JEFF SANDS is a corporate turnaround specialist who has devoted his career to saving businesses, jobs, and the communities they support. He grew up in a family manufacturing business and returned in his thirties to run, grow, fix, grow again, fix again, and eventually lose that business in the wake of Hurricane Katrina. Since then, Jeff has focused solely on saving other businesses and has developed a reputation as the best guy to call in the worst situations.

Jeff is a Certified Turnaround Practitioner (CTP) who was awarded a coveted TMA Turnaround of the Year Award in each of 2017, 2018, and 2019 and also the 2020 Turnaround Consultant of the Year by M&A Advisor. He consults select clients thru Dorset Partners LLC (www.DorsetPartners.com) and pursues distressed industrial acquisitions through American Industrial Acquisition Corp. (www.AIAC.com).

This book is highly recommended for any and all business owners who are contributing to society though capital formation activities. Business is usually such entrepreneur’s passion in life. As Jeff himself says in the preface of his book: “The ideal audience for this book is me 18 years ago: suddenly caught in a turnaround.”

Chapters 1 – 9 deal with the practicalities of businesses turnaround in a brilliant, clear, direct and practical manner. A field in which information is limited.

Chapter 10, the last chapter in the book then deals with “BUILDING LONG TERM VALUE”.

It is in Chapter 10 that I made the connection between BUSINESS COACHING and the turnaround prevention or building post turnaround.

As a practicing and certified BUSINESS and EXECUTIVE COACH with expertise dated and recent, of turnaround situations as an advisor, I experience a BLINDING FLASH OF THE OBVIOUS (BFO), an AHA moment when reading Chapter 10.

The rest of the Blog is Chapter 10 of “Corporate Turnaround Artistry” by Jeff Sands CTP, augmented by me, the writer of the blog, to illustrate the important role that BUSINESS COACHING can play in BUILDING LONG TERM VALUE. Pre, During and Post turnaround action.

CHAPTER 10: Building Long term Value!

Governance

Statistically, private companies with an independent board of dvisors do better than those without. Note that this is a board of advisors, not directors. You assemble the best people you can find, organize them into periodic meetings, and solicit their advice. In theory, they help you make better decisions and stay out of trouble. Certainly, managing a board will help the entrepreneur think, plan, and operate at a higher level. Our family business had four outside directors and three family members, and their advice often helped us make better decisions. All four outside directors were brilliant and hugely experienced; they had all run businesses much larger and more successful than ours.

At the time of my first turnaround, we had been hit with a dramatic market shift and were in a really poor position to react. I was active in an outside CEO peer group at the time, which met monthly. With all that support, our business still ended up in a very tough predicament. “Now is when you need us the most,” said my CEO peer group. “No, before now was when I needed you the most. What I need now is time and money, neither of which I can afford for this group,” was my response. Our board took a similar hiatus during our turnaround because none of them had that expertise. That being said, I still recommend a board of outside advisors for any private business not in crisis. The frequency and structure will help you work on your business instead of just in your business. The time to develop an agenda and presentations will help you step back from your business and think more deeply. It also provides a great opportunity to develop your staff.

People

Getting the right people in the right places is critical. In the early days of a turnaround, there are two documents that I have on hand at all times: my copy of that day's cash‐flow forecast and a copy of that day's organization chart. I think the CEO has to obsess about the org chart as a sports team's general manager would, always trying to move or develop people in a way that best suits the team.

Training and development budgets are usually gutted in a turnaround, but they should be added back into the recovery budget. It's the reinvestment in your people and team that will help the company rebuild its balance sheet. Additionally, the company has already experienced the high cost of carrying too many people or the wrong people. All those layoffs you didn't think the business could withstand, they were handled just fine. This tough, leaned‐down team will be your core going forward. They've been through a lot, so don't forget to share the fruits as your company recovers.

Sales

Think of yourself as the general manager of a pro sports team. If you're capped by league rules at 20 people, some managers will hire the best 20 people they can find, then spend all their time training, coaching, motivating, inspiring, incentivizing, and begging them to sell more. I used to do that and found it exhausting. What I found works much better is to recruit the best possible team at above‐market wages, give clear directions, measure and rank them, then fire the bottom ranked person and upgrade the team with a new recruit. Your wages make recruiting a replacement pretty easy. Each time somebody leaves; rehuddle your team, give better training, better direction, then measure and fire he new bottom ranked person. Replace them and repeat, maybe quarterly. I think it's a perfectly fair trade; the company pays well, treats you with respect, offers a great opportunity, and will never ask you to carry the bottom ranked person with your hard work. The superstars will love it, the bottom ranked will avoid you, and the mass of them in the middle will be pulled toward the light.

