Who’s Managing Your Organization?

 

If the name George Santos doesn’t ring a bell, then you’ve been in a sleep to match that of Rip Van Winkle or literally shutting out all of the news.

For those who fall into one of these categories, George Santos is a recent member of the House of Representatives from New York who was elected in the mid-term elections.

 

A COMPLETE LIE …

As it turns out, in order to get elected the story he told voters about his life is a complete and total lie.

Not content to lie about his employment history, he lied about his education, religion, family background, sexual orientation, criminal history, charity work, and yes, possibly even his name.

Yet, neither political party did enough of a background check to find any of this, and today, he remains an elected member of Congress.

 

WHAT’S THE BIG DEAL?

Given that this is a business blog, you’re saying to yourself: What does that have to do with my business? He’s a politician. Politicians lie! What’s the big deal?

The big deal is that while Congressman Santos is the latest political liar, people lie in business and that can affect companies large and small.

It turns out that Brian Williams, a respected NBC news anchor, told the lie for twelve years about being forced down by RPG fire while on a helicopter in Iraq.

When the truth of the fabrication came to light, Mr. Williams lost his network anchor position and NBC lost the number 1 network news position.

 

MANY OTHER EXAMPLES …

In another case, right out of the TV show, Suits, Brian Valery became an attorney for the law firm Anderson, Kill & Olick, claiming to having passed the bar despite having never even been to law school.

After representing 50 clients and charging over $300 per hour, Andersen, Kill and Olick was forced to negotiate settlements with those falsely represented. Valery lost his job and was sentenced to five years’ probation for impersonating a lawyer.

Mr. David Edmondson lied about two degrees on his resume to secure the position as CEO of Radio Shack. He claimed to have two degrees from Pacific Coast Baptist College. Neither degree was true, and he was asked to resign.

Ronald Zarrella served as CEO of Bausch & Lomb for eleven months when it was discovered that he did not have the MBA from New York University that was on his resume. Despite the news sending the shares of the company down in heavy trading, the company stood by their CEO based on his proven management skills. Lucky!

Other people who have lied about their backgrounds have held titles such as CEO of Yahoo, Dean of Admissions at MIT, CFO of Veritas Software, President of IBM’s Lotus Development Corp.

For those working outside the political world, the ramification for resume lies is often swift and absolute, labor experts say. An article in the Chicago Tribune outlines some interesting facts.

 

50% OF AMERICANS HAVE …

Most companies have some type of policy that says falsification of documentation is grounds for termination.

And yet, according to a survey conducted by StandOut CV in the Fall of 2022, more than 50% of Americans have fattened up their resumes at least once, with most lying about previous work experience, skills, college degree and personal details.

Yet the experts often disagree on the impact of falsehoods on both the candidate and the ability to do the job.

A former recruiter says that most falsehoods are really “embellishments” such as adding the word “proficient” to a skill on a resume where the applicant is not. And this type of subtlety is why many companies fail to notice.

Typically, most people don’t lie about where they went to school or what degree they have.

 

BAD ACTORS & DISASTROUS CONSEQUENCES …

Those are bigger than a white lie and they understand the liability behind that. Another expert states: “It would surprise me that people would do that now because it is so easy to Google somebody or run a background check and find these things out.”

For most employers taking candidates at face value is second nature. With multiple, urgent roles to fill, tons of resumes to go through, and dozens of interviews to schedule, you don’t always have the time to dig into a candidate’s background as thoroughly as you would like.

Most of the time, this isn’t a problem–the majority of candidates are honest, upstanding people just trying to find the right opportunity.

But occasionally, you will find a bad actor who chooses to exaggerate or even flat-out lie about their experience in order to get the job they want. If hired, the consequences can be disastrous.

Replacing an employee, especially a senior employee, even if they’ve only been there for a short amount of time–is time-consuming, expensive, and tedious, not to mention embarrassing.

 

CHECK FOR THESE SIGNS …

So, the next time you have an interview with a candidate that seems too good to be true, make it a priority to check for these signs that a candidate is lying or exaggerating.

1. Their answers are vague or unrelated.
2. Their body language gives them away.
3. They lean too heavily on group accomplishments.
4. They get defensive.
5. Their background and skills don’t pass the sniff test.

Despite the urgency of the hiring process in today’s environment, it’s important to go through the hiring process with deliberation. Above all, check references and check the references of references.

Check social media, all social media, not just Google.

Be prepared to give skills tests and for creative positions such as advertising and promotion ask for and discuss past work portfolios.

