#1294 Jeff Sands on How To Fix Any Business In 100 Days

Jeff Sands is the Founding Partner at Dorset Partners. He is also the author of a great book, “Corporate Turnaround Artistry: Fix Any Business in 100 Days.” In this conversation, we talk about Jeff’s experience turning around struggling businesses, crisis mode, hard decisions & hard conversations needed, vendor relations, debt, labor, and more. ======================= Cal.com is leading the charge of scheduling platforms in the open-source sphere, offering you the chance to harness the efficiency previously reserved for elite corporations and tech gurus. That's right, Cal.com is transforming sophisticated calendar management into an accessible tool for all via a user-friendly interface. Discover how countless users are optimizing their time in unprecedented ways. Use code “POMP” for $500 off when you set your team up with Cal.com. ======================= This episode is brought to you by Frec — Just as easy as investing in an ETF, Frec Direct Indexing can help you earn more by unlocking tax savings, no matter the market. Done for you, automatically. Check them out at ⁠⁠⁠Frec.com⁠⁠ ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode.

• 0:31Anthony Pompliano?

  Jeff Sands is the founding partner at Dorset Partners. He's also the author of a great book called Corporate Turnaround Artistry: Fix Any Business in 100 Days. In this conversation, we talk about all of Jeff's experience turning around businesses across America. We talk about how these businesses get into crisis, what you have to do when you step in, what are some of the hard decisions and hard conversations you have to have, and then he goes through a ton of stories of the different times that he's helped save businesses, helped save jobs in local communities, and helped actually get businesses back into a strong position. Throughout this conversation, you're going to hear all kinds of anecdotes, but also tons of lessons that you can take whether your business is struggling and you need to implement them today, or you can use these insights to actually implement into

• 1:14Anthony Pompliano?

  a healthy business to prevent you from ever getting into any sort of trouble. I really enjoyed this conversation. I learned a ton from Jeff, and I hope that you guys do as well. Here's my conversation with Jeff Sands.

• 1:25Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 1:49Anthony Pompliano?

  This episode is brought to you by Cal.com. What do I have in common with Chad Hurley from YouTube, Toby from Shopify, and Alexis from 776 and the co-founder of Reddit? We all use Cal.com instead of Calendly, and we are all early investors as well. Cal.com is leading the charge of scheduling platforms in the open source sphere, offering You the chance to harness the efficiency previously reserved for elite corporations and tech gurus. If you like to have your calendar organized and be able to have an efficient exchange when scheduling, but you love all of the benefits of open source technology, then Cal.com is for you. They are transforming sophisticated calendar management into an accessible tool for all via a user-friendly interface. You can customize it and you can make your

• 2:34Anthony Pompliano?

  calendar work for you. Use code POMP for $500 off when you set up your team with Cal.com today. Again, go to Cal.com, C-A-L dot com, and use code POMP to get $500 off when you sign up. Cal.com, an open source tool that allows you to take back control of your calendar, be efficient when scheduling, and make sure that no one can steal your time. This episode is brought to you by Freec. Historically, the wealthy had a hidden secret in investing. They would spend a lot of money and use very big teams to conduct tax loss harvesting. Tax loss harvesting is the timely selling of securities at a loss to offset the amount of capital gains tax owed from selling the profitable assets later. But now Freec is

• 3:19Anthony Pompliano?

  bringing this incredible advantage to any investor. They'll literally lower your tax bill regardless of how much money you have. They use state-of-the-art technology through a product called direct indexing to allow investors to invest in the S and P 500 while getting all the benefits of tax loss harvesting without the big bill. If you want to learn more, go check them out at freec.com. That's F-R-E-C dot com. I'm a big fan of the product and I even became an investor in the business. Freec.com. Go check them out today.

• 3:49Anthony Pompliano?

  All right, guys. Bang, bang. I've got Jeff here. Jeff, you are probably the number one turnaround artist in the United States, maybe even in the world. There's lots of crises that occur. Some of it's mismanagement and sometimes people just started a bad business, either a bad market, a bad business model, etc. When you see the crises, how do you determine whether the business can be saved or it's just a bad business and it deserves to die?

• 4:15Speaker 02

  You know, for sure, everybody says, oh, it's it's external factors. It's the industry. It's something else.

• 4:24Speaker 02

  And really, it's, you know, sort of manufacturing, you try to figure out what root cause is, try to get to the basis of that, you know, if it, if it really is industry-wide, I worked with a computer reseller recently, and according to him, the, all the manufacturers pulled back credit a couple of years ago, you know, so, okay, if that's true, and you're in trouble, what, what's, is everybody else in trouble? Is, are you the best performer? Did everybody else go out of business with this set of circumstances? What happened is that was universal, but then they, everybody hit this pivot point, like, my credit's gone, what do I do? They made a horrible decision, and went and got merchant cash advance money, and that's ultimately what's killing them. Forty-seven million dollar

• 5:07Speaker 02

  business, and, and there's just nothing left, because the MCAs are picking, picking them alive. The, so it's, it's really that, you know, you talk to the owners, and you just get a sense, you know, are, are they really committed? Are they goofballs? Are they, are, you know, do they have the wrong focus somewhere else? Those sorts of things.

• 5:30Anthony Pompliano?

  Now, when you've seen, I don't know, hundreds, maybe thousands of these crises at this point, I kind of think of it like you're the firefighter. The fire is blazing, someone's called you up and said, hey, we come put out the fire. What are the things that you see in the fire that would cause you to not want to go save it, right? Or like, what are the things that would turn you off from a situation? Is it people? Are there other things that are kind of the red flags where you're like, hey, even though I'm the best at what I do, I can't save that business, or I don't want to go spend time doing that?

• 5:58Speaker 02

  Um, in general, there's no set of circumstances that'll scare me off. Probably my most radical was I got a call from a bank, the CEO committed suicide yesterday.