I once hired a sales manager who immediately held a one‐week sales contest; the top‐three order writers would earn some amount of cash bonus. It worked well for maybe half of the sellers, and the top five really hustled. The next week she held another contest in which the top three people to open new accounts would get some special recognition: a special parking space or trophy or something. Same thing, about half seemed motivated and a somewhat different top group really hustled. I was intrigued but far from impressed. I was paying her for strategy and long‐term results, not a series of simple little promotions. When asked, she shared the brilliance behind her strategy: “There are only three types of sales people: the ones who are motivated by money, the ones who are motivated by recognition, and the ones who are motivated by something more complex than either of those. I'm a sales manager, not a psychologist, so in two weeks we know who is motivated by money, who is motivated by recognition, and who needs to be replaced by someone that is easier to motivate. If I have a team of easy‐to‐motivate sales people, I can accomplish great things with them, and that's what we're going to do.” I walked away amazed and impressed.

Accounting

Coming out of restructuring, it is time to reestablish your rules for accounting. CPA annual audits are expensive and a lot of work, but nothing helps you sleep better at night than a squeaky‐clean set of books. Every private‐equity‐owned company I work with has audited financials, whereas few entrepreneur‐owned companies do. Any broker or investment banker will tell you that the cost of five years of audits is usually rewarded many times over in a sale because it gives the buyer great certainty in the business.

Now is the time to set guidelines with accounting and accrual policies, while also establishing proper controls to guard against embezzlement, fraud, or mistakes. Your CPA can help you with this.

The turnaround has probably focused you in on the important reports of the business. The other reports you can eliminate to reduce clutter and bring focus. For me, I just want to see upstream in the order cycle to our own sales and marketing efforts and downstream with rolling financial and cash‐flow projections – no bells and whistles, just a clear view to each horizon.

Fraud Prevention

A banker friend once pointed out to me how many middle‐aged bookkeepers are prosecuted for embezzlement. I've watched since then and it seems like several per year just in our sleepy little state, plus others I know that were not prosecuted. Embezzlement requires only weak financial controls from the entrepreneur and a lapse in honesty from the controller. It's my opinion that strong financial controls will deter even the most dark‐hearted controller. The one thing you can count on is that everyone will watch how you respect and protect your money, and then they'll do less than that.

Larger CPA firms will provide process audits to help you set up the safest protocols for managing your treasury function. There needs to be a productive check‐and‐balance system in which activities are matched and authenticated before money leaves the building. They'll help you set up appropriate checks and balances for purchases, payments, payroll, and so on. Not only does it deter theft, it's the proper way to run your business. Sloppy accounting controls are like an unlocked door in a bad neighborhood; it's a dangerous temptation.

Culture of Theft; Culture of Free

Albany, the capital of New York, had a famous family‐owned steak‐house restaurant that was the meeting place for area big shots in business, law, and government. The owner was a gregarious guy who was always quick to buy a drink for the Governor or other high‐profile guests. But he always pulled the cash out of his pocket to pay the bill. Always. His family paid for food and drinks, in cash, no exceptions years later he died, his sons took over, and they were more liberal with giving away drinks. The waitstaff saw this, and they became more liberal with drinks and food. The bartenders saw this, and they, too, became more generous with drinks and started skimming cash. Within a few short years the famous restaurant was out of business.

Years ago, an employee of ours was caught pretty much red‐handed selling our stolen product. One of her boyfriends convinced her that loading up a trailer of our product (from our warehouse, on the weekend) and selling it on eBay was a foolproof way to make some extra cash. We found out and had the police visit her at her desk. She admitted everything; then we fired her and sought to press charges. The district attorney said we didn't have a case (years later this same Louisiana DA and his sheriff and our mayor are now all in prison on separate corruption issues). I was flabbergasted but slowly came to understand their (weak) point; because we had given away free product before to employees (always under $100 and for fundraising purposes to a local church group or sports benefit), we had set a precedent, and this employee was “confused” between a handful of product with permission and a trailer load without permission. Right or wrong, it drove home the points about consistency, documentation, and procedures.

