21:50,434 --> 00:21:51,768 Sure. Okay. 403 00:21:51,768 --> 00:21:58,275 We we did a fish processing factory in Kodiak, Alaska. 404 00:21:58,317 --> 00:22:01,194 Oh, that sounds disgusting. Okay. 405 00:22:01,194 --> 00:22:03,864 They had four flash freezers. 406 00:22:03,864 --> 00:22:05,407 Okay, okay. 407 00:22:05,407 --> 00:22:10,829 The fish needed to be flash frozen for 45 minutes before processing. 408 00:22:11,038 --> 00:22:13,165 You know, after that. Oh, okay. 409 00:22:13,165 --> 00:22:17,711 Then it had to be flash frozen for 45 minutes before it could be packed off. 410 00:22:17,711 --> 00:22:21,006 And. Okay. Sent to the lower 48. 411 00:22:21,089 --> 00:22:23,759 Well, what they would do is they would load the racks, 412 00:22:23,759 --> 00:22:25,886 fill up freezer number one, load the racks. 413 00:22:25,886 --> 00:22:26,470 Philippines. 414 00:22:26,470 --> 00:22:29,014 Number two, freezer number three, freeze number four. 415 00:22:29,014 --> 00:22:32,017 And then start the 45 minute clock. 416 00:22:33,268 --> 00:22:35,187 But freezer wanted 417 00:22:35,187 --> 00:22:38,190 already been in there for a period of time. 418 00:22:39,066 --> 00:22:42,319 So we made the suggestion you need to buy 419 00:22:42,944 --> 00:22:46,990 three more sets of racks and three more clocks. 420 00:22:47,407 --> 00:22:47,866 Yeah. 421 00:22:47,866 --> 00:22:50,577 So that when freezer number one is filled, 422 00:22:51,536 --> 00:22:53,330 you start the clock on 45 minutes. 423 00:22:53,330 --> 00:22:53,663 Right. 424 00:22:53,663 --> 00:22:57,167 And you don't wait until freezer number four has completed 425 00:22:57,167 --> 00:23:00,212 45 minutes before you empty freezer number one. 426 00:23:00,462 --> 00:23:04,341 Well, that took less than 36 hours to figure out. 427 00:23:04,383 --> 00:23:07,386 And we, you know, basically, that strategy saved 428 00:23:07,594 --> 00:23:10,597 about a million and a half dollars of direct labor. 429 00:23:11,306 --> 00:23:14,726 Wow. Wow. 430 00:23:14,726 --> 00:23:18,438 I'll take every easy fix like that all day long. 431 00:23:19,106 --> 00:23:24,778 Another example went into a large factory and they had nine. 432 00:23:24,820 --> 00:23:27,072 It was 600,000ft factory. 433 00:23:27,072 --> 00:23:29,032 They had 19 forklifts. 434 00:23:29,032 --> 00:23:33,078 And we said, let's talk to the forklift dispatcher. 435 00:23:33,412 --> 00:23:34,413 Okay. Okay. 436 00:23:34,413 --> 00:23:38,333 And he would dispatch a guy out and the guy would do the task, 437 00:23:38,333 --> 00:23:42,045 and then he would come back and get the next instruction. 438 00:23:42,462 --> 00:23:45,257 And we said, why 439 00:23:45,257 --> 00:23:50,429 are you not creating backhaul strategy tickets 440 00:23:50,429 --> 00:23:55,016 for when you send the forklift out to the other end of the building? 441 00:23:55,100 --> 00:23:56,810 He completes his mission. 442 00:23:56,810 --> 00:24:00,772 Why is he not back hauling right in assignment 443 00:24:00,772 --> 00:24:03,775 versus coming back and waiting for the next ticket? 444 00:24:04,151 --> 00:24:06,695 I mean, or get a radio? 445 00:24:06,695 --> 00:24:07,779 Right. Well, yeah. 446 00:24:07,779 --> 00:24:12,367 The strategy to find a back haul strategy to do another task on the way back 447 00:24:12,409 --> 00:24:13,702 didn't exist. Right. 448 00:24:13,702 --> 00:24:16,329 The dispatcher said one and done. 449 00:24:16,329 --> 00:24:22,002 And basically we were able to reduce the fleet by 25%. 450 00:24:22,210 --> 00:24:27,507 Oh. Just by working with a dispatcher so that he developed the planning strategies. 451 00:24:27,507 --> 00:24:30,385 So the guys just didn't go in and come back. 452 00:24:31,761 --> 00:24:32,095 Yeah. 453 00:24:32,095 --> 00:24:33,889 It's six football fields. 454 00:24:33,889 --> 00:24:38,268 Somebody is just deadheading back from the other end of the building. 455 00:24:38,310 --> 00:24:39,728 It just kills time. Right. 456 00:24:39,728 --> 00:24:40,604 Yeah. Right. 457 00:24:40,604 --> 00:24:42,856 The the forklift driver doesn't mind. 458 00:24:42,856 --> 00:24:45,150 No, no. Absolutely not. Because he's not working. 459 00:24:45,150 --> 00:24:46,943 Right? Right. 460 00:24:46,943 --> 00:24:49,779 Because, you know, they're they're simple things out 461 00:24:49,779 --> 00:24:53,074 there as well as

