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WSO Podcast | E94: Corporate Turnaround Artistry + Covid-19 Rocks Economies Worldwide

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In this episode, Jeff Sands, a veteran of corporate turnarounds shares his winding path. Learn why a graduate from the south moved to Alaska for 10 years, why he got his MBA, how he transitioned to his family business and what he did when they were wiped out. This is a very interesting episode, especially in light of how Covid 19 is rocking financial markets and economies around the world. Check out his timely book here

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WSO Podcast (Episode 94) Transcript:

Patrick (CEO of WSO): [00:00:06] Hello and welcome. I'm Patrick Curtis, your host and chief monkey, and this is the Wall Street Oasis podcast. Join me as I talk to some of the community's most successful and inspirational members to gain valuable insight into different career paths and life in general. Let's get to it. In this episode, Jeff Sands, a veteran of corporate turnarounds, shares his winding path. Learn why I graduate from the South move to Alaska for 10 years, why he got his MBA, how he transitioned to his family business, and what he did when they were wiped out by Hurricane Katrina. This is a very interesting episode, especially in light of how COVID 19 is rocking financial markets and economies around the world. Enjoy. All right, Jeff, thanks so much for joining the Wall Street Voices podcast.

Jeff Sands: [00:01:00] You bet. Great to be here,

Patrick (CEO of WSO): [00:01:02] To be great if you could give the listeners just a short summary of your bio.

Jeff Sands: [00:01:06] So Real quickly grew up in a family manufacturing business and in a long line of entrepreneurs, and was always determined to be an entrepreneur myself. Economics degree MBA worked outside the family business for 12 years, went back, worked in the family business, experienced my first turnaround there.

Patrick (CEO of WSO): [00:01:26] What did you guys? What did you guys make?

Jeff Sands: [00:01:28] We printed textiles, so we took raw polyester, printed artistic designs on it and sold our stuff. Your mom would buy to decorate the house pillows, the decorative flag in front of the home, stuff like that.

Patrick (CEO of WSO): [00:01:44] And it was a family business. Your dad started it.

Jeff Sands: [00:01:47] Your. Yeah, my dad started from scratch. My mom wouldn't let him put it in the garage. So he started with a very small rented space and one little heat transfer machine and built it to about two hundred and eighty employees at its peak.

Patrick (CEO of WSO): [00:02:02] Great. So then you joined right out of school.

Jeff Sands: [00:02:06] Well, I school and then afterwards, I spent eight years working out of the four years in school and then eight years working out of the family business in a variety of industries. Biotech startup Fortune five hundred distributor work for a crazy, crazy Russian importer. We're swapping out Russian sporting goods for chicken quarters, which entire shiploads whole chicken. And just

Patrick (CEO of WSO): [00:02:36] To give people some context, when did you graduate undergrad In eighty nine, correct? Eighty nine, Yep. So ripe for a recession.

Jeff Sands: [00:02:43] Yes. And I went up, I read way too much, Jack London, as a kid, I was obsessed with living in Alaska since I was like 12,  Which is odd for a kid growing up in New Orleans. But I wanted to go straight from high school to Alaska. My parents convinced me to go to college and I went, is, I think, like the day after graduation, I went up to Alaska. Live there for my twenties with my college girlfriend is now my wife and got my MBA worked in a wide variety of jobs, but a lot of it was just supporting a fantastic single kind of free before children lifestyle.

Patrick (CEO of WSO): [00:03:22] And what would You do there? What were you just hiking?

Jeff Sands: [00:03:24] Ice climbing, mountaineering skiing. Supporting the lifestyle? A lot working hard. Put ourselves through grad school at night. But you know, free kids, you have all the time in the world

Patrick (CEO of WSO): [00:03:36] Going to have a lot of family down in New Orleans. I don't know if you knew that.

Jeff Sands: [00:03:38] Oh no. Yeah. Yeah, great. As you know, a great town, great town.

Patrick (CEO of WSO): [00:03:42] I was just not going to like it. Yeah, I was just down there for the holidays is awesome. Oh, cool. So you get the MBA, I get the MBA. If you're kind of this free spirit out in the last, you just felt like you get better jobs out there

Jeff Sands: [00:03:55] Because I knew Alaska was short lived and I knew I wanted to. I really wanted to be an entrepreneur. My father is a Successful one and my mom was my grandmother. You know, and when you see entrepreneurship work, who wouldn't be attracted to that?

Patrick (CEO of WSO): [00:04:11] And when you kind of going into business school, did you have an idea of something you wanted to start or was it just like, No, I just want that foundational skill set?

