Preparing the Small & Mid-Sized Business for the Post Pandemic Inflationary Environment


The world is changing, perhaps more rapidly than we ever expected. Fuel prices are at the highest level in history.

Open employee positions are hard to fill. Anything connected with operating a business, from salary to inventory to rent to travel costs more and is harder to procure.

And interest rates for business and consumer loans are increasing rapidly in the hopes of driving down inflation.



Over the past year, Covid-19 wreaked havoc on economies across the globe. Businesses worldwide suffered drastically, and small and mid-sized businesses took the most significant hit.

Now that the economic outlook, especially in the US, is improving, the market instability caused by rampant inflation threatens to negatively impact the business outlook for these small and mid-sized businesses that are just in the process of recovering.

While it is possible that increasing interest rates will ease inflation, most experts predict an overshoot leading to an economic downturn. Given that possibility, there is a realization that businesses need to prepare for the next potential emergency.



What are the characteristics of that emergency? 

It’s a time when a business goes from a shortage of employees to a surplus.

When days of inventory go from almost zero to needing to cancel purchase orders.

And when low cost, easy to get money, from the government and elsewhere, becomes expensive and hard to get.



As the economy adjusts to a new “normal” there are steps companies can take to prepare for the future, while even in the middle of a changing environment.

Having cash reserves in any sized business is necessary, no matter the industry you’re in or how successful the business appears. Many businesses that survive today, do so because of the availability of the PPP and EIDL loan programs. In a downturn, those programs are unlikely to reappear.

Having six to nine months of
cold hard cash is the lifeline to survival.

This reserve allows a company to avoid taking on additional loan debt, just as it becomes more expensive. Or laying off key employees just when you need their expertise.


For many companies, the phrase “work from home” is continuing in 2022 and beyond. Even with the potential of increasing unemployment, there will be a continuing shortage of qualified employees in many industries.

Employees today expect flexibility in the work environment with many companies allowing for 60% to 100% of the work week being remote.

As employees acclimate to the new work environment and new technologies, they expect that companies will or have taken the steps to provide the new hybrid work environment.


Mixed signals in the labor continue to be a challenge for employers.

While unemployment is at an all-time low, this means that most industries are having a difficult time acquiring talent. And if they can identify the talent, they find that wages are 10-15% higher than only a year ago.

It is not only more expensive to acquire the new employees, but more expensive to retain those existing key employees that have become the backbone of the company.

Businesses need to plan for this increased expense and be able to deliver additional benefits such as flexibility, training, and career advancement.


Many factors have led to supply chain challenges and inventory ramp-up due to significant shortages.

As sales have rebounded, companies have considered changing or actually changed vendors in the hope of finding products where the supply chain is less impacted.

These changes, especially related to inventory and purchase orders, may have an impact on margins, which need constant review as pricing will need to change to reflect current market conditions.

In addition to margins, a changing supply chain environment provides the opportunity to review all aspects of operations to determine if certain aspects of the business are redundant or expendable.



It is often said that when you fail to prepare, you prepare to fail. The worst thing a company can do is to proceed as though the current business environment will never change or that a downturn will never happen.

Now, more than ever, business owners and managers need to ensure that their practices and business operations are running successfully and systematically.

And if you’re not sure, now is the time to get help in making the improvements needed before it’s too late.

So that when the next disaster or economic recession occurs, your company will have a plan to get through it successfully.

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.

How an RP-Managed Acquisition Preserved the Legacy of a Third Generation Family Business




Identifying business value is one thing. Unlocking it – particularly when under duress – requires different skill sets.

The process is both art and a science, which is appropriate in this particular case, since Revitalization Partners’ client was a 100-plus-year-old family business whose groundbreaking innovations had transformed it into a long-time recognized material supplier to the medical diagnostics and vaccine industries leader within the medical sciences field.

However, even the most innovative companies can run into problems, as this one when did when a firestorm of external factors converged to create a crisis that threatened its continued viability.

