Jeff Sands is the author of Corporate Turnaround Artistry. Before he started fixing and mending other companies’ broken income statements and balance sheets, he first had to fix his own where he learned how friendly banks could be. During this conversation, we also learn about debt stacks, a few myths about bankruptcies, the five stages of a turnaround, the three types of turnaround CEOs, the role of luck, and what Jeff calls the salvation process.
- Jeff’s unique origin story
- On how to survive staring into a bear’s eyes
- The importance and value of a Chief Restructuring Officer
- The differences between a broken P&L and a balance sheet
- The top and bottom of a debt stack
- Addressing a broken management team
- Jeff’s five stages of a turnaround
- The reasons financial people struggle with the 13-week cash flow forecast
- The better maxim for, “Never run out of cash.”
- Jeff’s definition of the salvation process
- A favorite turnaround story
- A simple primer on bankruptcy history and the process
- Why Machiavelli’s, The Prince is included in the bibliography
- Tuneups are as important as turnarounds
- Books mentioned – The Brothers Karamazov and Mark Twain
The Five-Star Book
Corporate Turnaround Artistry by Jeff Sands is a great book, especially if you want to elevate your business and financial acumen.
I’m going to do a quick, lightning-round version of a sampling of the highlights in my Kindle version of this book.
Who is the book for? CEOs finding themselves unable to sleep at 2:00 a.m. (those are Jeff’s words).
The turnaround process is, “a game of speed, confidence, and building alliances.”
I’ve found the psychology of leaders dealing with stress and crisis to be one of the greatest influences on success and failure though I feel it has been greatly underdiscussed in the existing literature.Jeff Sands, Corporate Turnaround Artistry
Key Terms such as insolvency versus bankruptcy along with the zone of insolvency are outstanding in this book. I had never heard of the term debt stack until this book. I also like Jeff’s term, The Salvation Process (think iterative if-then-else).
The two turnarounds – there are just two: income statement turnarounds and balance sheet turnarounds.
The 23 business killers starting on page 20 should even be read by business owners and management not facing a crisis. I especially like number 20, falling in love with your product.
Cash control – the role of the 13-week cash-flow forecast is practical and easy to understand. “If you understand the cash-flow forecast, you understand the business.” Chapter 3 walks readers through the process with additional tips to preserve and raise cash.
IRS 941 – never be in debt with the IRS. In short, know and respect your regulators.
Insolvency and bankruptcy – I know very little in this area. Jeff lays the groundwork by providing some history and context that will remain sticky in our minds. Don’t gloss over these sections. Also, be careful about bankruptcy attorneys. They may not have your best interests in mind. Jeff’s best advice is, “Avoid bankruptcy if at all possible. It is expensive, demanding, and fraught with risk, and almost everything that can be accomplished in bankruptcy court can be accomplished out of court through persuasion.” Finally, bankruptcy is a tool, not a goal.
Governance – “Statistically, private companies with an independent board of advisors do better than those without.”
The Three Questions
On some shows, I wrap up with either three or five questions to consider based on the conversation we’ve just heard.
Here are the three questions I posed at the end of the show:
- More than likely your business probably does not have a broken P&L or balance sheet. Can you clearly articulate why not? I’ll even help you with your answer. Consider the concept of CAMELS in the banking industry to support your answer (C – capital adequacy, A – asset quality, M – management, E – earnings, L – liquidity, S – sensitivity).
- Can you document your company’s debt stack? It’s okay to cheat by looking at the note disclosures in your audit report or review. Have your controller or VP – Finance help you. Also, don’t forget about off-balance sheet items too.
- If you are the CEO or if you work for one, is that person a 100-day change agent, a one-year stabilization CEO, or growth and slow incremental change CEO? When considering the question, think about the time stratums of The Requisite Organization (see this brief discussion for more insights). The first CEO is probably a Stratum II CEO. The one in the middle is probably a Stratum III CEO. The last one is a Stratum IV CEO.
Why is question three important? Stratums do not define cognitive abilities or value. All three CEOs are important and needed in the proper circumstances. The problem occurs when one stratum is working in another that is not natural or easy for them. That’s why this last question is important. It’s about alleviating stress, boredom, frustration, and even chaos once a CEO understands his/her natural talents in the context of stratum thinking.
More About Jeff Sands
Jeff is a Certified Turnaround Practitioner (CTP) who was awarded a coveted TMA Turnaround of the Year Award in 2017, 2018, and 2019 and also the 2020 Turnaround Consultant of the Year by M&A Advisor. He consults select clients through Dorset Partners LLC and pursues distressed industrial acquisitions through American Industrial Acquisition Corp. Other relevant links include: