Driving the Business Turnaround: Turnaround Part 2: Julie Rothgeb

Business turnarounds are indeed a tough job. It’s at a time in a business owner’s life that in many ways, they never ever expected, and in other ways knew it was coming. When I did my research a number of years ago on what happens in a turnaround, and what is actually the first step. We identified that it was sitting on our morals, actually not thinking that the worst could happen, going ahead as if nothing can get in your way. It’s in that state of denial that the beginning of the downturn actually begins, well before the financial statement catches it. In our deeper intuition we know that something is about to happen. That’s when the Rettig Corporation gets called. In my first show on business turnarounds, Patrick Rettig, the founder and chief guy of the organization, spoke to the tough love that he provides to clients who are facing death by bankruptcy or death by some other form of business crisis. And yet he doesn’t see death, he sees a new life. Julie Rothgeb is his go-to gal. She is the financial expert behind all of the Rettig Corporation’s business analysis. Julie has a Science degree in accounting. She’s a CPA and has a Master’s in Business Taxation. I wanted to talk to Julie because she’s left with the real work of understanding the financial elements of what went on and what went wrong in the organization.  And then she becomes the task master, following through with Patrick’s Advice on how to rescue this organization. But as Julie herself says, “The Rettig Corporation doesn’t rescue the organization. They rescue the individual in-charge.” Now Julie is going to talk about the man, in terms of in-charge of the organization. She was very specific with me that she is gender-neutral. So when you hear the guy or the man, she’s talking to you any business owner whatever that gender is. So let’s tune in to part two of the turnaround series.

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Lesley:  Julie, welcome to the show, I’m so glad you’re joining me today.


Julie:  Thank you as am I.


Lesley:  Well, you are part two of my three series on turnarounds and Patrick Rettig was the first, and you are now coming in as your own person to tell me about how you pick up the pieces in the turnaround work that he does and really make it happen. So my first question to you is what’s a solvency specialist?


Julie:  Oh okay well that’s interesting. Well, I guess that’s me, you will call me a solvency specialist. I mean, on my back on this accounting I’m a CPA. And really on the team that we work with, I’m kind of a financial person and we’re working with small clients. There are going to be people that are really good at their craft and people that have been successful at what they do, but these people might not know how to necessarily read their own financial statements, so that that makes me a specialist.


Lesley:  I understand that completely because as an entrepreneur, I was always interested in landing the next contract in delivering the next expansion. And, you know, I used to dread having my meetings with people like you because it meant that I have to face reality. And I think that’s part of the challenge is that often in small business enterprise, you’re so engaged in the day-to-dayness that you literally become void of wanting to look at those numbers.


Julie:  That is so true, and even the way that you say it like, “Oh we’re dread doing that.” Sometimes they’ll apologize to me. And they’ll apologize for the fact that they don’t understand the new miracle part of their business, and I try to reassure that they really shouldn’t have to know a whole lot about it. They should know certain few things which we can teach them, but we want them to be busy with what they do. That’s where their magic happens, that’s where the brilliance is they’ve done what they do. And they need to keep people like me around, a certain infrastructure that can support them and do the business for them. We don’t want our CEOs to talk debits and credits. We don’t want them to do that.


Lesley:  And so, your business often comes in when the crisis has occurred. In other words, when they’ve hit the wall, they’ve done either too much expansion or their sales marketing have been in a crunch and they’re hitting a wall financially. What’s the typical scenario of the client that knocks on your door or that says “I need rescuing”?


Julie:  They have to be really low in order to work with Patrick, because he will come in like a tornado and he will rock their world like they have never had it rocked. And if they’re stable, they’re going to see some guy come in and tell them what to do, they’re going to say, “Uh, you know, not so fast.” But when they’re at a point that they’re so low and they’ve isolated themselves from everyone, very often they can’t speak for themselves about it, their employees are angry and feeling it, they just become alone and they don’t know where to go. So when he comes in like a tornado, and says, “I know exactly what you need to do,” and he does. He does know exactly what you need to do. They’re saying, “Uh, just tell me, I’ll do anything.”