In fact, the company had received prior advice centered on that outcome.

The owner, whose complex business model included both bioscience and food processing components, contacted Revitalization Partners to determine if there were other alternatives available.

After reviewing both financial and operational conditions, we believed the company needed to adopt a different strategy. RP recommended an operational restructuring that included developing a plan for increasing working capital by better managing inventory and identifying a lender that was better suited for the business.

The owner took our advice.

We worked with the company over the next several years to improve operations and profitability while identifying a new lender and providing more liquidity for the business.

As part of the operational restructuring, we negotiated a partnership with the company’s largest competitor that allowed our client to focus on production – its competitive advantage – while the partner managed the sales process for both organizations.

During this process an RP principal supported the owner by serving as the company’s CFO, facilitating the successful execution of these initiatives.

Eventually, the owner received an offer to buy/sell his revitalized company. Because we had worked with him over an extensive period of time and gained his trust, we were asked to manage the sale and acquisition.

Our role was to be the interface between the company and the buyer to make sure the process was managed objectively and to manage the negotiations on behalf of the company.

Sounds relatively simple, but as is often the case with middle-market business acquisitions, there were a number of hurdles to overcome.



The buyer was backed by highly sophisticated and experienced investors, and as a result, we had to prepare for negotiations with reasoned objectives and a persuasive approach to the changes we proposed.

Our client’s biologics division had experienced significant growth and was extremely profitable. The food group, however, was struggling to break even – a formidable challenge considering that it provided the by-products used by its profitable counterpart.

The company also had a defined benefit pension plan that was significantly underfunded. To further complicate matters, the CEO/Owner also owned the real estate and buildings which housed the business as well as possessing a lease agreement with the company to pay rent and other charges.

The latter served as a prime example of one of our overarching challenges: How to successfully balance the CEO/Owner’s expectations for the price he wanted to receive for the company, while managing the buyer’s expectations for the lower value they were willing to pay.

These factors, along with the desire to successfully complete the transaction within the time frame the buyer had established, presented significant challenges to achieving a successful exit.



After completing initial due diligence and financial review, the buyer presented us with an initial letter of intent to purchase the assets of the company. Working with the CEO/Owner, we evaluated the term sheet and identified areas where we wanted changes and more favorable terms.

One of the initial roadblocks we encountered was that the buyer only wanted to purchase the biologics division. That prospect was not appealing to the seller as it would leave him with an underperforming food processing business. Allowing the buyer to achieve a carve-out could result in post-closing complications.

The initial offer involved three components, including a cash payment up front; a promissory note with no principal payments until maturity; and a substantial earn-out provision. One additional deal point that required negotiation was the required targeted working capital contribution.

Our goal was to negotiate terms that would minimize any reduction in the purchase price, and which could be beneficial to the owner.



Ultimately, the final letter of intent was accepted and signed, and the buyer and the company began their due diligence. We managed the process to ensure there were no material issues that could negatively impact the negotiated purchase price. After an extended period of negotiations, the asset purchase agreement and related agreements were finalized.

Notably, one of the final complications encountered was the beginning of the pandemic, which injected a high degree of uncertainty and volatility concerning its overall impact on the economy and, potentially, the company’s future prospects. Despite these challenges, we successfully closed the deal — with no decrease in purchase price.

The company was sold at a for a strategic valuation at
seven times multiple of trailing 12 months EBITDA.

In addition, we were successful in increasing the cash offer and the amount of the promissory note, while decreasing the amount of earn-outs with more favorable terms.

We also negotiated a series of annual promissory note payments that increased over the term of the note.

And, in one of the more pivotal aspects of the deal, we successfully convinced the buyer to purchase the food division along with the biologics group and increased the offer with an additional earn-out provision.

Other big wins included negotiating a lengthy new term lease with the buyer, resulting in a substantial increase in rent and related charges. Subsequent to closing, the owner received a favorable working capital adjustment, as well as the maximum earn-out possible under the asset purchase agreement.