Once I attended an industry event with an FBI agent in charge of prosecuting corporate fraud cases. He explained the moving target of FBI priorities; sometimes terrorism, sometimes drugs or mortgage fraud, but rarely basic embezzlement in a small to midsized entrepreneurial company. The secret, he said, to getting an FBI agent to take interest in a pedestrian embezzlement case is to allow them to use their superpowers. “Think about it,” he said, “we join the FBI so we can do all the cool superpower stuff like wiretaps, warrants, undercover work, etc. Bring me a lead that needs investigation services and I'm interested. Bring me a case that is all wrapped up like a Christmas present and there's nothing left for me to do. That's not nearly as interesting to me or my bosses.”

Budget and Strategy

Strategy can be a really fancy and complicated subject if you let it. To me it's simply: what do you want to accomplish and how can you get there? Most entrepreneurs want to have a good life and a big payday when they exit the business. That may not be easy, but it does not have to be complicated. Here's an example of a family friend who has a furniture business that can produce approximately $10 million of furniture in a year. For 30 years he's maintained roughly that same $10 million revenue through all sorts of booms and busts in the business. For the same 30 years, he's been determined not to spend another dime on expanding capacity, but, instead, on maximizing the building and equipment that he owns. In good times, he raises prices enough to maximize profit. In tough times, he lowers prices to keep his crews and equipment running efficiently. He's moderated risk, eliminated debt, focused on quality, and made a great living as one of the few remaining U.S. furniture makers. You'll never get a high‐priced consultant to suggest that strategy, but it's one of the best I've ever heard.

Contrary to what many creative entrepreneurs believe, strategy is the elimination of options. Every entrepreneur has dozens of opportunities, but strategy is set by the discipline to focus in on the one or two opportunities that make long‐term sense for the business. The smartest entrepreneurs get into a business with their exit plan already mapped out. Of course, there are all sorts of surprises along the way, but these entrepreneurs know where they are headed and will get there eventually.

Profitability and Budgets

It's no great secret that running a business is all about profits. Everything else combined (multiplied even) means nothing without profitability. I've seen lauded CEOs end up on the pavement when their lucky streak ran dry and they didn't know how to do the tough work of squeezing profits from tough times. Another thing I've learned over the years is that losses are forever, whereas profits are only transient. It seems that a year of losses follows you forever, whereas a year of profits is immediately under attack by changing market conditions. The natural order of businesses is toward entropy, so every day you are defying those odds with the best thoughts and efforts you and your team can muster. The single best tool to ensure long‐term survival is the humble budget.

Financial budgets are the one single activity most positively correlated with successful businesses because budgets make you think, reduce surprises, and give you visibility. I'm lumping management accounting and performance metrics in with budgeting because they are simply steps toward achieving the business's goal. For me it's like flying a plane; I'd rather have an instrument panel in case I end up in the clouds or the dark. The budget and all the supporting measures are just that, an instrument panel to help you operate the business. And even with that said, my guess is that more than half of businesses between $5 and $50 million in revenues do not have a formal budget process that gets reviewed monthly and that leads to management adjustments.

Financials

The trick here is knowing your numbers cold. There's really no excuse for not knowing the measurements of your business as well as you know your kids. Chances are your business is paying for their college tuition and their inheritance anyway.

The best CFO I've ever worked with gave me estimated financials on the 29th of every month. By the 5th day, I had finals and we were presenting results to the bank on the 10th of every month. This was a highly leveraged manufacturing job shop with mostly Defense orders, so our volumes fluctuated wildly (a 300% swing between our high and our low months). But I always knew exactly where we were, and our banker called us the best reporting credit in his portfolio. I see no reason why every business can't run like this. If your controller can't get you there, it may be time for a new controller.

Receivables – be tough. You are not a bank. I know a company that will cut off the U.S. Department of Defense over late payments, and they don't budge. That’s how confident they are in their products and service.

Clean Living

Intuitively, we all know the value of good habits in our lives and businesses. Avoid smoking, alcohol, and pork rinds. Exercise, stretch, and eat your vegetables if you want to be healthy. The same mentality works in business, and the very best companies embrace and leverage improvement programs like 5S and Lean. There is a certain magic that happens when you measure and run a tidy ship. Quality and on‐time delivery improve, which sets off a wave of other positive effects: happier customers, more sales, pricing power, earnings, etc. No, I cannot draw a quantifiable linkage to these events, but I see the positive consequences of Lean and 5S everywhere they are well implemented.

