The Toolkit

Tools for building the future

Steve Wybo at Riveron – National Business Advisory Firm

Top Takeaways

  • Don’t be ashamed to ask for help because no one is great at everything. Recognize your limitations and celebrate your strengths as an executive.
  • Until you’ve enforced the self-help or have done all you can to right-size your business, it’s unfair to go to the customers and look for them to solve your inefficiency problems.
  • You must maintain harmony in your cost structure to meet your customer’s demands but not be over-capacitated and have labor/excess materials that are not producing revenue.
  • Be willing to receive help from other firms when necessary before you end up in dire straits and it’s too late.
  • Work with folks who are operational experts to help reduce inefficiencies and refine your business system.

Guest Profile

As a senior managing director in Detroit, Steve Wybo leads Riveron’s automotive practice.

Riveron is a national business advisory firm specializing in accounting, finance, technology, and operations. With a broad range of functional and industry expertise, they partner with their clients to implement solutions across the transaction and business lifecycle.

Steve Wybo is a senior managing director with over 20 years of experience in providing turnaround, reorganization, M&A, and financial advisory services to distressed and underperforming companies.

Steve specializes in insolvency/bankruptcy matters, turnaround and crisis management, profit enhancement, mergers and acquisitions, business valuation, raising of debt/equity capital, and liquidations both in and out of court. 

Steve has also served as an interim chief financial officer, chief restructuring officer, interim chief operating officer, treasurer, and court appointed receiver for several middle market clients.

In prior roles, Steve was a senior associate at PwC, where he specialized in financial service compliance, investment banking in technology and other service industries, and automotive industry financing, including debt offerings, securitizations, and private placements.

Episode Highlights

  • If a company can’t make payroll tomorrow, how can you get confidence from customers, lenders, suppliers, and employees?

“The employees always come first, and you can’t open up for business if you can’t pay them.”

“In rare circumstances where a company can’t make payroll tomorrow (but it does happen), lenders and stakeholders temporarily have to provide a bridge to create long-term stability.”

“You can go to jail if you withhold money from an employee’s paycheck and don’t remit it to taxing authorities.”

“If you can’t make payroll, you cannot have your employees come to work on Monday morning.”

  • The contracts are much longer term in automotive. When a supplier gets into a bad contract that’s exacerbated by underperforming operations, what are the steps you must take when you get brought in, and they’ve got let’s say, a facility or a division that’s really underwater?

“When a facility, program, or company is underperforming, either they’ve misquoted the work and underestimated the cost to produce the widget, or they’re not an efficient company. Oftentimes, it’s both.”

  • The prices for logistics and labor have increased substantially over the last 24 months. What can your customers do to protect themselves or prepare for potential future years with similar conditions as they start getting into contracts with their customers?

“Here’s what I tell our clients: if you can take the risk out of the system, do it. Whether it’s currency, interest rates, or material costs.”

You’re not in the business of being a commodity trader or playing the interest rate game. You can’t control currency fluctuations.

Balance customer demands with fixed costs, especially in a volatile market.

  • Regarding negotiation, what have you found to be the situations where customers are willing to invest in the supplier rather than resourcing?

“Original equipment manufacturers (OEMs) want on-time delivery and excellent quality. You will not be in business if you can’t provide that consistently.”

“Customers want optionality. They don’t want the suppliers to have too much scale or power over them. There has to be a variety of well-available suppliers out there.”

Listen to the full podcast episode to learn more!

Steve Wybo’s Contact Information

Contact number: 248-952-8877

Email: steven.wybo@riveron.com

LinkedIn: www.linkedin.com/in/steven-wybo-2b834650/

Website: https://riveron.com/about-us/

About the Host:

Justin Fortier lives in Brooklyn, NY, and works for a consulting company serving industrial companies.

How to Connect with Justin Fortier

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Transcript

Justin Fortier: If you could just describe in a few sentences what you do and who you help.