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 the Elizabeth Holmes – Theranos Story



There have been numerous articles, books, movies and documentaries published about the Elizabeth Holmes – Theranos story over the years.

In recent years, however, the focus has been on how Elizabeth Holmes could go from a CEO of a company with a $9 Billion valuation to one that has been convicted by a jury in California on four counts of fraud, each of which carries a maximum sentence of 20 years in prison.



The question that must be asked is how she was allowed to perpetuate these egregious acts and how did the board of directors and investors miss some of the obvious signs that were there?

She certainly had many high-profile investors, advisors and board members that supported her until they didn’t. 

Notably respected names like Henry Kissinger, George Schultz and General James Mattis were on her board of directors. Investors included high profile marquee billionaires such as Rupert Murdoch, Betsy DeVos, Robert Kraft and Larry Ellison. 

All of these esteemed individuals are highly experienced, savvy individuals, with years of investing and business experience.

How could they be misled and/or not see the obvious signs that things could and would go wrong?



Revitalization Partners has been engaged to investigate similar situations where lenders or investors have been defrauded.

While none of the engagements were on the grand scale of the Theranos case, nonetheless, they were situations where multiple millions of dollars were lost.

We were asked to find out:
    > how much was actually lost,
    > what circumstances led up to the discovery of the fraudulent acts,
    > who perpetuated the fraud,
    > and to assist the stakeholders in recovering the funds that were lost.



In one example, a business owner borrowed money from a lender under fraudulent circumstances and then used the funds for personal expenditures such as expensive cars, boats and on funding an illegal business.

Another example relates to an investor who had invested in a business, and the CEO and controller of the business subsequently used the investor’s personal information without their knowledge to take out multiple high-interest loans in the investor’s name that included personal guarantees. The loan proceeds were used to fund personal expenditures of the individuals involved. During the course of the engagement, we found obvious early warning signs that could have been seen earlier and we asked the same question, how did this happen and how could this have been caught earlier?



There are a number of early warning signs that are consistent in almost every situation, and it is important that investors, board members, advisors and lenders be vigilant and take extra steps to make sure they are protecting their interests.

Some of the consistent warning signs that were prevalent in the Theranos story and that we have also seen include:

  • Grandiose business plans that are not supported by well-documented, achievable, detailed operational and financial plans. Furthermore, management does not adequately explain how these results will actually be achieved. The phrase “Fake it until you Make it” may be in play.
  • Financial statements that are not complete or are repeatedly not prepared in a timely fashion. It may be a sign that books and records may not be accurate, or that someone is trying to conceal something.
  • Inability to answer questions about the business in clear and concise terms supported by facts and/or have answers that consistently change as to the facts or reasons for business decline. This may be a sign that management does not have a plan or is making up facts along the way.
  • CEO’s who limit access to key executives or make excuses about why executives are not available when key stakeholders ask to meet with them.
  • Income statements that reflect year over year increasing profits, at the same time when cash flow does not reflect the same reality, and/or there is excessive borrowing on the company’s credit lines. It may be a sign of financial fraud and may potentially impact the lender.
  • Management consistently rejects bringing in outside advisors when the board of directors recognizes that management might need help or that they may not be providing adequate information. Management does not want anyone to see what’s really going on inside of a company.



It’s important to note that these warning signs don’t always mean that executives are committing fraud.

They are useful, however, for key stakeholders to keep in mind as they hold the CEO and key executives accountable for managing the business and for representing an honest and transparent view of what is going on.

And in the case of Theranos, stakeholders should have remembered the old adage, if it’s too good to be true, it probably is!


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.

Texas Bankruptcy Court Weighs in on Lender Liability And It’s Not Good News for Lenders


A recent September 2021, Texas bankruptcy court ruling is a cause for concern for lenders who deal with borrowers that have defaulted on their loan agreements.