• 6:12Speaker 02

  There's four felonies being investigated, revenues have fallen from forty-six million to six million, and about to go to zero, and I was in there next day running the business.

• 6:24Speaker 02

  Because as long as I can draw a clear line of all that fraud and all those felonies happened previous to me. And, you know, in that case, I reached out to the state attorney general and just said, hey, I just arrived. If you need to arrest anybody, you know, give me a call. I'll have them meet you in the parking lot. But we're running a clean ship here and we're trying to fix the business. So it's not so much circumstances. It's really the people. It's, you know, kind of if you, if you think of Alcoholics Anonymous or a CrossFit gym, it's the people who come in and really are ready to change their life and really are ready to go down a new path with passion and commitment. If I have somebody

• 7:06Speaker 02

  who's bullshitty dick dickin' around with like, oh, I think I want to lose weight. I'm tired of being 400 pounds. But, you know, you can tell if they're not serious about, why should I be more serious about fixing their problems than they are? We once had a guy who was drinking himself to death, locked himself in his apartment when he should have been at work, was out of options, called AA and AA said, we don't go and mug people with treatment. They have to come to us. And, and that's kind of me, you know, when somebody's ready to change in their heart, then, you know, they're my best client, I'm their best friend. But it's they've got to have that commitment. And there's a lot of

• 7:48Speaker 02

  people who sort of dilly-dally around the edges, but aren't, aren't ready to take that that plunge yet.

• 7:54Anthony Pompliano?

  So you wrote this book, Corporate Turnaround Artistry, Fix Any Business in 100 Days. And when I read this, I was like, I gotta talk to Jeff. Like this, this is a Bible, it almost seems like in terms of corporate turnarounds. It's almost 300 pages or about 300 pages. And my number one lesson from this was your job is to motivate people. Like there's all kinds of tips, tricks, you know, hacks, all these different things. But at the end of the day, you got to motivate people to actually want to fix these businesses. Can you give me a couple of examples of things that you've done to actually, when you walk in, there's the folks who kind of messed it up. And then there's the people who are going to stick around. What are the things you've done to motivate people that you kind of now use as part of your playbook?

• 8:32Speaker 02

  You know, I would say if you step back, if you gave everybody in the world the opportunity right now, today you can relive the most heroic moment of your life, or you can sit on the couch and take it easy, they're all gonna say, no, no, no, I want to go relive the most heroic moment in my life. And that probably involved a lot of sweat, some pain, discomfort, fear, all these things that no one really wants, but we do as humans, deep down inside, because we know it's it's worth it in the end. So I think everybody has that latent urge to run up, you know, charge up the hill and do something awesome. So for me, it's trying to define that. And, you know,

• 9:14Speaker 02

  take a union shop full of a bunch of tough old guys who've been working in a factory, that's pretty easy, because I just go in and talk to them like a high school football coach. And, you know, hey, listen, this got all screwed up. Y'all had a bit of this because you weren't working hard enough. But what we're gonna do is we're gonna work hard, we're gonna go kick ass. And you really need to motivate them. Everybody wants to go kick some ass somewhere. And you give them like, this is what we're gonna do, we're gonna go. And with a linear focus, people latch on to it. They love it. Now, I go into, you know, you take a pharmaceutical business, and I'm talking about let's do more with less, and they all want to do less with more. That's just the

• 9:56Speaker 02

  culture where everybody's kind of overpaid and taking it easy. That's a lot tougher. So you have to get their attention, you know, maybe it's shutting down a division, maybe it's firing their boss. But there's got to be some sort of thunderclap to get everybody's attention. And then, once they realize they're fighting for survival, some will leave because there's an easier path. But a lot will stick out and do their heroic battle to bring this business back, reclaim our pride, you know, and then you can leave. I worked with

• 10:30Speaker 02

  One guy who was quitting and I said, Bill, if you leave now, you're, it's going to haunt you for the next 20 years. He was like 60 and, and, and it's going to tear you up inside for 20 years. You're going to be a loser and you're going to know it and there's, you can bullshit your way around it, but you're going to know it in your bones. But if you stick it out here for six more months, we'll kick ass and you can walk out of here a winner with your head held high. You'll be a better grandfather and husband. And what do you have to lose? What the hell are you running home for? There's nothing there for you. You got to stay here. And, you know, I, I had like 30 seconds to make that pitch, but it stuck. It worked. Bill, Bill actually stayed for two years, but he totally kicked ass.

• 11:12Speaker 02

  We did a great job, saved the business and, and he went out a hero and everybody recognized him for that. And I, I think more than anything, that's what people want, deep down inside. They don't want comfort. They, they want, they want to do something cool.

• 11:28Anthony Pompliano?

  So I remember watching years ago, Marcus Lamonas, he had a TV show called The Profit. And one of my takeaways from watching that, although there was, you know, cool stories and cool businesses and stuff, was sometimes he showed up and they were like, oh my God, thank you, Marcus, for showing up and saving us. Other times he showed up and they were like, get the hell out. Like, we want nothing to do with you. What is the receptivity when you show up, right? You're, you're known as the turnaround guy. Like, are they excited to see you? Is it a mixed reaction? What has that been like?

• 11:55Speaker 02

  It, it's a mixed reaction. The screwballs definitely don't want me around. The, the people who, you know, the hard workers who feel oppressed do. And then there's sort of a middle road of people who sort of do in your belly. One speech I often give, and you didn't walk in to this business or whatever, 15 years ago with this shitty work ethic. You don't tell your kids. If your kids knew the shitty work ethic you're bringing in here every day, they'd be embarrassed for you. If your parents knew, they'd probably slap you. And you didn't walk in here like this. The culture brought you down. We're gonna fix the culture. And you gotta, you gotta bring the culture back up and the culture is gonna bring you up.