Spend time building a personal relationship with your bank. Get to know everyone on the credit committee, and stay in touch with them through good times and bad. Attend their events and invite them for factory tours and management presentations. I have received calls from banks that have gone to great lengths to tell me how this troubled CEO is highly respected by the bank executives and they want to do everything possible to support the borrower through a tough patch.

Summary

If this was a book on boxing technique, you would now know exactly what to do when you step in the ring – and almost assuredly you would get beat up when you did. Although I can share the strategy and tactics of the turnaround game, what can't be taught in a book is the subtle artistry of the fight. When to bob, when to weave, when to just take the hits and when to attack. Boxers train daily and for years to hone their craft, and eventually they do more giving than receiving in the ring. Meanwhile, business owners or executives are more like mugging victims. They are not honed and trained like boxers, they are soft and distracted, dropping a trail of coins as they wander into bad neighborhoods.

And when it's over, most entrepreneurs will take all those lessons and make sure to never go near that neighborhood again. It's what I recommend; be really good at what you do and avoid trouble at all costs. That's a really safe way to steer clear of future turnarounds and all the heartache they cause.

Another option is to assume that the business world is full of bad neighborhoods and that the only security you can ever really have is in developing your street fighting skills. That takes reps, not reading. It takes getting out of your comfort zone and getting scraped up along the way.

I don't think successful entrepreneurs are the ones who make it out safely with a clean uniform. Instead, the successful entrepreneurs are the ones who thrive in the mayhem, who give as hard as they get, who protect those who need protection, and can welcome the day's tumult with a big smile.

Nothing endures but change.

2. A BUSINESS COACH assist business owners and executives to step back and work ON your business and less IN your business. The cornerstone of Business Coaching “Work more ON your business than IN your business”

3. According to the ActionCOACH model, cashflow forecast and control comes right upfront under financial basics as part of the MASTERY level of the model.

A Business without proper structuring and clear positional contacts and responsibility is less effective. The ActionCOACH model addresses the management of people, the framework of any business, in the MASTERY level, the LEVERAGE level on people and education and the TEAM level which addresses recruitment, environment and 6 Keys to a winning TEAM.

4. ActionCOACH offers multiple training programs for staff to assist business owners to rebuild the balance sheet. Marketing, Selling, Team Building, Operations, Financial Management, Customer Service, Team Culture and Business Planning.

5. Remuneration programs and structures linked to proper designed KPI’s support highly effective and successful TEAMS.

6. RECRUITMENT and MANAGEMENT of TEAM MEMBERS are of critical importance in building businesses VALUE. ActionCOACH addresses these issues in various levels of the 6 STEPS business development model.

7. People management, especially in sales, is important and focused on the ActionCOACH programmes.

8. Regular management accounts and year end audited statements are invaluable and priceless. Again, Action COACHES enable their clients in the MASTERY level already to implement the necessary structure and procedures to enable clear and concise management accounts. The value of such implementation hugely contributes to the value of the business.

9. Business Coaching assist to set guidelines for accounting practices and control. It develops with the executive and business owner the required systems and entrench the culture around sound policies.

10. ActionCOACH Business Coaching assists clients with clear and simple reports though TEST and MEASURING to have a full view of market potential, lead generation, lead conversion, customer interaction and then profit and cash flow projections.

11. Business Coaching contribute to culture and values in the business and make the RULES OF THE GAME clear for everyone in the business to adhere to.

12. Business Coaching focus on systems to properly manage the business and to properly apply checks and balances.

13. Business Coaching assist the owner and the executive to properly run the business with discipline.

14. Development of a HEALTHY CULTURE to the benefit of the business and all stakeholders.

15. CULTURE OF DISCIPLINE

16. ActionCOACH DS Business Coaching assists clients with proper Strategic Business Plans. Not complicated and clear within which framework EXECUTION is exercised.

17. Think about GOOD to GREAT by Jim Collins. The hedgehog approach, stability, and profitability. Business Coaching assist with growth programmes when and where required.

18. Hedgehog Approach

19. Business Coaching assist owners and executives to build and develop an asset to be able to “EXIT RICH” when the time is right.