In an advisory proceeding originated by the Chapter 7 trustee, the Dallas bankruptcy court handed down a ruling in Bailey Tool & Mfg. Co. v. Republic Bus. Credit, LLC, that offers a cautionary view of how the court viewed the lender’s actions.

It deemed the lender’s loan recovery conduct as overly aggressive behavior in a distressed situation.



The bankruptcy court held that the lender caused the debtor-borrower’s bankruptcy and its subsequent liquidation.

It awarded the debtor judgment for the full enterprise value of the debtor’s business, lost profits, the debtor’s administrative expenses, damages, legal fees and prejudgment interest, amounting to more than $17 million.

The court described Republic’s conduct as “outrageous” and “grossly overreaching,” and concluded that (i) the lender caused the company, which had shown positive cashflow and significant enterprise value, to fail as a going concern and (ii) if not for the lender’s interference, the company would not have had to file for bankruptcy protection.

In awarding damages, the court concluded that …

… governing Louisiana law (which restricts contracting parties’ ability to limit damages for “intentional or gross fault”) allowed the court to disregard a provision in the factoring agreement that limited the lender’s liability for “incidental, special or consequential damages.”



It’s important to understand that the majority of lenders act responsibly and bend over backwards to allow time for a borrower to remedy the operating issues that lead to a default under a loan agreement.

In fact, in our experience, we have seen many lenders provide multiple forbearance agreements that span prolonged periods of time, and which gives the borrower leeway to cure defaults.

We have seen in some circumstances, where the loan agreements have been modified to accommodate the borrower, to prevent a default from occurring. There is a limit, however, to the amount of flexibility a lender is willing to provide to a borrower.

They eventually must take action to protect the value of their collateral and to avoid taking a write-down on the loan. When those circumstances occur, however, it’s important to act prudently, and not open the door to possible “Lender Liability” actions.



Bailey illustrates that lender liability, although infrequently applied, may arise where the lender exercises too much control over a borrower’s business affairs, and as a result, contributes directly to the borrower’s insolvency.

The case is also a reminder that loan documents may not provide a complete defense to lender liability claims, even if they authorize the lender to take the actions in question.

The lender should think carefully before choosing to exercise any degree of control even if the loan documents contain protective covenants, expansive remedies, and other provisions that afford lenders some degree of control over the borrower’s actions.



Specifically, lenders should reflect on the following key considerations in negotiating loan agreements and exercising remedies:

  • Lenders should communicate clearly with the borrower and ensure that the lending agreements capture the express intent of the parties, particularly with respect to economic terms and definitions.
  • Lenders should consider the governing state law carefully. In Bailey, the application of Louisiana law may have led to a less favorable outcome for the lender.
  • Regardless of any express rights or discretion a lender may have under the lending agreements, lenders should act in good faith in dealing with the borrower.
  • Before exercising remedies, lenders and their counsel should carefully review lending agreements to ensure that such remedies are permitted in reasonably clear terms.
  • Lenders should not micromanage the borrower and should generally not direct the borrower’s business decisions.
  • Lenders should train employees to manage email correspondence properly and employees should assume that any email they send could be produced in litigation.



Although Bailey is an extreme case, the decision will likely provide a roadmap to distressed borrowers looking to gain leverage against their lenders in future negotiations or adversary litigation.

Lenders should understand the impact of the court’s decision on the particular lending activities by consulting with their legal counsel and plan to mitigate any issues before they result in potential exposure to lender liability actions.


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.

The Risk of Poor Financial Management


In recent weeks, Revitalization Partners has been approached by several companies for assistance.

While the problems at each company differ, there is a common thread that runs through the requests.

None of the companies that we have spoken with have current financial statements.

And yet while each of the owners or managers we speak with know that it’s a problem, they all seem to have justifications for not being able to produce monthly P&L, Balance Sheet and Cash Flow statements within a reasonable time following the close of a month.



Having timely accurate financial statements is critical for a number of reasons. Management relies on internal financial reporting to assess the health of the business and to make sound decisions regarding capitalizing on opportunities and mitigating risks.