• 12:37Speaker 02

  And that's the book, that's the bulk of the people and, and they like that. They, again, they want to be part of a winning team and, um, and they're willing to, you know, people were raised right. People have a good work ethic. They know right from wrong. It's just that the culture hasn't required or demanded that of them in a long time and, um, and they're actually relieved and inspired when, when you do demand that of them because people, people want to perform at their best.

• 13:04Anthony Pompliano?

  That makes complete sense. Uh, we've talked a little bit about the internal, uh, changes that you have to go through. Uh, another thing that you talk about is one of the first steps, once you get inside of these businesses, is you immediately call up all the vendors and aggressively start renegotiating with them or trying to get some relief from them. Uh, it's not dissimilar from, you know, maybe a private equity firm like 3G is famous for, you know, being hyper, hyper aggressive with a lot of these vendor relationships. And so what is those conversations like? And what are some of the tactics that you've used? And now you say, hey, whenever I've got to renegotiate, these seem to really work.

• 13:37Speaker 02

  Me, and I walk into a tough situation because generally, um, payables are all aged. The vendors haven't been paid. And, um, and I, you know, ideally I don't want to pay them anytime too soon because I don't have cash and I want them to give me a lower price, which is probably impossible. So what I say is, here's a plan where you're gonna keep shipping us. We're gonna, we're eventually gonna deal with the past dues, but most importantly, I want to keep you as a vendor. I could replace you today, but I don't want to. I want to keep you as a vendor, but I need cash flow. I need, I need additional terms. I need, you know, this, that, or the other, some kind of grace from you. Once we solve the cash issue, then we're gonna go over to the P and L issue because the company is not profitable enough.

• 14:21Speaker 02

  Then I'm gonna really work you over for pricing and we're gonna make it fair, but I want the sharpest price you have, not, not the dullest price you have. And then, once we solve the profit issue, we're gonna go over and deal with the balance sheet. And that's where your past dues are, which we're freezing for the moment. Uh, and then we're gonna find a equitable way to deal with those.

• 14:43Speaker 02

  Worst case, we all know that bankruptcy, um,

• 14:47Speaker 02

  Provides the opportunity to work out debts to haircut or stretch or what have you. I don't want to do that. I'm not threatening it. But we all know that's an option. So after we get to solve the cash and then we solve the profits, then we're going to deal with the debts fairly.

• 15:03Speaker 02

  And we will have open conversations and see what the the company can afford to pay. And and you know, I'm thinking like every damn client I have right now, they just can't afford, even when we fix the company, they can't afford the balance sheet because they just have too much debt. And then it's really a conversation of, I mean, I got one right now. I can give you 20 cents. I can pay you off 20 cents on the dollar over four years, or we can just go into bankruptcy. You can get 10% over three years. It's it's your choice. But, you know, let's be friends. Why not work this out out of court? Keep the lawyers out of it and get you a higher recovery. But mathematically, you know,

• 15:45Speaker 02

  how can you show me how I can pay anymore? Here's our projections and

• 15:51Speaker 02

  emotionally they'll fight, but eventually the logic part of their brain takes over and and they say, yeah, I get it, unfortunately. And you usually have to go through several people in the organization and get the CFO or president, somebody who can really understand and their lawyer who says, yeah, kind of is what it is and we, you know, we need to accept this.

• 16:12Anthony Pompliano?

  Does it change?

• 16:13Speaker 02

  Or they fight, or they fight like hell and then my number one mission is to get rid of them. And, you know, and go give somebody else our profit. Or go allow somebody else to make profits on us for the next 10 years.

• 16:25Anthony Pompliano?

  Does it change at all when the vendor is a software vendor versus maybe somebody that's, you know, providing equipment or some other kind of physical economy type product?

• 16:34Speaker 02

  Yes, only because of the cloud. It used to be, you know, we buy software and they'd say, well, we're not going to service you. And like, fine, I'll call you when I need service, you know, I don't, I don't give my plumber a monthly retainer. Why the hell would I give you one? But now they have cloud access. They can just turn it off. So it's, it almost has become like a utility, you know, like the gas company. We just got to pay a monthly, maybe we won't, you know, we'll put the old balances on ice, but we've got to pay monthly

• 17:05Speaker 02

  either full or or partial, but it's, yeah, software has a lot more leverage than they used to.

• 17:12Anthony Pompliano?

  Now, one of the quotes that I've heard over and over again, that's probably one of my favorite quotes in business is that companies die by suicide, not homicide. And it's just them doing constantly stupid things. In the book, one of the really stupid things that you highlight is you say, Google IRS 941 prison. And you call it the dumbest crime in America. Explain what this is and then why do people fall victim to it?

• 17:39Speaker 02

  So a 941 is the, as an employer, you, you're a trustee for the withholdings for taxes from your employees, the employment taxes and whatnot. And, and all it does is I take it from your paycheck and I give it to the government. It's not mine to touch or take. But when companies get in trouble and CEOs get in trouble. I say, well, geez, there's a bunch of cash. Well, and I just use that today and we'll pass it on to the government in a couple of months.

• 18:10Speaker 02

  The problem is the IRS has made this the number one, the, the, the number one law to go after and punish. And when you Google IRS 941 prison, you'll find all these people who got, you know, found guilty and are in prison because they tried to play the 941 game. It's, you know, my, my first question is what the hell are you accomplishing? I mean, if you really have the miracle solution. Yeah, maybe it makes sense to take that risk if you really have the miracle solution. None of these people had the miracle solution. They were just hoping and dreaming and thinking, I'll rip off my employees in the IRS. To fund my delusional fantasy and eventually, you know, the, the order fairy will come around.

• 18:54Speaker 02

  Of course, there's records, you know, I always say, if you're going to rob a bank, go, go in with a ski mask because they don't know who you are. When you're doing like white collar bank crime, they, they know where the money went to. They have the accounts, they have the records, they have the EIN and numbers. Like there's no possible way you can outsmart that kind of crime. But people do it, it's impulsive. And it's, boy, the IRS just hammers on folks. So when I come in and find that we have to quickly deal with the IRS, make it known, come up with a payment plan and, and you know, stay away from their, their sharp knives.