Steve Wybo: Sure. Good morning, Justin, thanks for the opportunity to speak with you guys today. I worked for a firm called Riveron. And we formally were called Conway Mackenzie and sold to a private equity firm in late 2019, and joined up with a firm called Riveron. Legacy Conway Mackenzie cycle business, we now call that RTS. And we mainly work with companies going through some form of a transition and experiencing some form of distress. In the RTS it’s called restructuring and turnaround services. The other sort of two thirds of our business is an advisory work, working with healthy companies doing all kinds of financial advisory work, sell side by side, M&A, quality of earnings, we have some tech component, tax, etc. So we’ve split the firm sort of performing, and healthy and then underperforming and restructuring. And I work in the RTS division of Riveron. I run the Automotive Group and Michigan market and also sit on the board of the Combine Riveron entity and you know, our clients typically I tell people, it’s everything good or bad launch at a facility where they’ve got some underperforming contracts slash operations to you know, can’t make payroll tomorrow and probably going to liquidate and everything in between. And so it’s a spectrum of of distress. And I would say it’s usually somewhere in the middle where there’s you know, it’s not just one underperforming contract or one underperforming cell, it’s you know, a plant or a business or a division, and it’s not can’t make payroll tomorrow type thing, but you know, rather some form of distress that requires sort of a longer term outlook and view on how to fix it.

Justin Fortier: Got it. So when a company is on that extreme end of can’t make payroll tomorrow, what are the ways that you can get confidence with the customers, lenders, suppliers, employees, when a business is in bad shape? Is the option usually look for a sale? Or what are kind of the first steps you take?

Steve Wybo: Yes, sometimes it results in a sale. And you know, typically in you know, we’re specifically talking about automotive here. But this can be the most probably true to most manufacturers, you can’t switch tomorrow, the customers can’t say that’s okay, we don’t need your parts, and we’ll just get them down the street, right, whether it’s aerospace, or heavy truck, or ag or automotive. Typically, there’s some lag time where the customers can find an alternative supply. And so there’s usually a solution, a short term solution that involves the company’s lenders, customers, suppliers and shareholders to the extent they’re still contributing, you know, new equity dollars. And also, in the extreme, rare situation where can’t make payroll tomorrow, you know, that’s a phone call to your lenders and your customer saying, Look, we have a major problem, the employees always come first in a turnaround. And obviously, if you can’t pay the employees, you can’t open up for business tomorrow, right. And so, the solution, the temporary solution, in that sort of rare extreme that we’re talking about, is typically, lenders will have to fund you know, call out a formula or above and beyond what they’re comfortable or required to do, just to create some short term stability to figure out a longer term path. And or the customers would have to do something extraordinary accelerate a payment, perhaps provide a loan, provide, perhaps provide a bridge. But again, this is a very rare circumstance, and it does happen, but typically, the stakeholders outside of equity, because equity, wouldn’t usually be aware that payroll can’t be met and hasn’t decided to cure that problem for whatever reason, or they can’t or they won’t. And so, oftentimes, you need to look to the other stakeholders to provide that sort of short term capital to figure out the longer term solution.

Justin Fortier: Yeah, and automotive, as you you mentioned, the contracts are much longer term. So when gets into what is a bad contract, and maybe that’s exacerbated by underperforming operations or typically the first steps you take when you get brought in. And they’ve got, let’s say, a facility or a division that’s, that’s really underwater.

Steve Wybo: Yeah, typically an underperforming facility or program or company. It’s really one of two things that have happened, right? Either they’ve misquoted the work, and they’ve underestimated the cost to produce the widget and or they’re just not an efficient company. Right there, they’re going to buy material at market and they’re paying labor at market but they’re they’re just their quality is not good. The delivery is not good. Or overcapacity ties, they’re just inefficient, right? And oftentimes, it’s both and so you know, if we can and we have the luxury of time and liquidity and we want to work with folks like yourself, operational experts, you know, commercial excellence, etc, to fix the problem, right, right size the facility, reduce the inefficiencies, improve the quality and delivery and get the waste out of the system such that the contract which in this instance is probably priced right, it’s just the company is underperforming. If the company is performing well, and the quality metrics are good, the on time delivery is good, the utilization and OEE are good, but the contracts just underpriced. Say for example, To pull material costs are 80% of revenue and a metal stamp, or let’s say, you’re never going to be able to make money. If you’re a world class operator, if your material contents 80%, you’re just never going to make money. So you misquoted the job. And in that instance, suppliers need to look to their customers for help, right? And we’ve been through a period of time over the last 24 months where the price of everything has gone up substantially. And to the extent you know, you’re not hedged on your material in my metal example, then you’re just going to have to go to the customer for help because you’re misquoted you miscalculated, you weren’t on a steel resale program, you weren’t on an index or a crew or, you know, whatever the case may be. But you know, you’re not ever going to make money in that instance. So, oftentimes, it’s a little bit of both. And what I tell our clients is, you know, unless until you’ve implemented the self help, or have done all you can internally, you can’t look to your customers to solve your problems, right? The customers are willing to help where you know you’ve misquoted and where there’s just instances of massive inflation, and you just can’t make a profit even being a great operator. But if you haven’t done the things internally and brought in health or look to right size the business, then you know, you’re really it’s unfair to go to the customers and look, look for them to solve your efficiency problems.