Jeff Sands: [00:04:20] Pretty much the foundational skill set, you know, a lot of I've always wanted to know what I don't know, and I've always wanted to be able to size up, you know what don't? I know, I don't like being unprepared.

Patrick (CEO of WSO): [00:04:33] Was your dad kind of pushing you to get it to come back and help run the business?

Jeff Sands: [00:04:36] Or No? No, he really wasn't. He was great and gave me my freedom. He had a strict role. Can't come back before you're 30, You know, go Get outside experience. But, you know, really

Patrick (CEO of WSO): [00:04:49] Isn't that rare? Isn't that rare? Didn't he feel like he could teach? That's awesome. That's awesome.

Jeff Sands: [00:04:53] Yeah, it was. It was great. And I told my son the same thing. I've told all my kids the same thing. You know, go tackle the world. And if you want to come back, great. But otherwise I go, figure it out. Go realize what a real boss is like.

Patrick (CEO of WSO): [00:05:07] Yeah, exactly. Go realize how hard actual life is, right? Yeah. So when you're out there in Alaska, was it was it like touch and go at any point? Or were you just like employed by? I know you did a lot of random things

Jeff Sands: [00:05:20] Of random things kept my, you know, I keep my lifestyle and I overhead while gives you lots of freedom and I still recommend that.

Patrick (CEO of WSO): [00:05:29] Very cool. So you're you get it. The NBA, you come back and it's now time.

Jeff Sands: [00:05:34] Worked at yeah, worked in the family business, kind of worked my way up from sales through operations, and everything else got into our first turnaround in two thousand two. Our biggest product at the time was Decorative Flags nine eleven happened. Everybody put up the American flag and nobody flew a decorative flag for like a year and our revenues dropped. What was it? It was like 70 percent in three years or something.

Patrick (CEO of WSO): [00:06:06] Do you mind sharing what the revenue was?

Jeff Sands: [00:06:08] Peak was right around 30 million.

Patrick (CEO of WSO): [00:06:11] Certainly went from about 30 to 10.

Jeff Sands: [00:06:13] Yeah, maybe 12 or something. It's hard to remember. My joke is it took me three years to fulfill. My joke is it took me three years to pull off a six month turnaround and the shock was I thought it was pretty clever. The bank came in, really put the squeeze on us. Our CFO was playing Tricks With the inventory that shame on me. I didn't count Shaima. And the problem was I had started another business. My dad had retired. We brought in professional managers to run the cash cow. They screwed it up and then they hid their losses. And then the bank saw the bank came in and squeezed us and I went home. I don't know a damn thing about fixing a business, went through all my college textbooks. Nothing went to Barnes and Noble. The next day, There's four racks Of management books and not a single title on the topic. It's like studying life without ever contemplating sickness or death. It's just and you go to Barnes and Noble and it's, you know, it's just garbage. You know, just all this hype about being an entrepreneur and hype by faith. Nothing about dealing with anything like we're doing today. We're recording this on March 17th. The world's melting down from coronavirus, and nobody has learned anything about dealing with any of this crap in Any business school.

Patrick (CEO of WSO): [00:07:35] It's do you feel like do you feel like the turn around a sort of roadmap is much different on us, like a service business or a manufacturing business? Or are there certain kind of broad lessons you can apply Across

Jeff Sands: [00:07:47] A huge, broad lessons and really it's levers. And I would say the biggest difference in the different businesses business models is the availability of levers. Manufacturing is really complex, so there's a lot you can pull on and and the a vacant piece of real estate, there's nothing you can do but call real estate broker a vacant factory with air and inventory and a workforce and machinery equipment. Those are all whatever levers you can pull and are all assets you can squeeze cash out of. Interesting. So service business has less, but you still got you know what they are, but you still got lots of other stuff for sure.

Patrick (CEO of WSO): [00:08:28] So you're working kind of in the family business. It's a dramatic downturn For one or two and you start kind of just trying to figure out what's going on. So what did you do? Like what?