• 19:33Anthony Pompliano?

  So you mentioned delusion and one of the things I immediately jumped to is there seems like there's a growing number of entrepreneurs who don't have what I would consider kind of just basic financial skills or understanding, read a P and L, read a balance sheet, understand how some of this works. And it feels like maybe those two things are related, like you get increased delusion, the less that you are well versed in kind of core, you know, accounting or financial metrics. Is that true in your experience where, you know, people just, if you don't understand the numbers, then dreams run wild and it leads you to ruin?

• 20:06Speaker 02

  Yeah, yeah, largely. Interestingly, people who really understand the numbers still delude themselves. It's just, you know, it's, it's, it's a human trait. But you're right, the further you are away from reality, which is the numbers, the further you are away from reality.

• 20:26Anthony Pompliano?

  So in the book, you say, quote, "Few executives have ever thought of themselves as a chief profit officer." But that's what the leader needs to be in a recovering company. So the CEO or executive is the chief profit officer in a recovering company. How's that different than a normal company or a growing company? Or should they always be the chief profit officer? Or is it specifically during that recovery period where it's essential?

• 20:47Speaker 02

  They should always be the chief profit officer and somebody should always be. I entered a company recently, the CEO is the, on his business card and email, chief visionary. The number two guy was chief something else ridiculous. And I say, listen, y'all got plenty of this vision stuff and y'all got plenty of that other stuff. What y'all don't have is profits or cash flow. And, and somebody's got to quit that stupid job that means nothing to me and become the chief profit officer, you know, but I mean, you see it. Who wakes up in the morning and thinks, I gotta go shave some pennies today and I gotta go add a couple basis points to my gross profit margin every day like they're a monk and

• 21:28Speaker 02

  it's the only thing that matters. People just don't do it. And, and, and if you don't do that when times are good, then you're going to end up where times are bad, you know, probably chances are over time. And, and it's just, it's like the most fundamental mindset in the world, but we kind of forget about it. And entrepreneurship and being executive and all that crap is so over romanticized.

• 21:58Speaker 02

  And it has, you know, and, and, and the romance has nothing to do with scraping pennies, but retiring or, you know, retiring with a big war chest has everything to do with scraping pennies.

• 22:11Anthony Pompliano?

  You are probably

• 22:12Speaker 02

  Very glamorous.

• 22:13Anthony Pompliano?

  Of course, you're probably the epitome of a wartime CEO. Uh, could you be a peacetime CEO? Like i- is it possible if you run a business that's not in trouble?

• 22:23Speaker 02

  Uh, somebody else could. I, I can't. Um, and, um, and I, and I think there's a third, you know, there's a startup CEO, which is a different breed as well. Um, and usually when we buy a business, I'll run it for the first hundred days and then, and then I think you need a one year person that kind of sets the foundation and really just starts doing reps and gaining momentum. We're going to do the basics over and over and over. And, and then the third CEO type would be the growth, uh, sort of return to normal and growth. And I think they're completely different. I can do the first two. Somebody else might be able to do the second two, but I can't. No, I'd be a complete failure as a peacetime CEO.

• 23:06Anthony Pompliano?

  Now, in reverse, could the peacetime CEO be the wartime CEO in your experience?

• 23:12Speaker 02

  Uh, occasionally, you know, these guys like Bezos or Zuckerberg that can take it from zero to gazillions. I don't understand how somebody can have both temperaments. Um, and they're extremely rare. There are people that can do both the peacetime and wartime, but, um, there, I, I'm not one of them. And this is an extremely rare bird that can. Um, and I'll tell you the worst thing in the world is trying to, is fixing a company, getting it right, falling, not in love, but really believing that you're on the right path. And then the results aren't showing up and you need to turn it around again. Emotionally, I have this break where I just struggle to go in

• 23:53Speaker 02

  and, and take apart the organization that I just built over the last two years. So I almost need somebody to come turn around me when I need a turnaround.

• 24:05Anthony Pompliano?

  Now, I asked a friend of mine, Lulu Misveri, one time about peacetime and wartime in communications. She said something to me that's just seared in my brain, which is there is no difference between peace and wartime. It is pre-war and post-war. And maybe that is what the Mark Zuckerbergs and the Jeff Bezos, right? They just, they're prepping for war and then they're kind of recovering from war and prepping for the next one.

• 24:28Speaker 02

  I guess, yeah, I, I, it astounds me that, you know, the same person that can get this, this little idea off the ground. You know, anybody who's been through a startup, like it is so hard. It's just to get momentum and then to be able to do that and then organ, you know, organize and manage a company with a hundred thousand employees. I, it's just two different universes to me, but the, the occasional rare bird can do it.

• 24:57Anthony Pompliano?

  There's another line in the book that really resonated with me, which is the bottom line is that a turnaround will be some formula of raising prices, cutting costs, streamlining operations and fixing bad habits. Can you give me an example of each one of these? And maybe we start with raising prices.

• 25:12Speaker 02

  Yeah, raising prices, um, you know, the banal is raising prices. The more aggressive is we've raised prices on, um, you know, so it's one thing. We're going to raise prices going forward. It's another to say we're raising prices on our whole backlog that we haven't even produced yet, but we're just going to add an extra 10% to that and go tell the customers. The, the more extreme version is calling customers and saying, hey, and I've done this. Hey, we're in a bit of a pinch. Um, two things, one, we need cash that you've got to pay us immediately, even though you have 60 day terms that you turn into 75. And the other is we're not profitable, so we're adding 10% to all the open invoices.

• 25:55Speaker 02

  So, um, all the invoices you have, add 10% to them and pay them today, or we're not shipping any further. That goes over like a lead balloon, but you know, if you have leverage, it works. And, and you, you know, I've saved businesses that way. Um, it upsets them, but a lot of companies would rather have a viable supplier than, um,

• 26:16Speaker 02

  That they're not. And if you have that kind of leverage, you can do it.