20. Profit is the OXYGEN of the business. Without PROFIT the business will die.

21. Profit and more CASH FLOW is promoted by Business Coaching in support of businesses owners and executives.

22. The 12 Month per month BUDGET is a cornerstone in Business Coaching with clients, extremely important.

23. ActionCOACH DS Business Coaching is specialising in integrating management accounts with performance metrics, Marketing, Sales, Operations, and People productivity.

24. Business Coaching strongly promotes regular review of performance against budget and set forecasts to keep up with the budget.

25. “KNOWING YOUR NUMBERS” is a slogan of ActionCOACH DS Business Coaching.

26. TIMELY Management Accounts are only possible with discipline, culture, and attention to detail, promoted by Business Coaching. No value in flight instrument readings when you are through the cloud against the mountain, The inevitable result.

27. Business Coaching strongly promotes the right people on the seats in the bus.

28. Of the seven levers for CASH Management, debtors’ collection on the balance sheet is one of the most important. A commercial business is providing products and services and is not a bank.

29. The formula for success in ActionCOACH is:

BE X DO = HAVE

BE is about the gifted individual that is motivated and focused to drive the DO in the business. That requires sound habits, healthy living, and the lifelong learning. ActionCOACH Business Coaching assist business owners and executives to be the best BE they can be.

30. A Business Coach brings the experience to the ring for the business owner from many rounds with various boxer owners and executives. They are street smart to put you, owner and executive on the front foot. The value of a COACH!

31. A Business Coach from DS Business Coaching contributes to world class business management by business owners and executives. Think about world class sportsmen in all sports…..All have COACHES!

32. Business Coaching supports the owner and executives to get out of their comfort zones and become world class business athletes in their field through learning and active exercising the tactics!

33. With head winds, turmoil and noise in the business arena, business owners and executives need a NAVIGATOTR as assistance.

CHAPTER 10: Building Long term Value!

Governance

1. Statistically, private companies with an independent board of dvisors do better than those without. Note that this is a board of advisors, not directors. You assemble the best people you can find, organize them into periodic meetings, and solicit their advice. In theory, they help you make better decisions and stay out of trouble. Certainly, managing a board will help the entrepreneur think, plan, and operate at a higher level. Our family business had four outside directors and three family members, and their advice often helped us make better decisions. All four outside directors were brilliant and hugely experienced; they had all run businesses much larger and more successful than ours.

2. At the time of my first turnaround, we had been hit with a dramatic market shift and were in a really poor position to react. I was active in an outside CEO peer group at the time, which met monthly. With all that support, our business still ended up in a very tough predicament. “Now is when you need us the most,” said my CEO peer group. “No, before now was when I needed you the most. What I need now is time and money, neither of which I can afford for this group,” was my response. Our board took a similar hiatus during our turnaround because none of them had that expertise. That being said, I still recommend a board of outside advisors for any private business not in crisis. The frequency and structure will help you work on your business instead of just in your business. The time to develop an agenda and presentations will help you step back from your business and think more deeply. It also provides a great opportunity to develop your staff.

People

3. Getting the right people in the right places is critical. In the early days of a turnaround, there are two documents that I have on hand at all times: my copy of that day's cash‐flow forecast and a copy of that day's organization chart. I think the CEO has to obsess about the org chart as a sports team's general manager would, always trying to move or develop people in a way that best suits the team.

4. Training and development budgets are usually gutted in a turnaround, but they should be added back into the recovery budget. It's the reinvestment in your people and team that will help the company rebuild its balance sheet. Additionally, the company has already experienced the high cost of carrying too many people or the wrong people. All those layoffs you didn't think the business could withstand, they were handled just fine. This tough, leaned‐down team will be your core going forward.

5. They've been through a lot, so don't forget to share the fruits as your company recovers.

Sales

6. Think of yourself as the general manager of a pro sports team. If you're capped by league rules at 20 people, some managers will hire the best 20 people they can find, then spend all their time training, coaching, motivating, inspiring, incentivizing, and begging them to sell more. I used to do that and found it exhausting. What I found works much better is to recruit the best possible team at above‐market wages, give clear directions, measure and rank them, then fire the bottom ranked person and upgrade the team with a new recruit. Your wages make recruiting a replacement pretty easy. Each time somebody leaves; rehuddle your team, give better training, better direction, then measure and fire he new bottom ranked person. Replace them and repeat, maybe quarterly. I think it's a perfectly fair trade; the company pays well, treats you with respect, offers a great opportunity, and will never ask you to carry the bottom ranked person with your hard work. The superstars will love it, the bottom ranked will avoid you, and the mass of them in the middle will be pulled toward the light.