Remember, George Santos is only one of 541 members of Congress. But your next hire could have a major impact on your company. Take the time and choose well.

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Lessons Learned From 2022

 

As we bid adieu to 2022, we thought we would provide our insights into some of the lessons learned from our interactions with small to medium-sized businesses throughout the year.

Over the course of the year, we have had exposure to businesses in many types of industries and in a wide range of revenues.

We have found that many of these businesses have had several common issues or problems and we thought it would be useful to highlight what actions could have been taken to potentially prevent those companies from getting into trouble in the first place.

 

GOVERNMENT PROGRAMS HELPED …

During 2022, many companies continued to have cash resources provided by governmental programs such as PPP or EIDL loans.

The additional liquidity helped most companies cushion their operating losses until management was able to make course corrections to generate positive cash flow.

While a number of companies were successful in making those course corrections, there were still a significant number of companies that could not right the ship. In discussions with multiple lenders and people connected with those companies, there were common themes that surfaced.

 

SOME COMMON THEMES SURFACED …

In many cases, management could not determine what changes were required to make the course corrections, did not apply for the government programs that were available, or did not have an adequate plan to address the decline in their cash flow.

There are many lessons that can be learned from their mistakes; however, the most important lesson is how management should proactively address operational problems as they occur.

First of all, every business should have an annual financial plan that outlines their expectations for their business along with the assumptions that drive operations. For example, assumptions regarding revenue increases, pricing, new customer acquisition and new products should be incorporated into the plan.

Assumptions for expenses should include manpower and staffing levels, wage increases, and as it relates to other expenses the expected rate of inflation.

Once the plan is finalized the level of anticipated profitability and cash flow can be determined and used to monitor activities during the year.

 

AS THE YEAR PROGRESSES …

As the year progresses, current operating performance should be compared to the financial plan to determine if the business is on track in achieving their plan goals.

If there is a significant decline in revenue, or an increase in expense, then course corrections should be made. The financial plan can also be used to determine the amount of financing required to fund operations.

Management can use this plan to talk with their lender about options to increase their credit line, if required, or look for additional resources that may be available.

While the PPP and EIDL loan programs have ended, the Small Business Association continues to have programs that could provide help to small to medium-sized businesses.

 

REPORT CARD FOR THE BUSINESS …

Another common theme that we have seen frequently, is situations where companies are not able to prepare financial statements on a monthly basis.

Monthly financial statements provide a report card for the business and give management the ability to regularly monitor performance and to take advantage of opportunities or make course corrections when the business is not achieving the planned objectives.

When monthly financial statements are not prepared on a timely basis, management does not have the tools required to react to the actual performance of the business. Lenders also typically require monthly or quarterly financial statements as well.

In most lending agreements, an event of default occurs when financial statements are not delivered when due.

While most banks will provide a grace period before declaring an event of default, if it happens consistently, lenders may be forced to take more aggressive measures to force management to provide financial statements as required.

 

COMPETENT STAFF REQUIRED …

Management must ensure that they have the competent accounting staff and adequate systems required to prepare monthly financial reports on a timely basis.

When we see this type of problem occurring regularly, we often see that the finance staff lacks the level of sophistication or accounting knowledge to overcome these obstacles.

It’s really important to assess the level of competency and expertise of a company’s financial staff.

Often small companies hire bookkeepers to manage the accounting function, and as the company grows, management fails to upgrade their accounting staff to manage the accounting function of the now more complex business.

Regularly reviewing the requirements of the business with regard to financial reporting is an important element of managing the business and proactively upgrading the accounting staff is an imperative to ensure that the financial reporting requirements of the company are achieved.

 

ADEQUATE SYSTEMS A MUST …

Preparing accurate financial statements also requires accounting systems that provide for the needs of the business. We often see companies that do not have adequate financial reporting systems and/or the business requirements are such that the current systems are no longer adequate to provide the reporting required to monitor all aspects of the business.

We often see businesses using QuickBooks to manage their accounting functions. Initially, the QuickBooks system works well for small businesses that do not have complex business reporting needs or accounting issues. The problem starts when the company expands, acquires new businesses, or has multiple operating divisions.

While QuickBooks may handle basic reporting and accounting requirements, it’s difficult to modify the software to satisfy the needs of the business as it evolves.

Those companies that, do try to modify or use QuickBooks for more complex business reporting often learn that the software is not intended to be used without major modifications.

Often the end result is that management does not receive the information they need to proactively operate the business.