• 26:20Anthony Pompliano?

  Cutting costs. What about cutting costs? And what's maybe the most extreme situations you've been in there?

• 26:25Speaker 02

  You know, well, I mean, you know, it's the easy ones like you find. I remember this guy was billing 75 hours a week. So 35 hours a week in overtime and he had a 20 hour job. He was so bored that he started drinking on the job, became an alcoholic, crashed the the forklift, still didn't get fired. You know, so you go in like whammo, there's there's a bunch of costs that just got cut. You know, declare no more overtime without approval. And everybody fusses. I'm like, just come and talk to me. I'll prove sensible overtime. Nobody does because 90% of the overtime was BS.

• 27:05Speaker 02

  Then, you know, deeper into cost, you know, put, put your major materials out to bid. Most people don't frequently bid their, their supply items. And just get competitive market pressure going. And a lot of it's really Pareto analysis. You know, we're the 80 20 and people do a lot of just, you know, they're wasting time on products that don't really work, ideas that don't really work. Just call them, focus on, on, on what delivers the bucks. And, um, you know, there's your cost cutting, streamlining operations. Again, that's pretty much Pareto. You know, where are we sitting idle? I, I work on a lot of manufacturing, so it's a lot of industrial engineering.

• 27:48Speaker 02

  You know, just work workflows, process, scheduling is probably the single greatest place for pickup and profit. It's a, you can have people looking super duper busy. And you re-engineer the scheduling and you can just get out so much more. But it's, it's scheduling and, and it makes sense because processes develop over time and just become cumbersome and awkward with lots of bolt on steps and whatnot.

• 28:18Speaker 02

  Scheduling is the best one for that. And then the bad habits, you know, family members, soft work hours, soft expectations. You know, are we here to provide people with a work-life balance? Or are we here trying to win the frickin' Super Bowl? You know, go get a work-life balance somewhere else. We're here to, we're here to, you know, get to the playoffs and put some wins on the board and quite frankly, keep the business alive. We're not, we're not here for anything else. And I, I fell into this early in my career. I thought we, if we were more inclusive and we gave people what they wanted, it would work better. And when I rethought

• 29:00Speaker 02

  it of if I'm Bill Belichick, or I'm the general manager of a team and my job's to win, I have no qualms about swapping out my third string quarterback for a different third string quarterback. But you know, when you personalize and you treat everybody as family, it kills you to get rid of a third string quarterback. Cause you know, maybe had, they have some hidden potential and it, that's not my problem. You know, I'm here to staff a team and, and, and win. And you just got to bring in, get rid of, or let me say it this way, you need to upgrade every position rigorously, inconsistently. And if you do that, you'll have an all-star team.

• 29:41Anthony Pompliano?

  Do you think that it helps that you don't know the teams before you come in?

• 29:44Speaker 02

  Absolutely.

• 29:46Anthony Pompliano?

  Right? The fact that you're an external person?

• 29:49Speaker 02

  Absolutely. Cause I, I would have such a soft heart for so many people if I, if I knew them, without a doubt. And, and that's my problem when I'm running a business after a couple of years, that becomes my blind spot. You know, I love Bob. Oh, sure. He doesn't move that fast, but God, what a sweet guy and his wife's got problems. I'm such a sucker for all that.

• 30:10Anthony Pompliano?

  I talked to Graham Weaver, who runs Alpine Investors. They're one of the top private equity firms in the world. And one of the things Graham told me is 100% of the time when they buy a business, they switch out the management team. And he said, you know, sometimes they keep the manager team, sometimes not. No one has a really hard fashion rule. He goes 100% of the time we switch them out. And one of the things is, one, you get your people in there, but also two is it really changes the dynamic of the business. Because all of those personal relationships and, you know, everyone knows the person who's the good, kind of smoothie, right? Who's able to get different things in the business. If you don't have a personal relationship, all of a sudden it comes down to just, hey, what are the rules? What are the ways that we're going to run this business?

• 30:48Speaker 02

  Yeah. What have you, what have you been accomplishing? What have you been doing lately as opposed to 20 years ago? And with CTP, Certified Turnaround Professional, which is the designation in our industry,

• 31:03Speaker 02

  sacrificial lambs is part of the study guide and part of the test, and you have to write about the value of sacrificial lambs as part of the exam. And that is the public display of somebody getting shit canned where, and it tightens everybody else up. I had one situation where I declared an end to unauthorized overtime. It was a machine shop. So guys ran two machines each. One guy refused to turn his second machine on that day and said, I'm not getting overtime. I'm not turning, why would I turn on my second machine, which makes no sense. His supervisor didn't know how to respond to it. So he went to manager. Manager was confused by this. They came to me, I'm in the office freaked out, trying to figure out how to fund payroll.

• 31:49Speaker 02

  And I don't have a solution for that. And they give me this petty thing. And I said, listen, I'm so busy. Just bring him in here. Let me fire him right in front of everybody. Cause I don't have, I don't have time. I don't have more than 30 seconds to fire this clown. And they said, okay. And they went out and said, listen, you're not turning your machine. Stan's wants you to come in there so we can fire you in front of everybody in the office. And he said, I think I'll just turn my second machine on.

• 32:16Speaker 02

  And that was it. But you know, the word shot through the whole factory and everybody realized I'm serious and I don't play those games and we're here to win. And, um, and you know, it's nice to get a sacrificial lamb without actually having to throw somebody out the door.

• 32:29Anthony Pompliano?

  Yeah.

• 32:30Speaker 02

  But you gotta change, you gotta change that thinking. You can't, you can't soft pedal change.

• 32:36Anthony Pompliano?

  As we have seen over the last two years or so, tech companies, especially early stage kind of venture backed companies have struggled quite mightily. Is this turnaround playbook? Can it be used in the tech sector as much as in a lot of the manufacturing or industrial engineering businesses you're talking about?