Lesley:  Yeah. “I’m at that point where I need new oxygen to breathe and you’re the oxygen.” So, what has happened in their business that has allowed them to step away long enough to not see the crisis coming? I mean, we tend to push people away when we’re in crisis and they’re doing that, so what has allowed them to sort of stay in that space and not reach out?


Julie:  You know, sometimes they get just a little, um, they get in debt. Sometimes they get in debt because they were successful. You know, they got some big jobs, and they want to take on those big jobs and they took on just that. It kind of comes back to…they know how to their craft, but they don’t necessarily excel in running business operations. So there are two very different things being a contractor or owning a contract in a business. You know, being a person that knows how to bake cakes or running a bakery – two very different jobs.


Lesley:  So, Patrick talks about he comes in, and he says, “I have the list.” So, what’s on this list that he starts to really drum into people?


Julie:  Yeah. I would be afraid to say what’s on the list in this setting because it’s different. It’s going to be different for every client. You know, the list is something that…if he’s telling you what to do, it’s on the list. That’s what’s on the list, and it’s different depending on where they are, depending on what day it is, depending on what’s happening in the business. The list could be “Call this plant today,” or the list could be “Go home and take your wife out on a date.” It’s completely different depending on what’s happening, yes.


Lesley:  So, part of what you’re saying is, is that there’s things that we’ve avoided because of this insulation form the crisis, and we’ve gone further and further into ourselves. And the list includes reaching out to the people, who we most need to make contact with in order to keep that oxygen coming back into us to take on this tough stuff.


Julie:  Well, you know, the list could be, “Go get a haircut.” When Patrick comes in to save a company, everybody always things and myself concluded before I started working with him being an accountant, I would always have said… And I debated him and I’m embarrassed now. I hung on to this for as long as I did that business is run by numbers. “Oh I felt that, right? Come on. I’m on all about the financial statements. If you’re not doing it, you’re not like at the financial statements. You don’t know what’s going on with your company. You can’t react.” So, I am a complete 100 percent convert that a business is not saved by the numbers, it is not. And he has a saying “If you live by the numbers, you die by the numbers” and that is true. When we come into a business to restore a business, he is restoring a person. He is restoring the man. He is restoring the person that sits in a chair that that person is broken. And when he fixes that person, the person can fix the company. So all of this other stuff that we do, you know, I come in and I talk financial statements, and they got the marketing person, and they got the negotiator, and we do the things that we do. It’s all just noise compared to what Patrick is doing with that person in their personhood. He is healing them. They are broken.


Lesley:  And I think that that’s so real that the outer reflection of the broken company is the representation or mirror of what’s been going on inside of us. So, as you’ve observed and the work that you do is to keep following through this healing process, this working process, what would be a typical scenario of the types of work that you do on day one, on day two, on day three? I know it’s different for each client.


Julie:  Yes, and I love it so much because it’s like you’re saving a patient in a hospital, they’re on life support and that’s where we come in, right? And so that’s the most important time, the most exciting time. The first call with Patrick is always so exciting during that connection, hearing that person get a little life in them is so exciting. So when I come in I am coming in kind of investigative because I need to quickly assess the situation, and I need to know how quickly I can get Patrick information that he needs about the company. So, I will do a long interview with them either by phone or even house, where I’ll ask them all about their company. You know, “How big are you? What’s your sales volume? Are you an S Corp or C Corp?” Sometimes they don’t even know that. And when I learn what they know and what they don’t know, “What software are you on? Do you have…?” I’ll just kind of throw these questions at them not anything earth-shattering but by their answer, now I know their level of involvement. In their financials, I understand their level sophistication more and know about their step, and then they don’t want to talk to the person that does the books. And I want to learn the level of sophistication that person, sometimes they don’t have books. Sometimes they’ve got a great infrastructure, and we’re like, “Okay, we can run with this guy, we can do break here.” So I come in and I assess very quickly, and Patrick will not have the patience to do that. You know, I’ve got to spend the hour on the phone and get all the information, and then I can give it to him in bullet points. Very quickly I can give him what he needs so that he can do what he needs to do.