Justin Fortier: So when you come in, there’s definitely an element of you under are able to help clients understand what they should be charging for their are selling to their customers, I know that sales sometimes ends up looking like a black box. Obviously, there’s there’s a lot of math that goes into it at the beginning. But we’re, as you hinted at, we’re in 2022. So the last two years have really changed in terms of logistics, labor, everything can customers do to protect themselves or prepare for potentially future years, or conditions, as they start getting into contracts with their their customers?

Steve Wybo: Yeah, we’re not going to tell all of our clients is if you can take risks out of the system, and you can hedge do it, whether it’s currency, whether it’s interest rates, whether it’s material costs, those are the three major areas, you’re in the business of making car parts, or aerospace parts or truck part, whatever you’re in the business of, you’re not in the business of being a commodity trader, or playing the interest rate game or anything that you know, you can’t control currency fluctuations, you’re not you’re not you’re not a currency trader. So the best thing you can do is take that risk out, right, if your customers willing to put you on a resale program, or an indexing program for metals, or plastics, or whatever it is, do it, take the risk out. And you know, most manufacturing companies probably have 50% or more of their cost of goods is material, right? If you’re bending metal or making plastic parts, or you know, stamping metal, the material costs are significant input costs in your business. So if you can hedge 50% or more of your p&l costs, you should do that. Same with interest rates, same with currency. Beyond that, you know, you can’t hedge labor, right, you probably can’t hedge logistics, you can enter into some longer term future contracts and probably lock in transportation for several months, but not yours. But you know, we have clients that were paying 25,000 A container, I’m sure you guys do as well, when it was, you know, 3000 pre pandemic, that’s come down substantially in the 10 to 15 range now, but I don’t know what you could have done about that two years ago, right, you probably couldn’t have coordinated with your logistics company to, you know, lock in a $3,000 container price, you know, two, three years out. But if you can hedge it, hedge it, I think, you know, the key right now balancing customer demands with your fixed costs, right, we’re in a fairly volatile market right now, I think, you know, we were supply constrained for the last couple of years that are some thinking that, you know, that’s shifting to maybe a demand constraint in terms of, you know, consumer confidence going down, the ability to purchase vehicles, and everything else is with interest rates going up as less. And so if there’s a release in your system, you got to build to fulfill that release to your customer. We have a bunch of launches that are coming up for the next two years. So you’ve got to staff up for that. But there’s going to be some volatility in those launch schedules, there’s going to be some volatility in your demand schedules from your customers, we’re still dealing with the semiconductor issue and other things. So you’ve got to maintain this level of harmony in your cost structure to meet the demands of your customer, but not be overcapacity sized, and have labor and access materials and things sitting around that are now producing revenue dollar. So it’s a tough balance right now. And a lot of our clients are trying to find that happy equilibrium whereby they’re right sized right but not over overly capacitors for volumes that will come in or under capacitors and missing shipments, which you know, that’s the death of a company when you shut shut down. Oh, yeah. So it’s a very tough market right now.

Justin Fortier: Yeah, definitely. We’re seeing that as well. When you’ve done 2019 I saw you done at least over 75 of where you’ve led sometimes you’re actually stepping in as CEO, companies are going through a challenging point, how do they decide if they have the right person in place? They’ll support them help or they need to step in and take a business.

Steve Wybo: Oftentimes when we serve as an officer, whether it’s CEO or CRO, which I’m currently serving in that role for an auto supplier right now, the stakeholders of the business, whether it’s private equity owned sponsor or a bank, you know, anyone that has an interest in the business customers even oftentimes, they’ve lost confidence in the management team in order to provide the requisite support to effectuate the turnaround or the sale. The customers or the lenders or the sponsor says look, you know, we’re happy to support the business. But you current management team have not been getting it done for us. So we want to replace you are have oversight over you to help bring in an expert to effectuate the turnaround or effectuate the sale. And so it’s pretty rare where a CEO will raise his or her hand and say, Hey, I’m failing, you know, please be my boss, and help me through this. Right. So I would say it’ll the vast majority, if not all the time, when we serve as an officer, it’s at the request or demand of an outside stakeholder. When we serve as an adviser, oftentimes, the CEO or the CFO or someone on the board does see a need for Hey, my skill set is running a healthy company and growing it, it’s not negotiating with stakeholders, it’s not 13 We cashflow forecasting, as you know, fixing some of the things that you as a turnaround expert can do. So come out in and you know, ride Shaco with me, and I’ll focus on the business and you know, the customers and the employees, and you focus on the restructuring for their balance sheet or operations or both. And together, we’ll you know, turn the corner on this business, we’d like those assignments a lot, because it’s a partner who usually results in long term client where we’re helping them hopefully through the turnaround, and then back into the advisory and growth side of our of our business. The officer work is usually it’s, it’s for a reason, right? I’m serving as a CRO, but there’s a deadline whereby I must sell the company, or whereby I must raise equity or do a refi or something that’s, you know, typically a pretty major change in the business and oftentimes results in you know, new ownership. And so we do those out of necessity, we do those oftentimes, because the stakeholders demand it. But I would say more times than not, you know, an advisory role is what the management team prefers. And oftentimes results in, you know, longer term in place turnaround.

Justin Fortier: That makes sense. And I heard you mentioned two things that I want to follow up on, we can start with negotiation, that’s definitely one of any restructuring experts core skill. What have you found to be the situations where you are willing to invest in the supplier rather than resourcing? Are there things that they would have done in advance of you arriving? Or when you arrive to have the business potentially emerge rather than beat on both?

Steve Wybo: Yeah, customers are in the short term, they almost always have to support it, as we talked about earlier, but long term, the customers decision to support a business, which often comes with financial help, whether it’s a loan to the business, a price increase, accelerating receivables, whatever it is, but customers, you know, will only do that if the company is a good performing company, or has the potential to be a good performing company. The number one thing that OEMs want is on time delivery, delivery, I guess the two things in quality, right? Those are the table stakes, if you will, if you can’t do that consistently, you’re not going to be in business, right? And good companies that have on time delivering good quality, sometimes find themselves in financial trouble, right? They’re over levered, they lost a new program, they’ve screwed up a large volumes have come down, some things are just not their fault, right. And so the table stakes and the bare minimum for a customer to want to support a business through a turnaround and provide some form of accommodations. He got to produce parts on time, they have to be of good quality. That’s that’s that’s paramount. Beyond that, I would say the severity of the financial support or the accommodations will dictate what are they going to do long term? Is this a quick fix, you’re again, you’re you’ve met the minimum threshold, your quality is good, your delivery is good, but you’ve got this problem that we can help you through in the next 90 days. We’re good. It’s just a really long term issue that we’re going to get stuck with you for a while constantly providing you with financial and operational support, then they get less interested in hell. And also I would say it really depends on is, you know, the switch or the switching costs prohibitive indoors or functional capacity down the street with an alternative supplier, that is also a good supplier. And then the last thing is, do they want optionality, right? The customers don’t want too much control at one supplier right? If there’s one staffing company making the This widget in North America, that’s a problem. Because if that company has a problem, we’re gonna shut the auto industry down. And so they want optionality, they don’t want the suppliers to have too much scale and or purchasing power or power over them as customers. And so there’s got to be a variety of goods available suppliers out there. So I would say that are the last leg of the stool that they factor in is, yeah, this might be painful. And yeah, we might have support this company longer than we want. But if we don’t, we’re going to lose one last option. And now we’re going to have to go to ABC Company Too often, and put too many eggs in that one basket. And so it’s what’s the severity? Are you a good supplier quality and delivery? And what are my options else? And are they? Are they good? And are there many, if there aren’t many, they may support a company longer term than they’d like, just to keep that option open.

Justin Fortier: I know we’re not dealing with a specific company example here. But from listening to that, it sounds like if a company has a choice between worsening their cash position and an automotive company poor customer service, low quality or memories, they should probably call you, but then also focus on on being reliable, then in a little bit, financial position for customer leverage, or the ability for customer support. Would you say that that might make sense or?

Steve Wybo: Yeah, again, it’s a balance, right? If you throw enough people in money on a problem, it usually gets fixed, right? You could hand sort every part 10 times. And statistically speaking, you’re probably 99.9 something percent, going to catch a defect, right? But that’s just not sustainable to pretend time’s a sore. So you’ve tried to put systems and processes in your firm’s very good at this in place to detect these errors before they get shipped to your customer. So your parts per million, or whatever metric your customer uses on your scorecard is a good quality metrics such as getting new business, or it’s right. So it can’t throw 1010 sorting companies at every job, you can’t add much a labor you can add, you know, sensors and systems industry 4.0 to every single thing that you do to make it you know, 100% quality delivery. So you try to put processes, procedures, training, etc, in place to make sure that you ship parts on time you have good throughput, get out in front of your preventative, and corrective maintenance, and all the things that you know, your firm is very familiar with. But sometimes, you know, bad things happen in this industry. And so, you know, a bad part gets out, your line goes down, because your press breaks and you shut a customer down. If you do that too often, that will be a recipe for you going out of business, right in this just in time environment that we operate in, in this very high quality environment that we operate in. Again, back to my other comment, it’s a table stakes, right customers expect, you should be a part of every time I order one, and it comes in, in good quality sucks, I want to put it on a car, there’s not gonna be a warranty issue, and it’s you know, usable and merchantable. So we’ve come a long way from the 80s of cars breaking down and you know, 50,000 miles and mufflers falling off. And you know, these these cars, you know, domestic in 93 are very well Bill machines these days. And that’s because we have good quality systems in place. And we’ve come a long, long way in the last, you know, several decades. So I think you know, it’s a long answer to your question. But back to your question, you know, if given the opportunity to invest a little bit more to ensure that I’m going to have good quality and delivery, versus trying to conserve that capital and invest too much and go out of business. But I would always err on the side of pleasing your customer. Because if you don’t, you may not get resource from the current job you’re on. But good luck winning the next generation, you know, whatever vehicle that is, or any new contract with that customer, if you’re not performing the basics to the basic standard and the auto industry today.

Justin Fortier: Yeah, another thing you mentioned was the 13 week cash flow statement, most business managers are probably more accustomed to us. How does that function when you’re coming in for a turnaround or restructuring? We’re in the 13 week cash flow statement and some of the ways you construct that.

Steve Wybo: Yeah, in a turnaround we say there’s, you know, three, three legs of the stool, right? You have to have a product that or service that people want, if you’re making buggy whips, no turnaround effort, the world’s gonna save your company, right? That model doesn’t exist anymore. You have to have a competent management team to execute either internally or with some outside help, you know, like for firms like ours, and then you have to have cash flow, because you always need sort of sort of a bridge to a better day. Right. And a p&l is not cashflow, right EBIT, margins and gross margins and things like that. That’s not cash flow. Cash flow is cash coming in the door. Washington cash flows and cash flow out the door on a weekly basis to turn the corner, right. And if you’ve stretched your trade, for example, and you have demands from your accounts payable vendors above and beyond, you know, a normal cycle that requires a little more cash, if your lenders have, you know, deferred principal amortization for a couple of months, that generates cash. And so you need to look at the ins and outs of your liquidity. And typically, we look at 13 weeks because it’s one quarter. And pretty much any turnaround I’ve ever done requires at least a quarter. And usually the first quarters is the worst, right? Experts like us get brought in a little bit late. And typically we get brought in it’s a little bit hairy, right away. And so we in this industry build a 13 week cash flow forecast for lots of clients, because you’re right, most companies don’t manage, you know, on a quarterly basis or cash flow, they manage their margins and manage annual budgets. But what we care about and, you know, day one week one week 13 is can we pay our bills as they become do? Can we service the trade? Can we pay our principal and interest? Can we keep our utility bills, current everything that requires real cash, not accrual accounting, but cash is critical in the short term until you effectuate the turnaround. And so you know, our team is very skilled at getting very granular and building a weekly or daily, sometimes cash flow model cash in cash out. And do we have the requisite liquidity to manage while we turn the corner. And the last thing I’ll say is, when you’re in a sort of deeper, distressed situation, you as an officer director, you need to worry about a deepening insolvency or an insolvency period. And just the simple definition of that is, you can’t pay your bills as they become due. And if you can’t, then your fiduciary duties tend to switch from your creditors, I’m sorry, from from you as a shareholder your equity to the creditors, right. And so oftentimes, we create that transparency by building that cash flow and say, Look, over the next quarter, you know, we’re insolvent, we’re taking on more debt that we can’t pay. And you as an officer would want to know that because you may or may operate a little differently than you were the previous quarter. So it’s important for us to put a lens on the next 13 weeks to bring the cash flows front and center to all of your decisions, manage your precious liquidity, and ensure that you’ve got enough gas in the tank to turn the corner.

