The Need for Independent Board Directors

Most small and mid-sized businesses already have a board of directors. In fact, if they are organized as a corporation, they are required to have a board.

But many of these boards are made up of family members in a family- owned business or friends and sometimes investors in a mid-sized company. But is this really the best we can do?

A notable trend in business over the past few years has been the pressure on public companies to upgrade their governance practices by having a majority of independent directors. Many private companies should be doing the same. There are a number of reasons, both material and cosmetic, to be taking these steps.



It is important to consider forming a fiduciary board (as opposed to an advisory board) with one or more outside independent directors. Yet owners will comment: “We are doing just fine without a board”. Understandable. They can rely on their paid advisers like their attorney and CPA, other family members and even fellow business owner friends.

However, just being an attorney or accountant does not automatically license one to give business advice.

Years of direct experience are generally the only true path to the expertise and authority required for giving sophisticated business advice.

Many companies have upgraded to outside board members to provide advice on key strategic issues.

Expert seasoned outside directors can offer invaluable counsel on a variety of significant issues. The objective is to add to and expand the breadth of resources already available within the family and friends and among its employees, not to simply duplicate the already accessible experience of the existing management and ownership.



One of the most compelling reason to form a board is to strive to have a best-of-class managing group within your industry. A more basic reason might be improving your company image in the eyes of customers, vendors, bankers and even employees.

One of the most important byproducts of a board is the increased accountability of management whether or not that includes family. There is no business leader who has never made a mistake or an occasional error in judgment.

Having a qualified and balanced board can dramatically reduce these missteps. It gives even the most capable businessperson a critical check and balance. Another compelling reason is when a company is raising money or considering a sale. Investors or purchasers always place more value on a company with a comprehensively organized management team and board of directors.



When any decision is questioned by the board, a yellow flag is raised, allowing management to studiously reconsider based on the concerns surfaced by the board. Perhaps management was already aware of these concerns, perhaps not.

Regardless, this process substantially reduces potential problems. In the end the company and management may decide to stick to their original plan, but if challenged from the outside, they will certainly be more prepared and smarter for the process.

Aside from the governance aspects of an independent fiduciary board of directors, which a family business does not require, there is the benefit of assembling a small group of true experts, at a relatively low cost.

It gives the family leadership the opportunity to augment any weaknesses in skills or experience without hiring another expensive full-time employee.

  • Could you use some fresh ideas?
  • Is senior management all family members?
  • Do all the family members always agree?



A director from another industry might be a source of innovative ideas. Do you have some tough competitors? A director that has previously dealt with those issues could be helpful.

Would you like to acquire another company, sell internationally, or outsource manufacturing to China, but have never done it? An independent director may know how.

A mix of outside directors can be a practical solution when family owners and their managers admit that their personal experience in some critically important business areas is just not what it needs to be in today’s competitive environment.

A common misconception within closely held companies is that having independent directors will lead to loss of control.

In actuality, control is not sacrificed.

Independent directors enable you to have access to more knowledge, use your resources more wisely and leverage as much experience as you possibly can. You can work smarter and be better prepared than your competition. A board is a strategic weapon when wielded by wise management.



What are the reporting dynamics of a board? A fiduciary board reports to the shareholders. Their sole responsibility is to protect the interests of the ownership. All employees, including senior management, generally report to the CEO. The CEO, in turn, always reports to the board.

In a case in which the CEO is not the majority owner of the company, for example a large-cap public company, the reporting is a straight line very simple. He or she can be directed and even fired by the board.

But what about when the CEO
and their family own the company?

This creates a circular reporting structure, but it is still simple. The CEO reports to the board, and the ownership elects the board. Therefore, the board reports to the CEO and family. But this is not like rock-paper-scissors, a circular game where one element always trumps the next. In a family firm, the majority owners almost always have the final say.



A board composed solely of family and management will usually include directors who are experts about the business itself, and the industry. The board will certainly represent family interests. However, the director’s individual expertise and skills can be somewhat limited.