complicated things to find. 462 00:24:53,325 --> 00:24:54,242 Well, excellent. 463 00:24:54,242 --> 00:24:57,579 But none of that avoids going back 464 00:24:57,579 --> 00:25:00,540 to good financial administrative hygiene. 465 00:25:00,999 --> 00:25:02,626 Do you have a budget? 466 00:25:02,626 --> 00:25:07,422 Well, but if you were doing good financial hygiene, you will find those 467 00:25:07,422 --> 00:25:11,843 things on your own instead of needing somebody outside looking in. 468 00:25:12,469 --> 00:25:14,262 Hopefully, yes. Right. 469 00:25:14,262 --> 00:25:15,180 Well maybe. 470 00:25:15,180 --> 00:25:16,139 Hopefully. But. 471 00:25:16,139 --> 00:25:19,100 Yes. Yeah. You should find a lot more. 472 00:25:19,100 --> 00:25:22,103 You know, and it's interesting. 473 00:25:22,938 --> 00:25:24,523 One of my funnier experiences. 474 00:25:24,523 --> 00:25:29,361 I enjoy doing a budget and a business plan with, 475 00:25:29,486 --> 00:25:34,908 you know, BP manufacturing, BP sales, CFO and CEO in the room, 476 00:25:35,158 --> 00:25:39,246 and especially if there's a little bit of stress going on. 477 00:25:39,287 --> 00:25:41,998 Nobody will call each other out. 478 00:25:41,998 --> 00:25:43,667 No. Not generally. 479 00:25:43,667 --> 00:25:44,292 Okay. 480 00:25:44,292 --> 00:25:48,505 And I, as the outside consultant, can watch the body language. 481 00:25:49,005 --> 00:25:51,508 So when the VP of sales says 482 00:25:51,508 --> 00:25:56,930 I can produce sales for this skew group at this margin, 483 00:25:56,930 --> 00:26:00,976 and I see the VP of manufacturing rolling his eyeballs. 484 00:26:03,019 --> 00:26:05,146 Wanting to call out, 485 00:26:05,146 --> 00:26:08,775 right, I can start asking probing questions. 486 00:26:08,817 --> 00:26:09,192 Right. 487 00:26:09,192 --> 00:26:11,069 That nobody else will ask. Yeah. 488 00:26:11,069 --> 00:26:14,614 Or when the VP manufacturing says I can. 489 00:26:14,614 --> 00:26:18,451 Do you know, this level of yield, this level of scrap, 490 00:26:18,451 --> 00:26:20,078 this may the unit per hour. 491 00:26:20,078 --> 00:26:24,374 And I watched the CFO rolling his eyeballs, 492 00:26:24,499 --> 00:26:27,502 you know, saying no, not really. 493 00:26:27,586 --> 00:26:30,630 See say not actually how I've seen it come out. 494 00:26:30,672 --> 00:26:32,007 It's very interesting. 495 00:26:32,007 --> 00:26:34,050 You know, it's it's funny. 496 00:26:34,050 --> 00:26:38,847 Not so funny that I can I can watch this body language 497 00:26:39,139 --> 00:26:43,685 and ask probing questions without embarrassing anybody. 498 00:26:43,685 --> 00:26:48,023 And we all get to the root issue and, you know, modify 499 00:26:48,064 --> 00:26:52,694 projections and, you know, into a more reality face. 500 00:26:52,777 --> 00:26:55,488 Take the rose colored glasses off. 501 00:26:55,488 --> 00:26:58,116 Look at the reality. The actuals. Right. 502 00:26:58,116 --> 00:27:01,745 And and then, you know, convincing companies to really do 503 00:27:02,329 --> 00:27:04,789 monthly or quarterly reviews. 504 00:27:04,789 --> 00:27:09,711 You know, to really look at the managerial performance 505 00:27:09,711 --> 00:27:14,174 and then, you know, in a lot of cases where if a company 506 00:27:14,215 --> 00:27:17,886 does not have a board of directors, I'll recommend 507 00:27:17,969 --> 00:27:22,265 building a board of advisors that meets on a monthly, semimonthly 508 00:27:22,265 --> 00:27:27,020 or quarterly basis and put the companies through its paces. 509 00:27:27,312 --> 00:27:31,608 You know, with, with outside, you know, even if not, you know, maybe one industry 510 00:27:31,608 --> 00:27:37,072 expert, a company lawyer, the company accountant, you know, 111 of the officers, 511 00:27:37,113 --> 00:27:40,992 you know, put together, you know, a board of advisors that 512 00:27:42,494 --> 00:27:43,995 it works for two functions. 513 00:27:43,995 --> 00:27:49,334 One is it requires the company to put together a presentation 514 00:27:49,542 --> 00:27:52,754 on that monthly or separate monthly basis, which 515 00:27:53,505 --> 00:27:56,216 forces them to focus on their own issues. 