Justin Fortier: And you said sometimes that’s daily, and sometimes it’s weekly is that just based on the the narrowness of the guests you’re working with? How precarious the situation is when you choose daily vs weekly?

Steve Wybo: Right. If we get involved in a situation and they say, Hey, we’re we don’t know, if we’re gonna make payroll in a couple of weeks to our earlier example, that’s a daily cash flow. Right? If it’s, Hey, we’ve got a covenant, you know, at the end of the year, a leverage covenant that we are we think is going to be tight, all of our trade is paid on time, we’re not past doing anything and all of our taxes in 401k, and everything’s been paid forever occur. And we’re not worried about that when we’re worried about leverage or something. That’s probably not a daily cash flow, it might it might even be a weekly cash flow, but it absolutely depends on the severity of the situation, and, and how severe you know, the payments that need to be made will be and whether or not you think you’ve got availability to make those payments.

Justin Fortier: Cool. In terms of priority have to push off in terms of payments, there’s what’s at the top employees, taxes, falls from there if you had an order of most immediately negotiable and negotiable and made a bit of room to go after and try to see if you could extend the payment term or some way to increase cash flow.

Steve Wybo: Yeah, employees and we talked about that a little bit ago. That’s absolutely non negotiable, right? You cannot incur wages that you can’t pay you any withholdings from employees garnishments, 401k insurance, taxes, payroll taxes, non negotiable, absolutely has to be paid, actually officer can go to jail if you withhold money from an employee’s paycheck and then don’t remit it to taxing authorities or garnishments, you know, benefits, things like that. So that those two things, anything employee related 100% non negotiable, can’t make payroll, you got to call somebody for help, and you’ve got to raise the flag right away. And actually, if you can’t make payroll, you cannot have your employees come to work on Monday morning. Right? So that’s absolutely non negotiable. I would say beyond that. Everything else is probably negotiable. Right? You know, you gotta be careful structuring vendors, especially if you’re an in Sonam insolvency but you know, I would say honesty and transparency and a turnaround is will usually carry the water line to vendor say we’ll get your check on Monday and then you don’t get the check on Monday. That usually results in a shutdown going forward or cod or a requirement to pay on aniseed and dad even below the current terms. So I think it’s you know, being honest you know, if you can’t make your interest payments your lender calm as fat as early as you can in the process and you know, generally speaking stakeholders I think will work with you short term, they’re not gonna put up with that forever, right? You got to present them with a solution. But in the short term in a crisis, it’s my experience that the vast majority of stakeholders are willing to until, sorry about that I get a motion sensor. Until the until the turnaround plan is presented. You know, in the short term, suppliers are usually willing to work with you. Landlords are usually willing to work with you. Even utility companies have you know, grace periods and things like that, but employee costs 100%.

Justin Fortier: Now, you mentioned a turnaround plan. are you presenting a turnaround plan to both customers, vendors, financial institution that’s lend you money. Is that different for each of the parties? How you present that information? How might you go about dissing your plan for improvement with?