Lesley:  So, how was your approach changed? As you say that you’ve been evolving over this period of time and coming from a CPA viewpoint, and then because you also have a Master’s in Business Taxation.


Julie:  I do.


Lesley:  So you’ve really worked with the numbers. And so, how is your approach evolved in knowing what a business owner is going through in that moment in time and what they need from you?


Julie:  You know, it’s been the best evolution too, because I do have a big firm background. You know, I start out with a big firm and now I’m working with small companies, and they need love. I don’t know how to say that.


Lesley:  You just said it.


Julie:  Yeah. And, by me, spending time with them and helping them in these things. None of us say the numbers don’t matter, none of us say that. The numbers matter a lot but there’s no magic in the numbers. The numbers are not going to turnaround a company, but we have to be careful when we tell clients what we tell clients in how the clients are saved. So, we don’t come to the clients and say the numbers don’t matter, we’re not going to ever say that to the client, and they do matter. So, I will be the one that is talking numbers with them. We’ll do something what Patrick has developed something called a “Critical Profit Report” and we’ll do that on a weekly basis with the clients. Sometimes it’s a very handholding process because it’s like a casual statement but it’s a Layman’s casual statement, and we try to make it just as unintimidating as we possibly can. You know, these guys that are used to shouting orders at everybody, giving out there and giving all the directions to everybody, and we ask them how much money is in the bank, you know, certain questions might embarrass them.  They’re the man, you know, and I know I’m using all my gender to men. We do have women CEOs too and it’s the same. These women are used to being in-charge. They’re running their own company. They’re used to being in-charge and they’re often embarrassed about their failures. So, “I can’t come at it as a big firm, I’ve got a MBT. I’m going to show you how to write your business.” We don’t do that at all. We come and love them. We love them, and I truly love my clients. I love them. We have problems and they don’t know why their inventory is a mess, “Well, we’re going to figure it out.” You know, we just take one problem a time.


Lesley:  You know what, I understand when that is accumulated basically obviously when a contractor goes out gets a job then buys all of the supplies, the materials, and all of that. It doesn’t necessarily manage the cash flow, finds himself with the money come in but not all the debt paid out. But, what do you do with the client that a small business owner, who actually has gone completely dark in the sales area? In other words, sales have just stopped and they don’t know what is going on. How do you address that?


Julie:  That’s the time to hear Patrick talk to clients about that at the very beginning, because when clients first meet him, they want to… You know, we all want to present ourselves in the most positive light no matter when. Even at this point you’re meeting a strange person and they will always tell what happened, you know, like the economy with that. You’ll hear that so many times that it was the economy. He doesn’t want them off the hook. He will tell them that it was not the economy. So, right away, he holds them accountable for the sales, and he knows they used to know how they do it. They used to do it. So, he doesn’t want them off the hook. He just sends them right back to what they used to be good at. And the magic starts right away because they’re not alone anymore, and they have so many very in-control knowing how good they are. He knows how good they are, and he reminds them of how good they are. And it’s a now finally in a world that they’ve been and worked everyone, their wife, their employees, everybody is telling them how horrible they are from lying and they can’t get a debt… The whole world hates them, and they’ve got this most powerful man ever telling them what they know that they really aren’t that bad. “Yeah, I can’t make that talk. Yes I can.” You feel it right away. It comes from in them. Even before the sales made, you know they’re going to be okay.


Lesley:  So, in terms of the timeframe, and again I know it’s different for every client, but is there a theme in terms if they go up a bit and then there’s a bit of a crash and they go back up again? I mean, is there any kind of flow to how this works and what kind of timeframe are we talking about?


Julie:  You know, I don’t if I should say very often. You know, we have plans that go through bankruptcy, “With a certain amount of debt, that’s what we’re going to do.” And before they need us, they’ve thought bankruptcy, but to them that was a death sentence. They think bankruptcy is the end, so they don’t even want to say the word. Well, when we can and we see if its situation or bankruptcy is going to be the answer, if that’s the treatment for the patient then that’s the treatment for the patient. The most important thing is that the patient survive and continue, and live, and go on.  We’re there to restore. So if bankruptcy is the proper course of treatment, we’re going to prescribe bankruptcy and Patrick will make that call. Everybody wants to know the timing and it is different with everybody. But I would say “It’s going to be a year, buckle up. It’s going to be awhile that you’re going to be in the court system.” And even when they’re in bankruptcy, they always want to know the timing because it’s not a comfortable place for people, but it is absolutely life-saving, I feel bad that it has such a bad statement because it is life-saving to people that truly need it and they go on. They don’t die, it saves them.  


Lesley:  And so when that decision gets made and the calls have to be made, to the various players that are going to hold the strings on this, what does life during that feel like for the business owner? What do they have to go through?


Julie:  You know, that’s a great question because they have so much trepidation up unto that point. “These people will never want to work with me again, that means I’m not going to pay them.” It’s going to destroy all of these relationships. And I cannot think of a time when there hasn’t been more good than bad come out of the bankruptcy, even with those relationships, even with people that aren’t going to get paid for a good long time because of the human element. And that’s the most exciting thing about working with Patrick is the relationship, human elements. They’re everywhere in our business. When a person goes to bankruptcy, and he has all this fear that “Now I’m going to lose these long-term vendors and relationships.” He has to become human. He has to pick up the phone and call people that have been avoiding, or they used to be close but now it’s gotten become strange, or he never calls them because he’s had accounts payable do all that. We actually have the owner many times make calls to their key people; their key relationships that they want to continue doing business with. Invariably, when a guy picks up the phone and he says to someone, “I’m in trouble, I need help” people want to help. People don’t say “No I’m not going to help you. You’re a jerk.” They don’t do that. It’s the most restoring act right then and there to teach him how to humble himself, how to say “Dude, here’s where I am. I’m not going to be able to pay you. But you know what, I want to keep working with you. Let’s do this and I can get you some money here, and this will be paid later or part of it paid later. Do the court system. I don’t have control over that anymore.” And Patrick gives them the greatest wording. He gives them the coolest wording. Everybody wants to be like him. They all want to be like him, it just works. It’s something that they haven’t ever experienced before. They haven’t seen anything like him, and now they’re being able to get in touch with the sight of themselves that they had buried. When they met their spouse, when they were romantic, and when they started all the passion, they felt when they started the business. You know, that’s all human step, that’s the magic. And they lose that because it all became bigger and bigger, and they started to become this other thing that is fierce. And that strength is important, and that strength made them successful and they became powerful but yet it created some barriers also. Patrick breaks down those barriers on day one, on day one he connects with these people. And then, even on that first phone call when they start saying, “This guy kind of screw me” then you see the moment and they’ll say, “I did this.” You did the real story out of people, it’s definitely wrong.


Lesley:  And stuff went wrong way before when I actually start to pay attention that it was going wrong and it’s going back into that darker passage way, and sort of seeing the signs that were there. And that I chose not to look at because frankly entrepreneurs to me are very interesting. And being one is that there’s always this thought that “Tomorrow’s another day. Tomorrow is going to change. Something is going to be different. The next contract is going to come in, and it’s going to save what I mean right now.” So there’s this make-believe world that we create that allows us to stay in that kind of Zululand, that we don’t have to actually face that there’s stuff going on right now that if we face now we will start the preventive measure that we need to do. And human nature such that, you know, we just keep bowling forward. We use our strengths to try and deal with our weakness.


Julie:  Well and that’s the great thing about the breed of the entrepreneur. If they didn’t have that, I will see optimism to the point of delusion. If they didn’t have that optimism to the point of delusion, they couldn’t do some of the amazing things that they do. You know, you’re going to love that in them. They really do the impossible. I mean, they are the inventors, and they are the workers, the creators, and they do all the stuff that other people were like, “They can’t do that. Who could do that?” They are the ones that do it so you don’t want to kill that in them. You want to keep that amazing, creative powerful side of them that always sees the Brightside. They always find “Where there’s a will, there’s a way.” You know, they always find a way. And Patrick, it’s a very delicate balance, I’m watching to it all the time how he never extinguishes that fire. You got to keep that fire burning in them. Yet at the same time he can call them on their stuff like you have never seen and get them to own it. How do you triangulate all of that?