In addition, the possibility always exists that disagreements between family members can compromise a director’s judgment on some issues.

Independent director’s fiduciary responsibility will require them to consider the greater good of the firm and all its owners, as opposed to the benefit of any given faction.


The members of Revitalization Partners have helped assemble and currently serve on boards for both companies and non-profit entities. If you are considering the issue of forming or maximizing board participation, feel free to give us a call.


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.

You Can’t Fix Stupid


Normally this blog posts articles related to distressed companies, management concepts and financial management or activities.

This week is different.

This blog is about the country, which is in as much difficulty as any distressed company.




Recently I heard a story from a close friend of mine.

Her son, who is in his 50’s living in California, refuses to get the Covid-19 vaccine.

His girlfriend has been bombarding him with misinformation regarding problems and side effects.

He believes this despite the fact that his father and stepmother are both in the hospital with Covid-19 as this is written.

Some states and the federal government have worked tirelessly to convince unvaccinated people to get the shots.

There have been incentives, lottery’s, free tickets, paid time off, etc.

Despite these incentives, 74% of unvaccinated people state they are unwilling or probably unwilling to get vaccinated.



Obviously, these entities are taking the wrong approach. Many of these unvaccinated people state that they don’t trust the government or don’t want the government to tell them what to do. And we certainly do not want yet another government bureaucracy.

But maybe it’s time for the stick instead of the carrot.

What those of us who are vaccinated have heard from those unvaccinated is that they’re not worried about getting sick and if they do, they’re healthy and will recover.

And if that was all that would happen, it is their right to get sick.

But the new variants of this virus are highly transmissible and what about the other people that someone infects who may not be as healthy as they are.

Do they really have the right to potentially cause another person’s death, without any accountability, because of their own beliefs?



The sad part is that what should be a medical emergency has become a political football. Our politics and the courts are cluttered up with issues of the constitutionality of mask mandates.

Safety issues on public transportation lead to fights about someone’s right to not wear a mask. In these cases, an incentive clearly doesn’t work. We’re just dealing with stupidity.

The positivity rate of Covid-19 has more than doubled over the past three weeks and shows no signs of slowing down. In certain states, hospitals facilities are stretched to their maximum and beyond.



One question we should all be asking is:

Who pays for the care of these people that
could have been vaccinated but refused?

If they have insurance, then all of our insurance rates will increase.

If not, maybe we should ask those state legislators about who’s paying the bills for those unvaccinated, uninsured very sick people.

Maybe we should start asking businesses why they aren’t taking more action to keep the rest of us safe. And then start supporting those that begin doing so.

Why should we all take a risk of becoming sick or dying because some people don’t believe in science?



We have seen some businesses work toward a solution. Airlines enforce the mask mandate. Concerts and Broadway shows only allow those vaccinated attendees.

Even cruise lines operating out of Florida where the legislators passed state laws that conflict with science, have found a way around the issue by requiring unvaccinated people to carry trip insurance and submit to additional testing. And bear the costs of these things.

When members of Revitalization Partners have served in interim management capacities, we focus on the problems in a given situation and how best to fix them. But no matter how good or experienced we or those trying to help with this situation are, as that famous saying goes:

“You can’t fix Stupid.”


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.

Managing the Post Pandemic Business


The world has changed.

We don’t really know how much yet, but we do know that some things will never be the same.

According to the National Federation of Independent Business, some 92% of small business aid they had suffered negative effects as a result of the pandemic.

Only 5% said they had experienced no effects at all.

Change: A Double-Edged Sword …

For business, change is a double-edged sword. On one hand, it creates risk and uncertainty. Old strategies often fall apart in the face of new challenges. But, on the other hand, change creates opportunities.

Companies that can adapt to a post-pandemic world, readjusting their models to meet new demands while leveraging unrealized opportunities, will find themselves in the best possible position to not just survive, but thrive.

To maximize the post Covid-19 environment, there are some things to focus on to make sure that your business is more than just a survivor.


Rethink Any Assumptions About Your Market …

The long-term ramifications of the pandemic, in terms of market mood and sentiment, remain to be seen. Some argue that things will return to pretty much normal.

Others believe that the world is altered in ways we have not yet begun to fully imagine.

As a business, you can’t wait for the changes to become apparent before formulating a plan.

It’s your job to discover shifts in your market before they’re obvious.

And this means conducting market research and learning changes in your clients wants, needs and expectations.

How might you expand your value proposition to address the ethical, environmental and safety concerns that may have developed in your market?


Leverage new Opportunities

While developing a strategy to bounce back after the pandemic will be of primary concern to your business, you should also think about how you can take advantage of short- and medium-term opportunities.

It’s likely that many businesses won’t be able to survive as things get back to normal and government funding dries up. This is not a cause for celebration, but it’s important to be aware of any gaps in the market that you’re positioned to fill.

And as a number of companies have focused resources on essential tasks, promotional spending has decreased.

This has resulted in lower promotional costs, creating potential marketing opportunities.


Make a Full Transition to Digital

The pandemic has highlighted the benefits of remote working. These include, but are not limited to:

  • higher employee productivity
  • reduced office costs and
  • improved mental well-being.

It’s likely that at least some your competitors will chose to leverage both remote working and the improved leverage of new technologies and it’s important to not get left behind.

If you haven’t already put digital infrastructure in place to provide your business with the flexibility of new digital technology, make it a priority.

You need comprehensive digital systems in place such as encompassing project management software, video conferencing, time tracking, paperless workflows, cloud storage, etc.


Think About Your Safety Net


When the pandemic took hold and lockdown measures were introduced, a significant number of businesses found themselves unprepared for a major crisis. Even if you’ve managed to come through relatively unscathed, you should not assume that this event is a once-in-a-lifetime incident. Going forward, you need to ensure that you’re prepared for every eventuality.

You need to build a genuine safety net made up of cash reserves, contingency plans, and a post-crisis strategy. The world is an increasingly complex and unpredictable place. Threats resulting from climate change, political disruption and even further pandemics are very real possibilities.

Taking the time now to develop your crisis plan will ensure that your business will be able to weather any storm or heat wave, that you encounter.

As always, the experienced crisis management executives of Revitalization partners are here to 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.

When PPP Isn’t Enough


The Paycheck Protection Program (PPP), along with other federal and state initiatives, helped many business stay afloat during the COVID-19 pandemic.

Now that the U.S. Small Business Administration (SBA) stopped accepting new PPP applications from most lenders almost a full month before the $292 billion program’s application deadline, where can a company turn?



Even for those that survive COVID-19 and were able to secure PPP funds, it may not have been enough. For many companies, lack of liquidity will remain a significant problem, impacting normal business operations.

Lower staffing levels, disruption in the supply chain, stretched receivables and payables, and decreasing inventory levels all contribute to out-of-formula positions and covenant defaults with lenders.

PPP money was only a band-aid meant to cover payroll and some overhead expenses for a short period and unlikely enough to meet all a company’s future cash needs. Many will need additional support or investment from their lender or a third party to restart or continue operations.

And those companies that have failed to make the necessary long-term changes in their liquidity structure may find themselves not having a viable solution for their financial needs.



Lenders that have processed PPP loans are now dealing with the PPP loan forgiveness applications and have not addressed the myriad of expected issues with their borrowers. The latest round of PPP loans has extended this problem.

Sometime during the third and fourth quarter, however, lenders will review their loan portfolios and decide which clients they will work with to restructure their loans due to covenant defaults, out of formula loans and/or requests for additional financing.

Others will be asked to seek an alternative source of financing.

To buy additional time to refinance their loan relationship, they may be asked to enter into a short-term forbearance agreement which may include additional terms, reporting, and higher pricing. Some businesses may even be forced to sell or close their operations. Multiples, however, will be lower resulting in a discounted selling price from pre-COVID-19 valuations.



Merging with another company is a consideration, but it can take time to find the right partner, conduct due diligence, and negotiate a mutually acceptable agreement. Others will have no other option but to file for a State Receivership or bankruptcy and reorganize.