• 32:53Speaker 02

  I, I would say absolutely because, um, you know, ultimately it's about, uh, costs versus, uh, revenues and, um, but you gotta have product market fit. I get tech companies coming to me that haven't achieved product market fit. And, you know, what do I do? It's like you're adrift in, in, in the ocean and you've never seen land and you want me to navigate you towards land. Like I have no idea what to do, but if I can go into a company that like, well, we were profitable, but now we're not. Fine. I just reverse engineer like, okay, what changed? How do we get back to where we were profitable? That's pretty easy, but you know, people that have never been, I don't know how to make them suddenly. And then real quickly, tech also, you know, you've got your

• 33:37Speaker 02

  in, there's generally two turnarounds, income statement turnaround, which is your profitability and balance sheet turnaround. So you maybe you're profitable, but your debts are killing you.

• 33:47Speaker 02

  Tech has a somewhat different debt stack as well. So that's going to be treated differently. But you know, on the surface, it's, um, if gross margins are greater than expenses, uh, you're, you're profitable and if not, get them there.

• 34:02Anthony Pompliano?

  So debt, I think is a really interesting thing where most of the physical economy runs on debt of some form or fashion. Uh, in the tech world, most people are only familiar with either convertible debt, which really they just treat as an equity investment that yet hasn't been kind of finalized or venture debt. Um, talk your perspective on debt and, and you know, maybe what some of the hangups are, and then also times where you've seen it work really, really well.

• 34:27Speaker 02

  The, I often say that this sounds ironic, but bank debt is one of the best things you can have is because it, the discipline and rigor of dealing with bank debt is so great that it keeps you focused and keeps you online. And I see, we worked on a company this year who was trying to revolutionize some building product. They burned up $50 million, accomplished nothing. You can't do that with bank debt. You can do it with friends and family. You can do it with equity, but you can't burn up that kind of money on a frivolous adventure with, with bank debt. And that's what I kind of like about bank debt. The rigor and discipline keeps you from screwing

• 35:09Speaker 02

  up to that extent. One of my mentors has like 80 companies. Every single one of them does a daily borrowing base certificate where they, you know, if you're an asset based lending, even, even folks without debt, even companies are incredibly profitable. Every single day, they do a daily borrowing base certificate. What's the value of my receivables? What's the value of my inventory? How much can I borrow against that? What's my cash position? How much headwind do I have on cash? And that's just, if you watch that, you're not going to get in trouble or you're going to see trouble coming, you know, months in advance. You're not going to be surprised by it. Same with the 13 week cash flow forecast, which is somewhat similar,

• 35:51Speaker 02

  which works in tech companies or, you know, even asset light. You know, we do 13 week cash flows weekly for all of our companies and are always trying to see around the horizon or over the horizon, you know, what could be coming? What's the downturn and, and how could we, how could we get in trouble that we don't see it? And that, but family and friends will never make you do that. Equity investors will never make you do that. And that's why a lot of tech companies just flame out. You know, the flip side is they're not going to get bank debt because they don't have assets and they don't have collateral. And, you know, you can't borrow from a bank if you

• 36:32Speaker 02

  don't have either collateral or a hell of a proven earnings history, which obviously, you know, a tech startup doesn't. So.

• 36:42Speaker 02

  I'm going in a circle here, so they have to go to equity and friends and family. But you know, equity and friends and family should be running a tighter ship. But they don't. And I think, I don't know. That's what I like about, that's what I love about manufacturing. It's also tangible, it's real. And, and it's, if you do it right, it's, it's hard to, hard to lose your mind along the way.

• 37:10Anthony Pompliano?

  You mentioned a mentor. Most people would say that you're one of the best, if not the best in the business. What have you learned from your mentor?

• 37:17Speaker 02

  Oh, my God, all my mentors.

• 37:20Speaker 02

  Everything. I mean, I learned, I learned a turnaround game from a mentor. I learned the distressed investing game for a mentor. And I never purposely sought out mentors. But, but I've seen to have always throughout my life, had them, picked them up along the way. I can't say, you know, when I was in high school, I wanted to, I wanted to be a professional football player. And we lived outside New Orleans and some of the Saints were moving to our neighborhood. I went and took, took over every single lawn contract of every single player in my town. And they all said, I got somebody doing my lawn. I'm like, you didn't understand me. I'm taking over your lawn contract. If it's price, I'll beat them on price. If it's service, I'll beat them on service.

• 38:03Speaker 02

  But Jeff Sands is going to cut Kenny Sabres grass and I'm not leaving. And it was awesome. And then, you know, then they all became my buddies. Then I got to spend the summer at, in Vero Beach at summer camp and fly around on the plane. The best thing in the world. And I kind of did that when I took a fancy to turnarounds. I found the best guy I could find and wouldn't, wouldn't leave him alone until he basically adopted me. And then same with distressed investing. I wouldn't leave him alone. I just kept bringing him deals and then, and then we started doing them together. But there's best career path you can pick.

• 38:38Anthony Pompliano?

  Talk about the difference between turnarounds and distressed investing. Because they're related and they're somewhat sequential. But some people choose just to do distressed investing and some people want to just be in the turnaround game. And so why do you think that there's advantages or opportunity in being, you know, somewhat advantageous or expert at both of those things?

• 39:00Speaker 02

  Well, I, I think there's distressed investors who don't really do turnarounds because they're financial, they can run the numbers, they can do all the modeling. They can talk about it, but they don't know how to go on the factory floor and motivate people. Um, there's people who can go on the factory floor and motivate folks who just don't understand leverage finance and some of these other things, uh, you know, and how to successfully pull off a deal. Uh, you know, if you can do both, then you're, um, you know, if you can, if you can buy the take, buy or take over the problem and then actually go fix it. I don't, you know, if you're a control freak like me, that's great because you can, you can see the whole problem and the solution.