If a business does not produce timely reporting or has inaccurate financial statements, management will not have the appropriate information to operate the business, and more importantly, will not be able to recognize problems and make course corrections before it’s too late. 

Inaccurate or lack of timely reporting can also make your company appear less valuable than it is, or worse, cause significant legal problems.



Board of Directors, banks, and shareholders rely on these statements to assess the performance and value of a company. Inaccurate or no financial statements results in providing an erroneous view of the company’s finances and when the truth ultimately comes out, the creditability of management is called into question by one or more of these groups. 

The reports lack comparative data showing, for example, how a particular quarter compares to previous quarter or how actual spending compares to the budget.

  • The reports lack comparative data showing, for example, how a particular quarter compares to previous quarter or how actual spending compares to the budget.
  • Reports that do include comparative data leave it to the readers to interpret. A report that shows monthly sales revenue for the past year but doesn’t translate the differences into percentages requires the readers to make the calculation. They’re more likely to get it wrong or misinterpret what they’re reading. And if you don’t consistently have the data, you don’t know how business trends are changing.
  • Your accounting team or bookkeeper doesn’t follow Generally Accepted Accounting Principles (GAAP). The consequence of not following GAAP, may contribute to the inaccuracy of the financial statements. Banks typically require their borrowers to follow GAAP and by not adhering to this standard, it may likely put your lending relationship in jeopardy.
  • You receive internal financial reports, but you don’t read them. As a result, you can’t spot any discrepancies or oddities in the accounting for your business, if you don’t look for them.
  • You read the reports, but don’t analyze them. If there are negative trends such as accounts receivable taking longer to pay, you need to spot them before you can identify the problem and take action. As an example, you and your bookkeeper know one of your customers won’t ever pay, but you don’t alert management to the risk or take action to accelerate collection and adjust accounts receivable to reflect the potential bad debt.
  • Not monitoring cash flow closely. Even if your income is good, poor cash flow means you could lack sufficient cash to pay your bills. Your accounting team needs to update the cash-flow statement even more frequently than other forms of financial reports and provide commentary regarding any issues that they see.



One consequence of inaccurate reporting is wasted time.

If you don’t have experienced accountants and/or bookkeepers in your accounting department, there may be significant human error and inaccurate accounting from data flowing in from multiple sources within the company.

Your accounting department may have to spend hours or days each quarter reconciling financial data throughout your organization.

That can add up to a lot of salary spent fighting financial-reporting fires and can impede the flow of information.



Another consequence is that inaccurate information makes it harder to make good decisions. Companies rely on accurate financial data for budgeting, forecasting and developing performance indicators.

If information related to sales and profitability metrics as well as research and development expenditures are inaccurate, the problems will perpetuate themselves and your projections and budgets could be inaccurate as well.

If your reports understate your debt load, you may discover you’re deeper in the red than you thought. Errors in financial reporting can also hurt in other ways until they’re corrected. For example, exaggerated profits may lead to higher taxes, while underestimated profits make your company looks less valuable.



One of the biggest problems of not having or paying attention to financial reports is that it leaves the company open to financial fraud.  Unsurprisingly, many people commit financial-statement fraud for personal gain.

If their bonus depends on how much revenue their department brings in, it could be in their self-interest to inflate revenue on the income statement. If company performance was poor, upper management may keep the owners happy by manipulating the data which results in false financial statements that say otherwise.

Management sometimes also commit fraud, by misrepresenting the company’s financial health to impress investors or hide taxable income. Management fraud schemes aren’t necessarily about enriching the schemers. Business owners may manipulate the accounts to make the company look healthier to investors or lenders. They can do this by either inflating income and asset values or underplaying the company’s debts and liabilities.



If you think there’s something shady going on, ask for help. However, it’s better to set things up so fraud can’t get started. Strong internal controls are a must.

Also creating a culture of accountability and transparency is extremely important. Management must independently review financial statements to assess their accuracy.

In addition, having an outside accounting firm conduct an outside review of the financial statements at least once a year, is essential to ensure accurate reporting.

Finally, it’s important to have a system for employees to report suspicious behavior as an additional check and balance for management to get ahead of any potential problems in the company.

And above all, always listen to your gut. If you feel something’s wrong, ask questions; if the answers don’t add up, start digging deeper.

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.

The Dysfunctional Board of Directors


In our last article we discussed some of the difficulties with Company CEO’s that can cause problems for a company.

But, in many companies, the CEO reports to a Board of Directors. In this article we look at what happens when it isn’t the CEO that is having difficulties, but members of the Board of Directors.



A dysfunctional Board of Directors has the ability to cause havoc with a business or organization.

Not only will a dysfunctional board often fail to make the decisions that are in the best interest of the organization, but the dysfunction of a board has the potential to move outside of the board room, often creating negativity with employees and other stakeholders.

Many of the issues outlined here come from our experience when serving as interim management or in receiverships.



Much of what the board of directors discusses should be kept within the organization. 

When board members do not keep this information confidential, problems often ensue.

Members of the board may think they are simply sharing the information with close friends, but it could be misconstrued and released to stakeholders, causing undue stress, or shared with competing organizations.

Leaking information is one sign
of problems within a board.



Occasionally board members experience a lack of respect for the CEO of a company and vice versa.

This often happens when board members have been in place for a long time and a new CEO enters the company.

All parties must develop respect for one another based on their common interest in working for the good of the organization in order to keep the board from becoming dysfunctional.

A lack of respect between the various board members or factions is a sign that there might be dysfunctionality within the board.



Board members need to be on the same page when it comes to the future of an organization and its initiatives. If board members have conflicting agendas related to the direction of the organization, it will be hard for the board to make decisions. 

In addition to being on the same page as one another, board members must also be on the same page as the head of the organization.

Conflicting agendas often represent conflict
within the board and often the company.



Meetings involving the board of directors should function in an orderly manner.

If board members quickly jump from topic to topic, argue with one another or fail to discuss the most important matters at hand, the board is dysfunctional.

Board meetings should contain a designated leader and an agenda to make them productive.




A meeting of the board of directors can be a hostile environment, particularly when board members do not get along with one another.

This type of environment stifles productivity and prevents board members from sharing constructive opinions.

A meeting may become a venue for personal attacks rather than for focusing on coming to business decisions or providing constructive discourse.



While some information the board discusses should remain confidential, organizations should become concerned if a board of directors regularly holds secret meetings or meet on an unofficial basis.

Not only may some board members be left out of these meetings, but decisions could be made without the input of crucial members of the organization, or with unethical motives.



Board members should not allow personal and political agendas to cloud their decision-making. 

If board members continually propose moves that would benefit them personally or take a political stance, the image of the company could be compromised.

Personal and political agendas also lead to more disagreements among board members and often means that the board is not focusing on the best interests of the company.



Employees in an organization must trust the board of directors in order for it to be functional.

If the majority of employees do not trust members of the board, the advice and decisions the board makes may be ignored or may lead to high turnover rates within the company, among other things.


Members of a board of directors should work as a team to make decisions to benefit the organization.

The board’s ability to make the best decision is compromised when one or two board members are allowed to dominate the meetings.

This may involve harassment of other board members, talking loudly to dominate the conversation or immediately shooting down any dissenting opinions.

When certain members dominate meetings, the situation requires agreement as to how to make certain that everyone has the opportunity to participate.



Many boards are created by company owners or CEOs as a company grows.

Often boards created in this way are based on personal relationships without regard for the member’s background or experience.

Boards of Directors should consist of members who each have particular experience related to the both the business of the company or overall business and finance.

These members should be independent of ownership or management of the organization so that they will be in a position to make the often-difficult decisions that enable the organization to move forward.


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.