Jeff Sands: [00:08:39] Well, we did get it. We did everything to damn slow, which is the biggest issue. We probably did generally the right things. We just didn't too slow, too timid. But three years later, everything was wonderful. We had a huge product backlog. We weaned ourselves way down. Great product development backlog, pre-booking lots and lots of orders going into our busy season. Every single thing making a profit generating cash. Everything was marvelous except the balance sheet. It was so good that I left for a long overdue vacation. During that vacation, Hurricane Katrina rolled in, wiped out everything. I came zipping back and dealt with it From there. Our house was flooded, our neighborhood was destroyed. The business was Damaged, all the employees scattered. When I spent, I spent about eight nine months living in a trailer with three young kids in my life. Rebuilding the business, rebuilding the house got them both rebuilt. But at the end of that, you know, our balance sheet was weak going in and we just never got it turned around enough. Ended up selling it a loss. I, well, I'll tell you, don't ever talk to a bankruptcy lawyer if you don't know what the hell you're doing, because their answer to everything is file bankruptcy. So we want to talk to a bankruptcy lawyer. They said, Oh, that's right, you see file bankruptcy. Next thing you know, I'm filing personal corporate bankruptcy and then thinking, like, what were my options? What was? And that Created? I'm apparently in a really sore loser because that put a huge chip on my shoulder and I just wanted to relitigate and refight what had happened to me over the last several years. And I just became completely obsessed. I gave up reading and hobbies and just read everything I could on insolvency And

Realized how many good options there were and how much better I could have played the game. And then for myself, it was really looking for another shot. So I was looking for a turnaround because I wanted to go refight some old battles. But at the same time, once I did and got that out of my system, then I'm helping entrepreneurs save their business and not go through what I went through. And then That's very Rewarding. Then you go save a couple of businesses Where it's the biggest Industrial employer in the county and the county really needs, and it's a run down county and the Rust Belt and you're going to one hundred jobs are about to disappear and everybody really needs it and you save that and it's just the greatest feeling in the world. And now I do it just because I'm hooked on that sort of superhero feeling. It's just magnificent.

Patrick (CEO of WSO): [00:11:26] Said you wanted to kind of get so you filed for bankruptcy. What kind of got you back going? What was that next shot for you?

Jeff Sands: [00:11:34] No, I languished for a while. And then what

Patrick (CEO of WSO): [00:11:37] Did you guys do? You're in that trailer. What was the what was the next step?

Jeff Sands: [00:11:40] Mood Vermont got away from hurricanes, and ultimately it took a lousy job, got my feet underneath me, then hung my shingle as a turnaround consultant, starved for five months and then got to eat on a company in Detroit, flew out there and met with the owner. He hired me that day and this was in 09. Their revenues had fallen 90 percent and nine months.

Patrick (CEO of WSO): [00:12:06] How did you sell yourself as a turnaround consultant, given that you had that that passed? Were you saying, Well, I won't let this. I mean, because you did. You did have some good track records in terms of turning things around. Mm hmm. But then what? It was easy to say like, OK, well, Hurricane Katrina, that was it. But in terms of how you sold yourself, can you talk a little bit about that? Because I think that's really important for people to know how to sell themselves when they're going into meetings like that.

 

Jeff Sands: [00:12:33] I lots and lots of fake confidence. That's pretty much it. I knew I was starving. I hadn't brought in Nicole into the family of five and months and lots and lots and lots of confidence. And it worked. And he didn't have a lot of great options. The bank was foreclosing. He was leaving for three months for intensive cancer treatments. Oh man. And. And he didn't have any other good options, thank God, and I took it and I went, Oh my God, I went after that thing like it was a battle of a lifetime. And but two months later, we turned a small profit. And that's literally revenues fell 90 percent. It was a complete bloodbath. Wow. We got a small batch.

Patrick (CEO of WSO): [00:13:18] Can you share what industry was in?

Jeff Sands: [00:13:20] Yeah, it was metal machining

Patrick (CEO of WSO): [00:13:22] And it was 90 percent hit and we just flooded with

Jeff Sands: [00:13:26] Caterpillar. They were a high cost, high quality aerospace shop. They had like a hundred parts under Mars rover. They used to do all this fantastic work. Got it. And then the owner wasn't really paying attention. The salesperson realized that he got as many high fives, bringing in a million dollar order from Caterpillar as he did from Boeing. Of course, the order from Caterpillar had no margin in it whatsoever. But he felt like a superstar whose revenues up their gross margins sucked. They got completely pregnant with Caterpillar. Then, like, what's probably going to happen now? The order book just vanishes. Just every week. The order book gets smaller and smaller and smaller, and all sudden you're like. There goes there's a 90 percent decline in revenues. Geez, it was shocking. Yeah, but

Patrick (CEO of WSO): [00:14:16] So besides layoffs, obviously, or furloughing or