7. I once hired a sales manager who immediately held a one‐week sales contest; the top‐three order writers would earn some amount of cash bonus. It worked well for maybe half of the sellers, and the top five really hustled. The next week she held another contest in which the top three people to open new accounts would get some special recognition: a special parking space or trophy or something. Same thing, about half seemed motivated and a somewhat different top group really hustled. I was intrigued but far from impressed. I was paying her for strategy and long‐term results, not a series of simple little promotions. When asked, she shared the brilliance behind her strategy: “There are only three types of sales people: the ones who are motivated by money, the ones who are motivated by recognition, and the ones who are motivated by something more complex than either of those. I'm a sales manager, not a psychologist, so in two weeks we know who is motivated by money, who is motivated by recognition, and who needs to be replaced by someone that is easier to motivate. If I have a team of easy‐to‐motivate sales people, I can accomplish great things with them, and that's what we're going to do.” I walked away amazed and impressed.

Accounting

8. Coming out of restructuring, it is time to reestablish your rules for accounting. CPA annual audits are expensive and a lot of work, but nothing helps you sleep better at night than a squeaky‐clean set of books. Every private‐equity‐owned company I work with has audited financials, whereas few entrepreneur‐owned companies do. Any broker or investment banker will tell you that the cost of five years of audits is usually rewarded many times over in a sale because it gives the buyer great certainty in the business.

9. Now is the time to set guidelines with accounting and accrual policies, while also establishing proper controls to guard against embezzlement, fraud, or mistakes. Your CPA can help you with this.

10. The turnaround has probably focused you in on the important reports of the business. The other reports you can eliminate to reduce clutter and bring focus. For me, I just want to see upstream in the order cycle to our own sales and marketing efforts and downstream with rolling financial and cash‐flow projections – no bells and whistles, just a clear view to each horizon.

Fraud Prevention

11. A banker friend once pointed out to me how many middle‐aged bookkeepers are prosecuted for embezzlement. I've watched since then and it seems like several per year just in our sleepy little state, plus others I know that were not prosecuted. Embezzlement requires only weak financial controls from the entrepreneur and a lapse in honesty from the controller. It's my opinion that strong financial controls will deter even the most dark‐hearted controller. The one thing you can count on is that everyone will watch how you respect and protect your money, and then they'll do less than that.

12. Larger CPA firms will provide process audits to help you set up the safest protocols for managing your treasury function. There needs to be a productive check‐and‐balance system in which activities are matched and authenticated before money leaves the building. They'll help you set up appropriate checks and balances for purchases, payments, payroll, and so on. Not only does it deter theft, it's the proper way to run your business.

13. Sloppy accounting controls are like an unlocked door in a bad neighborhood; it's a dangerous temptation.

Culture of Theft; Culture of Free

14. Albany, the capital of New York, had a famous family‐owned steak‐house restaurant that was the meeting place for area big shots in business, law, and government. The owner was a gregarious guy who was always quick to buy a drink for the Governor or other high‐profile guests. But he always pulled the cash out of his pocket to pay the bill. Always. His family paid for food and drinks, in cash, no exceptions years later he died, his sons took over, and they were more liberal with giving away drinks. The waitstaff saw this, and they became more liberal with drinks and food. The bartenders saw this, and they, too, became more generous with drinks and started skimming cash. Within a few short years the famous restaurant was out of business.

15. Years ago, an employee of ours was caught pretty much red‐handed selling our stolen product. One of her boyfriends convinced her that loading up a trailer of our product (from our warehouse, on the weekend) and selling it on eBay was a foolproof way to make some extra cash. We found out and had the police visit her at her desk. She admitted everything; then we fired her and sought to press charges. The district attorney said we didn't have a case (years later this same Louisiana DA and his sheriff and our mayor are now all in prison on separate corruption issues). I was flabbergasted but slowly came to understand their (weak) point; because we had given away free product before to employees (always under $100 and for fundraising purposes to a local church group or sports benefit), we had set a precedent, and this employee was “confused” between a handful of product with permission and a trailer load without permission. Right or wrong, it drove home the points about consistency, documentation, and procedures.