• 39:42Speaker 02

  And, um, you don't have to depend on anybody else to get you there, you know, other than like your, you know, your trusted teammates.

• 39:50Anthony Pompliano?

  Now, um, another part of this that seems really interesting is, uh, labor. Every single time I talk to anyone in the fiscal economy, they tell me labor's a problem. It's a restaurant, it's manufacturing, whatever. Uh, you have the, uh, blessing of having to recruit labor to a crisis situation. It's one thing when you're the turnaround guy, you're the guy who's used to doing this, you're choosing to go do this. But now you have to convince people to come work at a business that's basically failing. How do you do that? How much of it is like, you just tell them it's failing, you try to motivate them to come and help? Versus you gotta show kind of the shiny, you know, uh, kind of rose colored glasses and, and sell them the dream. How, how do you recruit people to these crisis situations?

• 40:27Speaker 02

  Uh, largely selling the dream. Um, you know, uh, often I, often I go in and, uh, I remember one, everybody's like, boy, if Rick were here, you, you should bring back Rick. Um, boy, if Rick were here and I'm like, who's Rick? So I went on, oh my God, I got a bunch of stories like that where you just hear his name and then you go find a guy like, everybody wants you back. They all thought you were the best. Here's what we're doing with the business. Here's your role. You can be the hero of this journey. Um, and what else you doing? You know, your, your boss doesn't care about you. You're stuck. We're, we're gonna love you and worship you. You gotta come back. Others I just recruited in a, um, controller for a, uh, distress company that we don't have a solution for.

• 41:10Speaker 02

  She can see the numbers right there, but you know, the pitch is, um, You know, you're going to learn all about turnarounds. It's going to be fun. Um, it's going to be a hell of a rollicking adventure. If it doesn't work, um, you know, go back and get a boring job. But you know, if it, if it does work, hey, it works. And you got this fantastic education and a great experience. And I'll give you a heck of a reference and it's a thousand percent sale job. You know, I'm just, you're right. I don't have much to work with, but I'm, I'm shutting it up as best as I possibly can.

• 41:44Anthony Pompliano?

  That makes complete sense. Um, in the chapter called building long-term value, you say there's four things that can be done immediately for a business. Uh, one is get rid of the turnaround consultant. Explain that like most people would say, wait, why is this guy saying get rid of the turnaround consultant?

• 42:00Speaker 02

  Yeah. Well, you know, once the, uh, the business is profitable, the balance sheet's cleaned up. I, um, I'm just taking up space. I'm billing a lot and I'm not providing much value anymore. And it's just, it's time for me to move on. Um, some turnaround consultants will not have the next thing lined up, so they'll try to stay there, but it, it's just time to get rid of them, get rid of that expense and move on.

• 42:27Speaker 02

  Yeah, sorry. That was answering your question.

• 42:30Anthony Pompliano?

  The, the second one is maintain a monastic focus on the fundamentals of running a lean and profitable company. And that seems like maybe just like reinforce the good habits.

• 42:38Speaker 02

  Yeah, yeah. Basically, you know, the, it's Pareto, but it's just that, that focus. And I, I don't know, how can you be successful at anything without a monastic monk-like focus on the fundamentals? And if you do that, you're going to stay out of trouble. Uh, and, and probably the reason you end up in a turnaround is you didn't do that. You got distracted by other stuff by chasing, um, shiny objects. But if you just do the right things over and over and over and keep your life simple, you should probably avoid trouble.

• 43:10Anthony Pompliano?

  Number three and four is gain core strength and accumulate resources and then pick the right strategic direction now that you're lean and flexible. And it seems like rather than try to, um, you know, improve your weaknesses to some degree, you're saying, hey, lean into the strengths and really kind of accumulate those resources. Explain that further.

• 43:26Speaker 02

  Yeah, it, it really is, which probably goes back to the Pareto. You know, what are we going to be exceptional about really? Clean up and focused and, um, You know, uh, book profits and just put them into retain earnings and strengthen your balance sheet. Don't go chasing shiny objects. Don't go try to create a new division. Just do your thing and do it well and get strong, get your feet super strong underneath you. Um, and then when it is time to go expand, you know, do that with just laser-like intensity and don't, don't lose, don't lose your focus, your foundation, your laser-like intensity. Cause everything other than that is just risk. And it's a, it's a tough world out there. Um, and there's just

• 44:11Speaker 02

  bad, you know, you like remember Successories posters, they say dumb shit like, um, you know, uh, there's no such thing about luck. It's just about preparation. And every life coach who says there's no such thing as luck or whatever, they all buy insurance because there's bad luck. There's good luck and bad luck. And, um, you know, bad luck's out there and it doesn't matter. Nothing else matters. Did you get, I mean, I got, I lost a factory to a, I lost a factory in a home to a hurricane. What the hell could I have done to prepare for that? Um, it just, you know, bad luck's gonna happen. There's fires, there's tornadoes. And if you don't have a strong core, it, it, it can be fatal. If you have a really strong core, you can probably weather a storm.

• 44:55Anthony Pompliano?

  Let's talk about liquidating a business or liquidating assets. Uh, in these crisis situations, you need cash and you need it quickly. And so selling some of the assets potentially could help you do that. But a lot of times, especially if you're selling a, a business unit or, or something that isn't just a physical asset, uh, could take a long time, even a real estate deal could take a long time. And so how have you in your career kind of expedited these sales and really ensure that you get the cash as quickly as possible?

• 45:21Speaker 02

  Um, you're, you're right that it can take time and, um, the more of a hurry you're in, the lower the price you're gonna get, you know, for a piece of equipment or real estate. It's more than anything, if you think of yourself and then you think of all your stakeholders, your customers, your vendors, your lender, everybody else, they all have balance sheets. What you're trying to do is pull cash off of their balance sheets onto yours.