Jeff Sands: [00:14:20] Getting people got The head of Sales who was quitting and convince him to stick with us, and we basically went back to the customers and fought like hell, claw their way back to business. You know, also timing helps. This was August of 09, so the economy was sort of bouncing back. You know, just like we're going to see in six months, a turnaround six months from now is going to be a lot easier to turn around right now. Yeah. And there's I always say it's lots of timing and lots and lots and lots of luck in the turnaround. You'll meet a, you know, a life coach who will tell you there's no such thing as luck. It's all about preparation or some crap. But you know, but everybody believes in bad luck, right? And hurricanes and tornadoes hit and viruses hit. And there's good luck and bad luck. Sometimes fast, sometimes slow. And quite frankly, if you can get the good luck early and the bad luck later, you'll probably survive if it's the opposite. You'll probably burn up your cash and your options before you can. Yes. Or you're just wounded and, you know, Like we've got big old industrial rundown factories with old rundown equipment. Sometimes the equipment will go to yours before breaks and sometimes they'll break the month after you buy it. And you know and. That it's just it's all luck, and then that equipment breaks the first month you're screwed as far as cash flow, there goes your whole model And everything's out the window. Two years I Can generate enough cash And enough Cushion and comfort that when the equipment goes down in two years, we can work around it.

Patrick (CEO of WSO): [00:16:01] So tell me a little bit about so you went into that. That was kind of like a really critical engagement. So it was it like a full time. You're just coming in, you're doing this turnaround, your CEO, you have the full range since he was out.

Jeff Sands: [00:16:12] Yeah, exactly. And I'll tell you my two best turnarounds for clients. One was this guy who after three months of cancer treatment, the other was a the CEO committed suicide the day before I was hired. But when there's nobody around to second guess, it's amazing how fast you can move and what kind of progress you can Make when you're stuck with The CEO who doesn't want you to cancel the country. Club membership still has his eyes set on an RV for the summer and all that lunacy. It just slows you down and you don't make nearly as good progress and doing, you know, doing turnarounds as an investor, obviously, you don't have this legacy CEO makes it a lot more enjoyable.

Patrick (CEO of WSO): [00:16:59] So tell me, how long was that engagement where you kind of got things profitable with really fast? But then, you know, the economy was still pretty weak in 09. So did he come back after his treatment and you just handed the reins back?

Jeff Sands: [00:17:09] And yeah, pretty much. And they want to pretend like they never met you. It was probably it

Patrick (CEO of WSO): [00:17:14] Was because it's embarrassing.

Jeff Sands: [00:17:16] Yeah, exactly. Like no one ever goes and tells their friend about the marriage counselor to help them out.

Patrick (CEO of WSO): [00:17:21] It's almost like if you came into Wall Street Oasis and you're like, Oh, you idiot click, like the revenue triple or quadruple. And I was like, Oh man, I'd be embarrassed.

Jeff Sands: [00:17:32] Yeah, right? You send me on your way.

Patrick (CEO of WSO): [00:17:36] Yeah, was me because I was so smart to bring in this. Yeah, no. I get it. There's a lot of ego involved

Jeff Sands: [00:17:44] And, you know, so like that time, I kind of wanted to hang around because I didn't have any other options and I needed the money.

Patrick (CEO of WSO): [00:17:51] But tell me a little bit about the arrangement you made with him in terms of like pay. Was it like just a retainer or was it a success fee, anything like that?

Jeff Sands: [00:17:58] Yeah, we just hit. That last point is it's good. I need to leave and I've realized that, you know, I'm a change agent. I'm not a peace time general. And once you know, what's the other thing? Sometimes need a gunslinger. Some need a sheriff. Yeah. You know, once everything's fixed, I don't need to be there and I need to move on fees. It ranges the bigger firms like to do an hourly fee and stuff a whole lot of consultants in their run up the bill and all that. I try to do a daily if I can work it to a monthly or something I can. There's lots of options with gain sharing equity. There's a lot of lots And lots of ways to skin the cat. And I would make Alawis probably the industry standard.

Patrick (CEO of WSO): [00:18:50] But given how like, how bad a position you're in prior to taking this role where you just did, you just accept whatever he said or what was the did you negotiate at all or how did you get yourself to negotiate when you're kind of you're going to do it for whatever?

Jeff Sands: [00:19:04] It's probably so scared to death. I was negotiating with myself. I was worried about getting the gig right. Yeah, he didn't. And I underbid the hell out of it. But you know, whatever it was, it was my first business that was not my own. And it gave me the confidence to go get others, and it gave me a foothold on a track record

Patrick (CEO of WSO): [00:19:28] And see at least willing to vouch for you to other potential clients.