516 00:27:56,216 --> 00:27:59,135 Right. And highlights and services issues. 517 00:27:59,135 --> 00:28:03,682 And secondly brings in outside another size. 518 00:28:03,807 --> 00:28:05,266 Yeah. Outside view. Yeah. 519 00:28:05,266 --> 00:28:06,851 What's going on? Absolutely. 520 00:28:06,851 --> 00:28:12,190 And it's almost difficult to determine which of those is more important 521 00:28:12,190 --> 00:28:16,903 for the company to put together its own monthly board book. 522 00:28:17,529 --> 00:28:20,657 Well, they wouldn't do it if they don't have anybody to present it to. 523 00:28:20,699 --> 00:28:21,199 Right. 524 00:28:21,199 --> 00:28:24,202 Like, if you're just presenting it to yourself, it's just fluff. 525 00:28:24,369 --> 00:28:25,704 Well, and and like, 526 00:28:25,704 --> 00:28:29,999 being a CEO of a privately held company can be a very lonely job 527 00:28:30,166 --> 00:28:33,378 because a lot of people won't tell you what's going on. 528 00:28:33,420 --> 00:28:36,339 Right. Your banker can't tell you what's going on. 529 00:28:36,339 --> 00:28:40,218 Your lawyer may not be inclined because he's a lawyer. 530 00:28:40,218 --> 00:28:41,511 He's not a business guy. 531 00:28:42,804 --> 00:28:44,764 Your accountant is tithing to 532 00:28:44,764 --> 00:28:47,392 his fees, and he may not want to tell you what's going on. 533 00:28:47,392 --> 00:28:48,143 Correct. 534 00:28:48,143 --> 00:28:52,230 So being a CEO of a closely held 535 00:28:52,230 --> 00:28:55,734 or middle market company can be very lonely. 536 00:28:55,775 --> 00:29:00,113 And that's why I try to recommend a board of advisors or a board of directors. 537 00:29:00,363 --> 00:29:04,284 Voting authority is optional, but just have somebody to 538 00:29:05,076 --> 00:29:08,079 force you into good hygiene for the company 539 00:29:08,079 --> 00:29:13,334 and force you to review issues on a regular, routine basis to say, yes, 540 00:29:13,334 --> 00:29:18,840 we have these issues and we, you know, built these solutions around this issue, 541 00:29:18,840 --> 00:29:23,219 and we have a strategic plan with the money to carry out right. 542 00:29:23,595 --> 00:29:26,806 Plan. Right. Well, thank you for joining us. 543 00:29:26,848 --> 00:29:29,642 Lots of good wisdom in this in this talk. 544 00:29:29,642 --> 00:29:31,060 Appreciate that. 545 00:29:31,060 --> 00:29:34,147 The last question that always ask everyone if you got a do over, 546 00:29:34,189 --> 00:29:38,109 you can pick anything else besides what you did your entire career. 547 00:29:38,109 --> 00:29:39,152 What would you pick? 548 00:29:40,195 --> 00:29:43,198 I mean, investment banker. 549 00:29:44,532 --> 00:29:47,535 I'd probably be a lot wealthier. 550 00:29:50,580 --> 00:29:53,583 Getting deals done and working with people. 551 00:29:54,417 --> 00:29:57,378 You know, I do it because, 552 00:29:57,378 --> 00:30:00,715 you know, when I, when I look at a company, if there's 50 553 00:30:00,715 --> 00:30:03,718 employees, 500 employees or 1000 employees, 554 00:30:03,718 --> 00:30:07,180 if the one, 2 or 3 people at the top of the stack are screwing it 555 00:30:07,180 --> 00:30:11,726 up, I have enormous empathy for everybody downstream from that. 556 00:30:11,768 --> 00:30:12,185 Yeah. 557 00:30:12,185 --> 00:30:13,311 And, you know, 558 00:30:13,311 --> 00:30:18,024 whether I'm helping on a transaction or I'm helping to improve performance 559 00:30:18,024 --> 00:30:21,903 or I'm helping to avoid a bank default problem or whatever. 560 00:30:22,862 --> 00:30:25,824 You know, I like the 561 00:30:25,824 --> 00:30:28,785 my contribution to the social contract 562 00:30:28,785 --> 00:30:32,789 and my philanthropic concept, even though I'm getting paid. 563 00:30:33,581 --> 00:30:36,459 Excellent. Well thank you Bert. 564 00:30:36,459 --> 00:30:37,919 If you want to get in touch 565 00:30:37,919 --> 00:30:41,589 with Bert, his contact information is on the podcast page. 566 00:30:41,756 --> 00:30:43,091 Please reach out. 567 00:30:43,091 --> 00:30:46,094 Questions and comments are always welcome. 568 00:30:46,135 --> 00:30:46,594 I'm sure. 569 00:30:49,264 --> 00:30:54,561 Meet. Him. 570 00:30:56,229 --> 00:30:59,232 Maybe it. 571 00:31:00,692 --> 00:31:02,151 Means we.