The important lesson here, is that management should periodically review the information reporting requirements, particularly as they plan to expand, add new product lines, or divisions.

This should be done as part of an annual planning process.

If there are inadequacies or gaps in the current software, management should proactively determine a plan to upgrade accounting and financial reporting software in advance of the need for additional reporting requirements.

While the list of lessons learned over the past year is lengthy, we wanted to highlight some of the situations we see more frequently.

In most cases, these types of problems, if not remedied in a timely manner, cause damage to the business, loss of shareholder value and in some cases, cause the business to fail.

Being proactive will help mitigate the damage. And, if businesses find themselves in this type of situation, don’t be afraid to ask for help.

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Revitalization Partner’s Principal Pens Article That Appears in January 23′ Issue of The King County Bar Association Bulletin

 
Revitalization Partners Principal – Bill Lawrence – Pens Article That Appears in January ’23 Issue of The King County Bar Association Bulletin.

https://www.kcba.org/For-Lawyers/Bar-Bulletin/PostId/1910/the-false-path-of-the-pied-piper

 

Smaller Businesses in Need of a Loan Find Banks are Tightening

 

While inflation is the highest in decades, and workers are demanding higher wages, even in normal times it can be tough for a smaller business to get loans from traditional banks because they lack the assets or credit histories of larger companies.

And in many cases, they lack an understanding of the issues that drive the lending decisions made by banks and other lenders.

 

KEY DOCUMENTS MISSING …

Revitalization Partners is working with multiple clients that are behind on taxes for multiple years. And in several cases, financial statements lag as well.

And yet, despite this lack of financial data, these companies continue to seek operating loans to continue operations.

 

TOUGH LOAN ENVIRONMENT …

Only about 30% of businesses that applied for financing last year received the amount they requested, down from about half in 2019.

And the President of the National Small Business Association, an advocacy group, said the current loan environment could make it tougher on smaller businesses trying to recover from the pandemic.

Their balance sheets, which banks use to assess loan applications, were weakened during the pandemic, even if the future looks bright.

 

14.7% LOAN APPROVAL RATE …

In February, big banks approved 14.7% of loan requests, down from 28.3% in February 2020. And small banks approved 20.5% of loan requests, down from 50.3% in the same month in 2020.

That’s according to the online lender Biz2Credit, based on data from more than 1,000 small business owners who applied for funding on the company’s platform.

The banks’ stinginess has led business owners to consider other options such as community banks and online lenders.

Owners were more likely to apply for an online loan last year than in 2020, while applicants were less likely to seek financing from a small bank, the Fed survey shows.

 

THERE ARE TRADEOFFS …

There are tradeoffs however: Alternative loans can be easier to get but are likely to come with higher interest rates or steep penalties.

Typically, traditional banks’ small business loans carry interest rates up to 7%, or greater while online loan rates vary widely but can easily be 10% and higher.

We’re in that part of the cycle where credit availability is going to get tighter. The fact that a lot of small-business lending is short-term in nature and often involves floating interest rates could make rising interest rates even more challenging for small businesses that need capital.

 

CREDIT WILL COST MORE …

It’s going to cost more to get credit. Underwriting standards are going to get tougher because you’re going to actually start seeing delinquencies and defaults, and the banks don’t respond to that by going, “we need to be looser with our money.”

They respond to that with tightening up their underwriting requirements.

A tougher lending environment means business loans will likely come with higher price tags in the coming months, but small-business pros say there are things entrepreneurs can do right now to get lower interest rates on business loans.

 

NOW’S A GOOD TIME TO …

If you don’t have an existing relationship with a lender, now may be a good time to make one.

It has been suggested that connecting with a local banker who has some autonomy in the underwriting process can make all the difference during a tight credit market.

They know what their underwriters are looking for, and they will do the coaching with the business owner to make sure that the balance sheet looks the way it needs to look,” he says.

A local banker might also look at credit reports and payment histories ahead of time to make sure there are no red flags on your application.

 

CORRECT, COMPLETE & CURRENT …

To get approval on a business loan, be sure your business’s financial statements and tax returns are correct, complete and current, you’ll have to be able to explain to lenders what each line item means on your financial statements and what story that tells.

You also should be able to explain how the information on your tax returns ties to the information on your financial statements.

And if you don’t have the contacts or expertise, don’t be afraid to ask for help before you ask for the loan.

While occasionally a “yes” turns into a “no”, rarely does a “no turn into a “yes”.