Jeff Sands: [00:19:32] Yeah. I don't know if I ever

Patrick (CEO of WSO): [00:19:34] Had to help. Did he ever help you or you just had that confidence now you could go out and be like, Yeah, I just had trouble. So tell me how. So that was what, three months, four months? What was it that was like six months? Oh, six months. Ok, so then did you immediately get your next one or was there another?

Jeff Sands: [00:19:47] Yeah, maybe we went mostly through bank workout departments, and that's where I got most of the deal flow and where I've gotten it over the years. And then like,

Patrick (CEO of WSO): [00:19:57] Where did you get that workout department? Yeah, bank workout departments. So where are you? Who are you?

Jeff Sands: [00:20:03] Banks got two department sales and collections and you know, the sales guys, the guy with the great good smile, strong handshake, logo, golf handicap and an expense account. The Workout Guys is troll in the basement, who's a collector? And that's it. And he doesn't have an expense account or a golf game, and that when you get transferred from one to the other, you know you're in trouble. And but those are the folks I work with and their job is their job stuff. They have to get the banks money back, but also maintain their standing in the community, be decent people about it.

Patrick (CEO of WSO): [00:20:41] So tell me about like, how are you developing relationships with those collection? And people are like, how are you doing? How are you in terms of deal flow? Somebody who is looking for a turnaround who feels confident, it's a good it's a good source to like, befriend those people in the community or just say, you

Jeff Sands: [00:20:57] Know, you look at the TM8 Turnaround Management Association, they rank it Bank workout. Second would be bankruptcy attorneys and third would be CPAs. That's useful. And then If you're on the investment side, it's mostly investment bankers and brokers or Some corporate Development folks who will do divestitures out of big, big companies.

Patrick (CEO of WSO): [00:21:21] So for all the listeners right now, do they do you would you recommend them going or targeting restructuring?

Jeff Sands: [00:21:26] No, I'd say stay the hell away from this. Yeah. You know, it's fast, crazy, chaotic. And if it fits your lifestyle, it's the greatest thing in the world. If it doesn't, it doesn't. But it is You got to Be comfortable breaking lots and lots and Lots of stuff to Make something work.

Patrick (CEO of WSO): [00:21:48] Ok, so tell me about your next there one of your next clients. What was the kind of the toughest any that you weren't able to save? I'm sure there are some. I mean, some are just irreparable, but

Jeff Sands: [00:21:57] Yeah, some are irreparable.

Patrick (CEO of WSO): [00:22:01] Why were the CEOs are still there?

Jeff Sands: [00:22:03] Yeah. And the key is really it's like a plan of cascading failures. So first thing is, we're going to we're going to jam sales and grow our way out of this. But if that doesn't work, then we're going to work on a strategic sale. And that doesn't work. Then we're going to work on selling to a financial buyer. If that doesn't work, we're going to have a panic sale to anybody in the world. And if that doesn't work well, then we'll talk to the bank and have a slow, orderly, peaceful liquidation where everybody where it's clean and the real, what that what that does is what I didn't have. It allows the owner to go out with a nice, clean plan, having every shot at success. And at the end, they had their dignity and their pride intact, and they've been treated well and the bank treats them with respect. And that's really what a good the whole secret to turnaround is having a really good plan. They're executing it really, really fast because bad, bad news is coming at you. But bad news only moves so fast. And if you can move faster, then the bad news you can gain on it if you sit there right now, the news bad news is spreading pretty quickly, and I think there's a lot of people just sitting there and they're just getting run over.

Patrick (CEO of WSO): [00:23:16] Yeah, interesting. So tell me about kind of the next you got your taste of success, you got your confidence, you started landing clients, you started kind of bringing in some cash into the Family and feeling good. That it's continued forever. When did you start writing the book?

Jeff Sands: [00:23:35] Let's see. So that was so like Detroit was 09, 20 13. I bought a business with a friend and did our own turnarounds. I've done. I'm kind of a mix between consulting and doing it as an investor, and I was headed up to northern Manitoba in the middle of winter for a paper mill that had just been purchased and. I was thinking know I do all this from scratch every time a blank piece of paper and nobody knows anything and I got to like, take them through the whole program. If I only had a playbook or something that I could give The people like, just bring them Up to speed faster. And so I just started outlining and I was up there for six weeks in the dead of winter and just started outlining and then filling in the skeleton. And then and then, quite frankly, it spun out of control and became a book over the next couple of years.