Bankruptcy can be very expensive, and few survive over the long term. Additionally, the stigma of working with a company who is reorganizing while in bankruptcy may not have support from their lenders, vendors, and customers to stay in business. Some companies will just close their doors forever.

Management should rely on trusted advisors (attorney, CPA and/or turnaround consultant) to explain the best options available.

Accurate and timely financial and collateral information must be available to prepare a plan and help negotiate a deal either with the bank or an alternative source of financing.



If a bank says no, and is unwilling to continue working with a business, there are alternative sources of financing for businesses requiring working capital.

This option is usually in partnership with a factor or asset-based lender who finances the invoices to pay off the PO lender and provides additional working capital going forward.

An asset-based lender leverages the receivables, inventory, machinery, equipment, and real estate of a business on a formula basis to pay off its existing lender and provide additional working capital.

These lenders provide financing to companies with high leverage, weak balance sheets or those that have experienced losses but are still viable.

These businesses should be able to show their operating performance and plan to return to profitability.

While the pricing is almost always more than a bank, asset-based lenders can provide critical and essential access to working capital.



It’s best to begin thinking about financing options early before the cash need arises. Lenders need time to conduct diligence, get approval, and document the agreement.

Waiting too long to obtain financing can result in further disruption and missed opportunities to operate and grow the business.

It’s smart to have a Plan B to finance working capital needs when PPP isn’t enough.


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.

Why Cash Flow is More Important than Profits


Many equate the success of a company to its reported profits. While profits are good, they do not represent the financial standing of any given company.

It is quite possible for a company to report profits while at the same time being on its way to going out of business. It’s also possible for a company to be profitable but not being able to grow, secure financing or attract investors.

There are several reasons why cash flow is a better indication of a company’s financial health.



Profit numbers are easier to manipulate as they often include such non-cash items as depreciation or goodwill write-offs.

Under generally accepted accounting principles (GAAP) businesses can use non-cash expenses such as depreciation and amortization to offset large capital expenses.

While in most cases, investors and bankers will focus on earnings before interest, taxes, depreciation and amortization (EBITDA), these items, while improving profit, can also represent the usage of large amount of cash, impacting the ability of a company to continue to operate.



Cash flow statements, on the other hand, provide a more straightforward report of the cash available to the company. While a company can appear profitable “on paper”, it may not have sufficient cash to replenish its inventory or pay its immediate operating expenses such as rent, utilities or payroll.

For example, if a company cannot purchase new inventory, eventually it will not be able to generate new sales. If a company cannot afford its operating expenses, it will eventually go out of business. Either way, “Cash is King” in keeping a business alive.



Another important consideration is that profits are based on sales income.

The main issue here is that recorded revenue is often greater than the amount of actual cash received from sales.

When sales are on credit, the receivable period can often be two or three months. Or, in some cases, never.

This means that a company needs to have sufficient cash on hand or a viable line of credit to both float the operation for the length of the receivable period and to absorb the write-offs on bad receivables.



In most cases it is likely that a company also makes its purchases on credit. In this case, accounts payable become another important factor to consider.

To be sustainable, a business must pay close attention to its cash cycle and make sure to be able to cover the cash gap between receivables and payables. If a business runs out of cash and/or credit, operations will simply cease.

Assuming that a business has enough cash to maintain its current level of operations, most businesses will want to grow their operations. If cash is king in sustaining ongoing operations, it becomes even more important when considering expansion.



Sales growth is positive unless it results in the total depletion of cash. Companies should prepare for cash outlays to fund the expansion, especially since cash outflows probably exceed cash inflows during the initial phase of a growth cycle.

Businesses may assume that securing commercial financing will solve the growth dilemma. But lenders expect regular payment on the financing they provide. As such, lenders rely on a company’s current and projected cash flows to determine if the company can afford the additional debt.



When dealing with PPP loans, it is easy to misconstrue a company’s cash flow position. As the PPP loan is used and forgiven, the expenses that were covered by the PPP loan now become part of a company’s general operating expenses.