 

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Seasons Greetings

From all of us at Revitalization Partners, we wish you and your families the best of the holiday season. We look forward to a great holiday and resuming our writing after the first of the year.

All the Best

 Revitalization Partners, LLC.

 www.revitalizationpartners.com

 (206) 903-1855

Full-length RP Article in December King County Bar Association Bulletin

The King County Bar Association has featured a Revitalization Partners article in the December issue of their Bar Bulletin.

Click the link below to read the full article.

http://www.kcba.org/For-Lawyers/Bar-Bulletin/PostId/1876/the-distressed-loan-dilemma-are-we-acting-fast-enough-to-mitigate-risk

 

 

How An Incompetent Leader Can Destroy A Business

 


Over the years, the business world has seen many great leaders that have had a positive influence on the business community and on society.

Having said that, many businesses have also been negatively influenced by incompetent or unprepared leaders. They range from examples like Elizabeth Holmes of Theranos fame to Ken Lay of Enron, that ultimately destroyed their companies and were subjected to numerous lawsuits.

And then there is Sam Bankman-Fried, the Crypto Currency King!

 

INFLICT SIGNIFICANT DAMAGE …

Incompetent leaders can, and most likely will inflict significant damage and, in the worst case, can single-handedly destroy a company.

Companies of all sizes can be subjected to incompetent leadership. One might ask the question how does this happen?

How do incompetent individuals rise to the level of CEO, or other senior management positions?

And if they do, why don’t shareholders, board of directors or other stakeholders deal with the problem before it’s too late?

 

GOOD INTENTIONS & BAD OUTCOMES …

It is important to understand that most incompetent leaders are not committing crimes or intentionally destroying their company.

In fact, the most likely scenario we have seen is where an entrepreneur has a great concept to start a company and attempts to rapidly grow a company without the experience or management team that is capable of executing the strategy.

In our experience working with companies, the professionals at Revitalization Partners have seen many examples of incompetent management.

 

SIMILAR LEADERSHIP CHARACTERISTICS …

In most situations, incompetent leaders have similar characteristics that we can quickly identify.

For example, they often demonstrate a sense of charisma and confidence, however, frequently they do not have the ability to put together a cohesive strategy and ultimately push problems down the road.

And, to a large degree, they tend to be self-centered and narcissistic and only want to talk about what they believe they have accomplished, even when the facts don’t support their stories.

Others simply do not have the confidence to actually manage. Rather than having operational standards to which they hold subordinates accountable, they depend on being liked as opposed to respected.

When board members or other stakeholders question their thinking or confront them with the facts, they typically push back and tell them that they don’t understand their business, or in fact, blame the business problems on other factors.

 

A CLASSIC SITUATION …

One of the classic situations we have seen is when an incompetent leader will blame their lender for not increasing their credit line, or worse, providing an extension to the existing line of credit to accommodate their needs.

In most cases, it’s not the lender’s fault that the borrower’s business is not profitable, but nevertheless an incompetent leader most likely will try to blame them.

Likewise, they may try to blame their attorney for not providing good legal advice for handling a significant business problem. Again, the attorney is most likely providing sound legal advice, just not the advice that the incompetent CEO wants to hear.

Then, there is the situation where the CEO blames the direct reports for not properly doing their job. They often criticize one or more individuals for not accomplishing certain goals.

And, in many cases, while providing criticism, they are not willing to discipline or replace those individuals for a variety of reasons.

 

JUST LIKE ME …

In reality, incompetent CEOs have a tendency to hire management and staff that have similar characteristics as their own, and as a result compound the problem of achieving strategic or financial goals.

As this type of behavior goes on for a period of time, the real operational issues are not addressed and the company’s financial performance declines.

And, if the behavior does not change, the company faces a real crisis in incurring multiple months and years of losses that ultimately results in bankruptcy or a receivership.

 

AT THE FIRST SIGNS OF TROUBLE …

It’s really important for board members, shareholders, lenders and other stakeholders to challenge leadership at the first sign of trouble.

And the first signs may not be financially related. It most likely will be reflected in a loss of talent, people who will not work for an incompetent leader, or several important key vendors that decide not to do business with the company.

Challenging the CEO to explain why these things are happening may be the first clue that they are not managing the company properly.

And, if their answers are not definitive and accompanied by a sold action plan and timelines for improving the situation, it’s another sign that things will likely get worse in the future.

Monitoring the CEO’s performance and holding them accountable is vitally important in making sure the company does not continue down a slippery slope of decline.

 

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, a State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.