Patrick (CEO of WSO): [00:24:32] How did you have time? Was it in between clients that you did that? Or I guess at that point you were an investor in a company? What gave you the time for that?

Jeff Sands: [00:24:38] I did it nights and weekends and in Canada. And then the second big blast was I spent a month in Spain and I wrote it in in the mornings in Barcelona before the U.S. woke up. And that was pretty much those two big Blast and Somebody in. And then I had this

Patrick (CEO of WSO): [00:24:56] Why don't you show the book and tell, tell people about it so I can go buy it?

Jeff Sands: [00:25:00] Corporate turnaround artistry fix any business in one hundred days, and this takes you from getting in trouble, dealing with the bank, restructuring your debt on the other side and coming out clean and healthy. And it's everything I've learned from my own experiences and fixing dozens and dozens of other books.

Patrick (CEO of WSO): [00:25:19] I will link to that in the show notes as well.

Jeff Sands: [00:25:21] The people be great, and I'll tell you, I nobody likes a turnaround topic I posted the other day on so Saying basically, Hey, look, we're in a recession. Here's a book, and it's a valuable resource for somebody. And I'm getting his monkey crap thrown at me because no one wants to talk about it.

Patrick (CEO of WSO): [00:25:39] I think it's because the community is very, very Protective of people not Coming on promoting something, especially if you're a new member. So that's probably why if you come on with an AMA and then we embed this podcast and whatnot, I think they'll be much more open. It's almost like if you give the green light, give you the green light as you're available, as a mentor or whatnot, or even if you're not. I think people will be much more open to asking you.

Jeff Sands: [00:26:07] That's a much more sensible approach

Patrick (CEO of WSO): [00:26:10] Because people don't want like They don't know. They don't know.

Jeff Sands: [00:26:13] So they just get how it could look bad.

Patrick (CEO of WSO): [00:26:15] Yeah. So I think you're running this company for six years. Tell me that that path from 13 to even Just still actually still running.

Jeff Sands: [00:26:25] No, we sold that one off. And I think, yeah, I'll tell you that what I see right now and I saw this in nine and I didn't have much of a platform note anybody would really listen to me. If you think about driving a car and you use turnarounds, there's lots of metaphors. None are so great. But, you know, take the economy. The last Four years, everybody 10 lane interstate, everybody's hauling ass at 80 miles an hour. Everything's fantastic. But we know there's no like now. We know there's a turn up ahead, right? So everybody's going to go into this turn after flying down a road real fast. If you know anything about driving race cars or anything, the way you do a turn is you brake hard going in and you accelerate fast going out. That's the exact same thing you got to do with the business. I mean, right now, today, quite frankly, weeks ago, people need to be stopping under brakes, hoarding cash, doing their cuts, raising prices, moving your balance sheet around, doing everything absolutely possible and get in a position. And let's say, you know, the virus is going to peak in three months and the stock market will start looking good in six. You should be Jamming to gas at month three coming out of it because

Patrick (CEO of WSO): [00:27:40] Do you think that I almost feel like peak panic will be in three weeks early April, when the rate of I think the testing is so far behind that. Forget about that. But the actual the actual, you can't avoid reporting deaths, right? So in terms of if not to be Too morbid, but in You know, there's 19 days plus the five day incubation. So like twenty something days from when they really started shutting things down, especially here in Santa Clara County, where I live, which is like one of the epicenters, the breakouts. I'm thinking, like Early April, we're going to see the worst acceleration Of actual Deaths in the area, Which is really I feel like the market has already come down so far so fast that it's almost that that expectation hasn't been maybe fully priced in the chaos that will happen, I think, in the next few weeks. But I feel like,

Jeff Sands: [00:28:32] Yeah, you could 09. I think the market bottomed in March, and I don't think revenues that manufacturing companies bottomed till, probably very similar to what I had in Detroit August September.

Patrick (CEO of WSO): [00:28:47] So I think there's going to be, oh for sure, the ripple effects, for sure. We'll be dragged down, but I'm thinking more market like, what do you think in terms of the price action and stuff like that? You feel like you

Jeff Sands: [00:28:57] Don't follow the stock market,

Patrick (CEO of WSO): [00:28:59] Ok?