• 45:46Speaker 02

  And then, and then at some point, you, you, you push the cash back on to theirs as you get through this hole. You know, if I got a piece of real estate or equipment, I can, I can sell an option in it. I can sell a part of it. I can borrow against it. I can take a hard money loan against it while I'm going for a sale. Maybe I can get the bank to advance me a little bit more if we have the real estate listed. It's how do I get cash from other people's pockets into mine? So I can, I, I can, you know, pay great working capital, pay for my expenses, keep, keep my employees going, buy materials and spin that and then ultimately generate profits and then be

• 46:29Speaker 02

  able to push that back out. And most people, if you say, hey, I'm just going to borrow from you for a little while and then I'm going to give it back, but I've got a bomb proof plan. We're going to track it every day. I'll be a hundred percent transparent. They'll, they'll buy into it, you know, because they want a customer, they want a vendor. And I always, you know, if you've got a good plan, people will support it. If you got a, if you don't have a good plan, people aren't going to support that either. And, and the world's just full of plans that aren't that great.

• 46:58Anthony Pompliano?

  When you go in, how much of it is you come up with a plan yourself and then you approve the plan yourself and you go implement the plan versus you're looking for kind of consensus, right? Whether it is with investors, whether it's maybe some people at the business, how do you just think about, you know, setting the plan and then actually approving that plan?

• 47:17Speaker 02

  Um, the, it's a great question. The, you know, I walk in as beleaguered as the entrepreneur is, I mean, some, there's just some bad CEOs, but usually I say, you're still the most qualified person in the world to run this business. You don't feel like it. You've really had your head kicked in. But you're the single most qualified person to run this business today. And then I get them to give me the ideas. How do we get out of this situation? If they can't come up with that, with that, or you know, so often I'll take their disjointed ideas and put into a plan. If they don't even have disjointed ideas, then I basically come up with a plan myself.

• 48:00Speaker 02

  There's no consensus. There's absolute buy-in. I don't need everybody to think it's a swell plan. I need everybody to get behind it and execute on the plan, whether they like it or not. And everybody's free to leave and sometimes people have to leave. But it's, it's about the execution. And you know, if you leave it up to the inmates to come up with a plan and execute it. I mean, there's a reason I got called in the first place. And it's not because y'all were doing a great job.

• 48:29Anthony Pompliano?

  When you think about maybe external pressure, another thing that's really interesting is in these, let's say a local town. People know that there is a crisis happening. And so whether it is kind of the whisper network and, and you know, people go to the bar at night and they're talking about it. Or maybe even the local papers writing about the problems, et cetera. That kind of compounds some of these issues. How do you deal with maybe the soft stuff, right? It's not numbers. It's not, you know, the actual business itself, but you're trying to almost manage expectations or, or maybe change the narrative around the business in the local community.

• 49:01Speaker 02

  It, it's really hard. And as you can imagine, entrepreneurs personalize their business. It's, it's part of them.

• 49:11Speaker 02

  You know, I get some that won't, won't cut the country club membership because they're afraid of how it'll look. And I get, on the other side, I get people who just bravely go into bankruptcy. We'll call the paper and say, hey, we're going to file. It's going to be news. I want you to have the inside scoop. And this is what we're doing. And this is why we're doing it. They'll go to the trade show and deal with all the vendors who haven't been paid and it's, I have one of those now, but it's rare to have somebody with that sort of courage. The employees is tough and the toughest part of the employees, like I can talk to people all day long and you know, pump them up and tell them it's going to be okay. And here's a plan, all that stuff.

• 49:50Speaker 02

  And they go home and their spouse starts nibbling at them or their jerk brother-in-law starts nibbling at them. You're like, oh, blah, blah, blah. That's really hard to overcome. And you know, Monday, everybody needs to be built back up. And you lose some in the process. But yeah, you're totally right. That how it plays out in public is fragile is probably the best word for it.

• 50:13Anthony Pompliano?

  Last question I have for you is, in the book, there is a quote, and I think it's in the beginning of the book. It says, despite being impatient and relentless, Jeff is the happiest guy on earth. And there's some sort of dichotomy almost of like, you're running into the fire every single day. You're just seeing absolute, you know, everything in shambles, businesses are failing, people are stressed. There's all kinds of uncomfortable, tough situations or conversations. Yet you remain really happy. How do you do that?

• 50:44Speaker 02

  Number one, it's not my neck in the noose. And when it was, my first two turnarounds were my own business. And, you know, I was looking at losing my home. That wasn't fun.

• 50:55Speaker 02

  But I love untangling big, complex problems that other people can untangle. And the ability to do that and have all this action and not risk losing my home is, I think it's just the coolest thing in the world. And I often say, I, you know, I hope on my dying day, on my deathbed, somebody calls me to talk about deal structure. Cause I'd, I'd love to have one more, one more conversation on buying a distressed asset before I check out.

• 51:26Anthony Pompliano?

  I love it. So Jeff, you wrote the book Corporate Turnaround Artistry, Fix Any Business in 100 Days. I highly suggest people, if you have not read this yet, please go pick it up and read it. It's fantastic book. And I think part of what makes it so good is very practical, obviously, but it's also looking at these turnaround situations and it really can reinforce and teach good habits and things that you should be doing with the healthy business as well. So it's focused on turnarounds, but it's really about how do you run a business correctly and avoid these mistakes? I've learned a lot today. I appreciate your time. Where can we send people to find you? Or if somebody unfortunately has a turnaround situation and needs your help, where can they get in touch with you?

• 52:05Speaker 02

  So my website is dorsetpartners.com, D O R S E T partners.com. You can find me there, Jeff at Dorset Partners, my email, I'm on LinkedIn and Twitter and stuff like that. But yeah, and you know, again, my dying day. I love these conversations. I love getting phone calls and I get such a kick out of this. It's not work for me.

• 52:31Anthony Pompliano?

  I love to hear that. All right, Jeff, thank you so much for doing this. We'll definitely do it again in the future.

• 52:35Speaker 02

  Thank you, Anthony. It's been a blast. Take care.