Budget and Strategy

16. Strategy can be a really fancy and complicated subject if you let it. To me it's simply: what do you want to accomplish and how can you get there? Most entrepreneurs want to have a good life and a big payday when they exit the business. That may not be easy, but it does not have to be complicated. Here's an example of a family friend who has a furniture business that can produce approximately $10 million of furniture in a year. For 30 years he's maintained roughly that same $10 million revenue through all sorts of booms and busts in the business. For the same 30 years, he's been determined not to spend another dime on expanding capacity, but, instead, on maximizing the building and equipment that he owns. In good times, he raises prices enough to maximize profit. In tough times, he lowers prices to keep his crews and equipment running efficiently. He's moderated risk, eliminated debt, focused on quality, and made a great living as one of the few remaining U.S. furniture makers.

17. You'll never get a high‐priced consultant to suggest that strategy, but it's one of the best I've ever heard.

18. Contrary to what many creative entrepreneurs believe, strategy is the elimination of options. Every entrepreneur has dozens of opportunities, but strategy is set by the discipline to focus in on the one or two opportunities that make long‐term sense for the business.

19. The smartest entrepreneurs get into a business with their exit plan already mapped out. Of course, there are all sorts of surprises along the way, but these entrepreneurs know where they are headed and will get there eventually.

Profitability and Budgets

20. It's no great secret that running a business is all about profits. Everything else combined (multiplied even) means nothing without profitability. I've seen lauded CEOs end up on the pavement when their lucky streak ran dry and they didn't know how to do the tough work of squeezing profits from tough times. Another thing I've learned over the years is that losses are forever, whereas profits are only transient.

21. It seems that a year of losses follows you forever, whereas a year of profits is immediately under attack by changing market conditions. The natural order of businesses is toward entropy, so every day you are defying those odds with the best thoughts and efforts you and your team can muster.

22. The single best tool to ensure long‐term survival is the humble budget.

23. Financial budgets are the one single activity most positively correlated with successful businesses because budgets make you think, reduce surprises, and give you visibility. I'm lumping management accounting and performance metrics in with budgeting because they are simply steps toward achieving the business's goal.

24. For me it's like flying a plane; I'd rather have an instrument panel in case I end up in the clouds or the dark. The budget and all the supporting measures are just that, an instrument panel to help you operate the business.

25. And even with that said, my guess is that more than half of businesses between $5 and $50 million in revenues do not have a formal budget process that gets reviewed monthly and that leads to management adjustments.

Financials

26. The trick here is knowing your numbers cold. There's really no excuse for not knowing the measurements of your business as well as you know your kids.

27. Chances are your business is paying for their college tuition and their inheritance anyway.

28. The best CFO I've ever worked with gave me estimated financials on the 29th of every month. By the 5th day, I had finals and we were presenting results to the bank on the 10th of every month. This was a highly leveraged manufacturing job shop with mostly Defense orders, so our volumes fluctuated wildly (a 300% swing between our high and our low months). But I always knew exactly where we were, and our banker called us the best reporting credit in his portfolio.

29. I see no reason why every business can't run like this. If your controller can't get you there, it may be time for a new controller.

Clean Living

30. Spend time building a personal relationship with your bank. Get to know everyone on the credit committee, and stay in touch with them through good times and bad. Attend their events and invite them for factory tours and management presentations. I have received calls from banks that have gone to great lengths to tell me how this troubled CEO is highly respected by the bank executives and they want to do everything possible to support the borrower through a tough patch.

Summary

31. If this was a book on boxing technique, you would now know exactly what to do when you step in the ring – and almost assuredly you would get beat up when you did. Although I can share the strategy and tactics of the turnaround game, what can't be taught in a book is the subtle artistry of the fight. When to bob, when to weave, when to just take the hits and when to attack. Boxers train daily and for years to hone their craft, and eventually they do more giving than receiving in the ring. Meanwhile, business owners or executives are more like mugging victims. They are not honed and trained like boxers, they are soft and distracted, dropping a trail of coins as they wander into bad neighborhoods.

32. And when it's over, most entrepreneurs will take all those lessons and make sure to never go near that neighborhood again. It's what I recommend; be really good at what you do and avoid trouble at all costs. That's a really safe way to steer clear of future turnarounds and all the heartache they cause.

33. I don't think successful entrepreneurs are the ones who make it out safely with a clean uniform. Instead, the successful entrepreneurs are the ones who thrive in the mayhem, who give as hard as they get, who protect those who need protection, and can welcome the day's tumult with a big smile.