Jeff Sands: [00:29:00] I just

Patrick (CEO of WSO): [00:29:00] Know I agree with you in terms of the

Jeff Sands: [00:29:02] Spectator, it just seems so disjointed from reality. Yeah. What the economy grew to a point seven percent last year and the market went up 30, and nobody saw a problem with that. But they're all horrified when they start matching each other, it's I don't know. Yeah, I like smaller businesses where I know what's going on. I have controls. But anyway, so what you watch, 90 percent of the companies will break too late. They're not doing it now. They're not getting aggressive, they're thinking about it. And then they'll be scared and sort of emotionally wrecked and everything. And they're not going to accelerate out of this. But somebody will, and there's going to be this huge distancing you take. Take an industry now that's fairly close. Mm hmm. A year from now, somebody, the top person, the bottom person is going to be gone. The top person is going to be really healthy and we'll come out of the stronger and everybody gets to make that choice right now. But probably no one's making that choice. But it is very conscious. You can you can turn crisis into the best thing to ever happen to you only because everybody else getting your ass kicked so bad that they're not paying attention.

Patrick (CEO of WSO): [00:30:13] Interesting. Boy, you know you think it's just it's mindset

Jeff Sands: [00:30:16] Like almost impossible.

Patrick (CEO of WSO): [00:30:17] The psychology of it is just like hoarding fear and like fear of paralyzing fear instead of actually going out and executing.

Jeff Sands: [00:30:25] Yeah, yeah. And you know, you go through it enough times that, you know, like, I'm just smiling and whacking and kicking ass and making changes, knowing that it's going to work because I've been through it dozens of times. My first one, I was a mess. I did everything wrong and too slow and too late. And this is a lot of people's first ones, or maybe a second, but they forgot over 15 years of sunshine.

Patrick (CEO of WSO): [00:30:51] So tell me a little bit about so that business where you were, you were acquiring distressed industrial operations, correct? And kind of taking them into a rollup strategy.

Jeff Sands: [00:31:01] No, all different. All different industries. Just very opportunistic And so how many businesses did you

Patrick (CEO of WSO): [00:31:08] Acquire over

Jeff Sands: [00:31:09] Those six and seven years? Great. And. And they don't all work, but some do.

Patrick (CEO of WSO): [00:31:19] Ok. And so you came out OK from all that?

Jeff Sands: [00:31:21] Yeah, absolutely.

Patrick (CEO of WSO): [00:31:22] Great. And then so, yeah, tell me, so what are you? What are you up to nowadays?

Jeff Sands: [00:31:26] What's the first time in four years? I have nothing going on. It's the greatest feeling in the world. I'm helping a friend do a wind down who feels better and better about his decision. Every day is the whole rest of the world is going bananas chilling out at home, and I'll take on a bunch of small projects and there's going to be some big, fat, juicy acquisition fall in my lap in the next six months, and I'm just doing everything I can to stay, stay available for that.

Patrick (CEO of WSO): [00:31:56] And that means like stay liquid, But

Jeff Sands: [00:32:00] It's as much time as anything. You know, if I'm consumed on something on somebody else's project, I can't do my own. And I think that let's see, opportunity cost is the biggest cost.

Patrick (CEO of WSO): [00:32:12] And so you feel like right now, I guess you already have those relationships. You're going to start hearing of potential real distress somewhere with good fundamentals underlying it that you feel like, Oh, That's a great opportunity to come in I guess. Talk to me a little or tell the listeners a little bit like what typically you look for in a turnaround candidate as an investor? It's.

Jeff Sands: [00:32:33] It is part of it's indescribable, right, kind of like an architect goes into a house and knows if it has good bones that good, good customers, blue chip customers certainly stand out a part in an industrial product if you make a small switch on a Toyota Camry. You know there's demand for the next five years if you make anything on a shelf in any retail store. They really don't need you tomorrow. They can run your store just fine without your stuff or somebody else's version of yours. But if you have an engineered part on something other than maybe a seven thirty seven, you're probably doing pretty good. So, you know, you look at that and then leverage who your customers, who or your vendors Who are your Employees. Is there a union and who's the bank? And you can get all four. You get your customers, consume your lenders to lend your suppliers to supply your workers to work. It works. What happens in a turnaround is everybody stopped doing that. It's all falling apart, and I've just got to go convince everybody to to let's go. I'll get back in the roles and do our job. And we've we've had pretty good success taking over factories that have actually stopped production and and we basically bring the band back together and go around. Customers don't want us vendors to want us, employees still want us. And if you can hold that together, you've got a business.

Patrick (CEO of WSO): [00:34:03] How much do you feel like it's case by case, but is a lot of the value add that you bring? Do you feel like just knowing how to negotiate with the banks?