Steve Wybo: Yeah, oftentimes, you’ll bring the stakeholders into one room, usually not the the trade creditors or the vendors. But oftentimes the interests of the customers and the lenders are aligned early on, right, the customers want their parts and got to untie it with good quality and don’t want to shut down their lines say no, it’s you know, damages are measured in the hundreds of 1000s of dollars per hour, sometimes in lost profits on these on these vehicles to the extent you can’t make these up. So you know, customers don’t want to shut them shut their lines down. They don’t want you to do that. In lenders. Oftentimes, these middle market, auto suppliers have a borrowing base, or they get advances on the receivables or their inventory. Sometimes it’s an ABL structure, sometimes it’s a cash flow loan. But oftentimes, these lender or these middle market suppliers rely on their lender on a weekly or monthly for liquidity, right. And so the lenders also have a vested interest in that they don’t want the customers to get shut down, because the customers typically have what’s called a consequential damage ability. So if I shut down General Motors, and they incur hundreds of 1000s of dollars of losses per hour, and they owe me $5 million, my payables, they can offset my payables because I’ve caused damage to them. And now the bank was lent me money on those receivables or the payables from the customer, their collateral starts to deteriorate, right, if they’ve lent me 85 cents on the dollar, for a revenue dollar today, and tomorrow, I get notice from GM that they’re not paying it. Now, the bank has lent him that collateral, right. So oftentimes, the lenders and the customers early on, get together and figure out how to protect each other. Right? You do this, and I’ll do that. And I’ll lend a little more if you promise to pay. And so there’s, you know, there’s things that we do in this industry, and I don’t want to get too technical, or maybe give away my trade secrets, no, they’re going to typically get along for a short period of time to effectuate you know, the, the turnaround vendors, some of them will have their own issues and will need the liquidity on time. But, you know, the vast majority of vendors are going to work with you, they’re not going to not ship your parts tomorrow, and shut down, you know, General Motors and my other example, which causes all those problems I just talked about, and because they too want to get paid the money they lent you right or provided credit terms for so you know, my experience, again, is be honest with them, hey, look Campania this week, but I can give you a one for one, you’re gonna shoot me 100 hours in other parts, I’ll pay you 100, you’re not gonna get any worse off, give me some time to figure this out. Right. So these things take time to negotiate. And obviously, you know, you may have hundreds of vendors. So you try to parade and all the the the biggest ones and the highest risk and things like that. And so you could attack it, you know, different ways, depending on the case. But generally, you got to communicate to the stakeholders fairly early. Because, you know, any one slip in a vendor shipment, or the bank shutting off your line or the customers not paying your payables, any one of those things could cause you know, a death spiral.

Justin Fortier: Yeah, customers and lenders are really the two people that would put more money into your business. So it may make sense that they declined, since they’re kind of trading off their the operationally there’s, you can reduce inventory, contracts, reduce headcount, are there any other big items that you’d look for in an operational side of a turnaround, something that, you know, a proven way to improve the cash position of a company?

Steve Wybo: There’s cash flow management, and then there’s operational, which I’ll call that, you know, p&l management, right. And the vast majority of our clients, you know, met many of the turnaround, people think on a balance sheet restructuring. It’s a it’s a, it’s a balance sheet problem. Not really, usually the operations drive the balance sheet problem. Do we have companies that are over levered right out of the gate? Sometimes, yes, but the vast majority of the time leverage is appropriate at the time it’s said. And then the company underperforms because operationally bad contract bad law, all the stuff we talked about earlier, and that caused the leverage to go off and now they have a balance sheet problem. You know, a true turnaround expert is going to focus on the operations and so you know, things we do, we’ve talked about some working capital manage, you know, Can you stretch your trade a little bit Can you go to your customers and ask for early payments can inventories a huge suck of cash? Right? If it’s if it’s sucking up working capital, and it’s sitting on the floor and not performing for you, that’s waste. So can you get your turns up, right your days inventory on hand down. And so there’s there’s lots of working capital management receivables, payables inventory that consumed cash, but then there’s operation. And I would say, we hit the working capital on day one. But the if the lesson until you fix the operational piece, you’re gonna be right back in the suit hill in the future. So from an operations standpoint, I think a lot of people know the quick hitters are the costs, right? Can we let go of a lot of, you know, middle management tomorrow and not miss a beat with our customers? Can we trim SGMA? Can we cut the marketing, spend, travel, entertainment, all these things that are not that don’t go into buying materials? Yeah, you look at that, and there’s usually some fat and there’s lower hanging fruit, but longer term, you know, when are you running efficiently? And are your operations you know, 90%, efficient, 60% efficient? Are you creating scrap at the end of the press, you know, more than you should, if you have too many heads, because you’re you know, you don’t have an engineer process where you’re introducing robots or Cobots, or you’re handling the park too many times here, these are things that your firm is very good at, right? We’ve worked with the guys already moving parts, five miles all over the planet, when you don’t have in sequence manufacturing. And so those are the things that they take more time, and they oftentimes take money, right? If you’ve got a press and you’ve got a process that’s off site that you can move at the end of the press that takes money to move that capital, and it takes time. And you’re not gonna see that dollar savings tomorrow, like you wouldn’t cutting ahead. But you really probably need to fix that stuff long term. And so from a, you know, a call it short, medium long term, it’s cashflow management, day one working capital, it’s, you know, day to cutting some costs, trimming as much fat as you can. But day three and beyond or week three or month three, you really need to address the core problem. And oftentimes, that’s just inefficient operations.