If a company has other commercial lines of credit or term loans, the use of PPP funds may have made the payments on that debt easier to make.

Cash flow projections must take that into consideration far enough in advance to provide certainty of sufficient funds to continue to make these payments.

Overall, understanding a company’s cash situation is critical to making sound business decisions. Managers of a business must understand and always be in touch with the cash aspect of the business regardless of the profits reported.


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 or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Financial Security and Why it’s Important for Employees


Several weeks ago, Rosie Johnson, one of our readers, inquired if they could write a paper for Revitalization Partner’s blog.

Given the contrasts in the economy and the impact that the pandemic has had on the financial security of so many people, we felt that this weeks blog, written by Rosie exclusively for RP, is an appropriate topic for our readers.

Financial security means having enough money to fund your lifestyle while working towards your financial goals. Often, people attain financial security by sticking to a personal budget and saving money for the long term.

However, the recent COVID-19 pandemic has upended everyone’s daily routines, even the state of their finances. According to the Pew Research Center:

51% of non-retired adults claimed that the pandemic has caused a delay in reaching their financial goals.

Many employees have had their hours or wages reduced, lost their job, or had to cover the cost of medical bills and other essentials, which contribute to an employee’s financial stress. This, in turn, harms overall work productivity.



Luckily, plenty of measures can be taken within the (virtual) office setting to offset the adverse effects of the pandemic. One thing employers can do is actively support their employees’ financial security.

This has become commonplace in the business industry as around 62% of employers feel responsible for their employees’ financial wellness. More companies are implementing financial programs and policies for their employees.

And this is now more important than ever given the pandemic.

Financial security is one aspect of employee wellness. Therefore, it is a crucial consideration when leading a business through the COVID-19 crisis.

Employers must develop solutions to their employees’ needs to ensure that internal processes continue unhindered. So, if you’re looking to support your employees through these uncertain times, here are a few measures you can take:


1. Provide financial assistance to employees facing emergencies …

Financial assistance is a direct way of helping employees struggling with the financial crisis. This can include income advances, emergency loans, and hazard pay. The extra compensation can go a long way not only for the employee’s financial dealings, but also for their emotional wellness.

Paid leave is another option. It’s ideal for employees who also double as caregivers for elderly parents or young children. And given that vaccines are now being distributed, employers should also consider paid leave for employees who feel sick after their shot. The Biden administration even promises tax credit for small and medium-sized businesses that allow for the paid leaves.


2. Offer financial planning services

Another way for employers to assist employees is by offering financial planning services. This is more important than ever, given that a strong financial plan is a necessity in times of crisis.

In fact, 65% of employers offer some sort of financial service. Making use of it can lead to significant benefits for the workforce, especially since 59% of employees report that money is their biggest stressor.

Fortunately, financial professionals are growing in number to meet this rising demand. The main way this is being achieved is through top universities opening up their accounting and finance degrees to online students. Those who take an online accounting degree are prepared for their certified public accountant exam, which will qualify them to work for individuals and companies.

Businesses can take advantage of this increase in online accounting graduates by hiring financial advisors to help their employees.

Personal financial advisors help individuals in money management and financial planning for the future. They can give your employees personalized plans for debt management, budgeting, and saving for the future.

This builds the foundations for financial freedom and makes for a happier, more productive employee.


3. Implement a financial wellness program

In addition to financial planning, employers can also offer financial education. This is where financial wellness programs come in as they are aimed at educating employees through a series of lectures or workshops.

It can boost the workforce’s financial literacy and assist individual employees in their daily financial dealings.

Researchers from the Washington University in St. Louis found that employee financial wellness programs benefited both employees and employers.

They help employees attain financial security, which improved their performance and, consequently, contributed to company goals. In these uncertain times, employers need to be empathetic to their employees, most especially those in difficult financial situations.

But apart from extending empathy, employers should also strive to help whenever they can. Because at the end of the day, the workforce is the backbone of the company, and the success of the business rides on them.

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 or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.