Jeff Sands: [00:34:12] Yeah. And I would say everybody else, you know, the banks and everybody's got their weakness and leverage, and everybody wants something out of this right? And it's usually to return to their money and the only way to end a good turnaround. The only possible way they're ever going to get paid is through future cash flows. So they have to support me, whether they like it or not. They have to support me to have an opportunity of getting paid back through future cash flows

Patrick (CEO of WSO): [00:34:39] And in terms of the specifics of. The bank, I mean, if it's a secured loan like senior secured loan. Is there option also just to Whatever they call it, not foreclose on, but to take precaution? But a lot of them don't actually want that, right? Yeah.

Jeff Sands: [00:34:56] They're going to come up short. I'll tell you, if you're a small company and a big bank and they can get and they can liquidate you and get all their money back, they're just going to liquidate your ass. And that's it. But if you're if you're not that, then you have a chance of working with them. Smaller banks will actually want to put the credit back on your books, even though it's been downgraded Through

The regulators and you or you can move to another bank. You know, often you'll go from a big bank to an ABL Shop if you're Deep. It's a dumb thing to say, like if I owed the bank a million dollars, I have a problem with the value of the bank $10 million. The bank has a problem, but there's some truth to that. If the banks are in a bunch and they can't extract it through an auction, then and you can give them a really good plan that they believe in, they'll support that plan to get paid back in full.

Patrick (CEO of WSO): [00:35:51] Let's talk a little bit, I'll let you go soon, but tell me a little bit more about as an investor for people who are interested in going following a similar path to you. How do they even get into that? Can they buy a distressed small company save making all one hundred thousand in revenue, but no profit? Is that too small? Or is it? Or do these things work from a tiny scale up all The way to the multimillion dollar?

Jeff Sands: [00:36:12] They probably work at a tiny scale. They have to work at a tiny scale. I don't go that far. You know, our range is probably 30 million low to five hundred million high. As far as revenues go, almost always negative EBITDA. So that's not a good measure. But yeah, the fundamentals and you could certainly take over, I think, any business and improve the way it's running most. Here's another secret

Patrick (CEO of WSO): [00:36:40] Like how did people develop these skills is the only way to do it is to actually start. Like how should they start as a consultant like you, like you did, is that the best way to kind of gain?

Jeff Sands: [00:36:49] Yeah, I'll tell you, when I did, the first thing I did is I. The Turnaround Management Association has a certification program, certified turnaround professional, three different books, three different exams, management, finance and law. And so I bought the books and study them. I thought, Well, here's sort of my entry ticket, right? If I know What's in these books, I should know Probably what I need to know. And that's what I got. It's really hard for a young person to get into the industry because you have to know so much about all these different topics. They all flow together. And if you know two and not the third, you're going to struggle. But the fact that I know what the factory is doing, I understand the cash flow forecast and I and I understand all my options in and out of bankruptcy court what I'm dealing with the bank. I can have a complete conversation, But you

Patrick (CEO of WSO): [00:37:42] Understand the legal aspects. You understand the financial aspects of how to actually yeah.

Jeff Sands: [00:37:46] And I know and I know what the company is actually capable of. And then the fourth thing is the psychology and the people, and you've got to you've got to motivate hundreds of people who are completely demotivated and have a bad attitude and you got to somehow get them not only having a good attitude, but working twice as hard as they have previously and doing things and trying Harder than they ever had before. And, you know, if you can pull that off, that sure helps.

Patrick (CEO of WSO): [00:38:15] So any other guidance or any wisdom you learned over the years that you would tell your younger self or tell your listeners before we call it,

Jeff Sands: [00:38:22] Oh my God, this is the greatest opportunity in the world right now with coronavirus and Get in There and get aggressive, get knocked around and Learn the hard way. And try and manage risk. Listen, when I'm an investor, I manage Risk, I don't really Look it upside, but if I had my downside controlled and my upside will Bounce, that's Ok. It's, you know, but I've been wiped out. I know what it's like. My partner has been wiped out. He knows what it's like, and I don't think most people are as shell shocked and risk averse as we are. But I like it that way.

Patrick (CEO of WSO): [00:39:04] That's great. We'll leave it there. Yeah, Jeff, thanks so much for joining us. Say tell, tell the listeners your book one more time.

Jeff Sands: [00:39:10] Corporate turnaround artistry fix any business in one hundred days available on Amazon. Great. Thanks so much, Jeff. Thanks a lot, Patrick. Take care.

Patrick (CEO of WSO): [00:39:17] And thanks to you, my listeners at Wall Street Oasis. If you have any suggestions whatsoever, please don't hesitate to send them my way. Patrick at Wall Street Oasis. And till next time.

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