Justin Fortier: One last question today. And it’s more on the team structure and how your firm helps. It sounds like you work with a range of troubled businesses to says that at Riverrun. One of the things we noticed with some of our clients is that they like to call as late as possible. Game structure change, if they called early when they begin to see a problem that they’re not capable to fix internally. Do you send fewer people over? Team look like? What being like when you’re, it’s hair on her? pale? How does that structure change?

Steve Wybo: Yeah, I think you know, I talked earlier about the history of our firm where we were just a legacy restructuring shop, we always got brought in not always the vast majority, we got brought in too late because we were viewed as the hardcore if going to file for bankruptcy, bring those guys in, if you can’t make payroll. Next, we bring those guys in the heart surgeons, right. We weren’t the general practitioners, it was the emergency medicine, so to speak. Now, because we offer these other things, and advisory we are getting introduced earlier. And we can help a strategy, we can help you if you’re doing an acquisition, do buyside diligence. And so we, we do a lot of performing companies stuff, I sit on a couple of boards of very healthy companies. And so we’re less of a hardcore turnaround of Undertaker, if you will to a business advisory firm, strategy firm, performance improvement firm. And we’re on the front end of the cycle, what I would say is, it gets a lot more expensive and a lot more dire, the longer you wait, kind of like no going back to your health, right? When you exercise regularly and to keep your cholesterol down, you’re probably not gonna see the heart surgeon but when you do, it’s very dire. And it’s very expensive, right? And that’s typically, again, maybe you use a crude analogy for turnaround when we got to come in and save the business. It’s all hands on deck. It’s expensive, because we’re throwing a lot of bodies at it trying to negotiate with a lot of different people. And it’s triage, right? Can we save it? Whereas had you brought us in a quarter or two or three before? And it was just that bad contract, not a bad balance sheet, not stretch trade, not a formula with your bank? Maybe we could have helped you earlier, right? We could have given you some strategic advice, we could have teamed up with a firm like yours, we can fix the problem. We could have lowered your cholesterol before you ended up on the operating table, so to speak. So I don’t know. It’s always tough. It’s for a business owner to raise their hand and say I need help. Because in some regard, it’s admitting a little bit of failure. And it’s I think it’s human nature to believe you can fix it yourself or if there’s any advice I can give to our clients. It’s you know, it don’t be ashamed to ask for help. If you’re a public company or private equity owner, you’ve got significant bank debt. Those stakeholders will respect you right? I’m not great at everything. I can’t run the operations as good as you probably can on an auto suppliers. I know My limitations are, but I also know what I’m really good at. And I think a good executive knows his or her weaknesses and strengths. And we’ll bring in firms like mine bring in help firms like yours, early enough, such that you don’t end up in dire straits. And it’s too late.

Justin Fortier: Yeah, when you were saying that I was thinking about how many hands it would probably take to, to make sure you’ve got accurate daily, all the time. I know that even just when we’re in there, with operations and trying to make sense of a business, when we get first brought in, and it’s chaotic, it takes lots of people in a lot of places, gathering data, making sure those systems make it quick the next step. So welcome for coming on. I think. Yeah, this was really great. I’ll provide all the info about your company afterwards. So in the end, you but email or I guess, what’s the best place for people to find you?

Steve Wybo: Our website is a good spot. And we’re obviously on LinkedIn like everybody else. If someone wants to call me or email me my informations on our website, we’re happy to help. We’ve got a auto qualification stack that we can send to your clients just shows the breadth of services we have there’s, I speak at a lot of conferences. I do a lot of stuff like this. So I think if you’re trying to get a hold of me, I’m pretty easy to find. And we’d love to talk to your clients or anyone else that thinks they can benefit from our services.

Justin Fortier: Wonderful. Thanks, Steve. I appreciate it. Thanks, Justin.

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