Lesley:  It’s idiomazing. So we have left, Julie, and what I’d love you to do is to take us out with your 2-minute story of one of your favorite stories of a turnaround.


Julie:  Oh I wish I had prepared for that. I’m not a good judge at two minutes but my favorite story would have to be the story of my brother, because he was my first turnaround client and I didn’t know Patrick at the time and that’s how I met Patrick. So, my brother called me, and he has a big enormous personality and always is in-charge. And he called me and I have never heard him like this before, he was unequivocally broken. And he said, “I think I have to file bankruptcy and I need help, and our dad is no longer alive. He’s gone, he can’t help. I can’t talk to my wife and I need you to help me. Will you help me?” And you know, I said, “Of course, I’ll help you.” And I had no idea how to help him. I’m an accountant, I don’t know what to do but we talked about filing bankruptcy and then what attorney we’re going to use. And when I hung up with him like my big brother, you know, honestly I got down. I hung the phone and I got down on the floor, and I prayed, and I cried. You know, it just feels so sad. So, we worked together and filed with an attorney. And it was horrible because he was going to sell his business work for the new owner, and made jokes about him working at Starbucks. And I ran into my cousin who said his business was failing, but he met this guy who saved his business. And I said, “Huh, what guy? What was the guy?” And he said his name was Patrick and that was the beginning. So, my brother called Patrick and it was the mediate connection. And I think another kind of cool thing was, Patrick asked my brother and I don’t know why he did. But he asked my brother, “Who is your go-to person? Who do I need to talk about?” And he said, “My sister” and he said, “Then get your sister on the call.” So, that was pretty cool that that happened because I don’t see that happen with other clients. I don’t know why he did that with my brother, so the three of us started working on saving the company. And my brother also had cancer and my brother also wasn’t speaking to the cousin that referred Patrick, so it was a mess, and he was overweight and drinking. And for meeting Patrick, he gave up drinking, and smoking, and meat, and he’s a black belt in Karate, and he’s a yogi. He goes to church and he attributes all the miracles to God, and he knows that God sent Patrick to him. He’s alive and well, and happily married, and he’s healthy. You know, it’s a pretty cool story.


Lesley:  And it is amazing story. And Julie, I can’t thank you enough for sharing that. What happened to the business?


Julie:  He’s still in business. We call it “The Big C” we go to continue. We don’t want anything more than to continue to the next day. Well, this story was five years ago. He went for bankruptcy, in and out and it’s what we do. And I can’t believe how it all happened and then I get to be here and tell about it and work another plans. I didn’t know something like this existed.


Lesley:  Well, you know what, you think you’re lucky to have Patrick. I mean, Patrick is darn lucky to have you.


Julie:  Could you tell him that?


Lesley:  You know what, I’m telling this now to everybody who’s listening and I will include him in that that yeah, it’s the combination of chemistries that create turnarounds. And you’ve talked really well and brilliantly about the chemistries, and it isn’t only one. It’s a mixture of the mystique of human nature and how we weave these different capabilities and talents together that end up holing it out of the rabbit hole. So, in behalf of all my listeners, I want to thank you so much for sharing such a profound level work that you do. We wish you absolutely continued success.


Julie:  Thank you. Thank you so much and thank you for having me. I really appreciate it.


Julie Rothgeb truly loves what she does. I wish you would have the great fortune as I did to interact with her visually. Because when you do, this gorgeous woman truly emanates the passion that she holds for the work that she does. Yes, she’s the number’s gal, and she’s the one that works her way through their financials and through the realities of what it’s going to take to produce, and deliver, and collect. And yet, she understands as Patrick Rettig does that the real journey is the emotional return to well-being that the CEO has to take in order to move forward. The best day is the day when a CEO realizes that they need help, and they make for call to get it. All too often we know that the time has changed and yet taking the responsibility to forge ahead in a direction that we have no idea what it’s going to be, but we know it can no longer be the one that we’re taking. That’s the day when we demonstrate our greatest courage, and then to do the tough stuff to make the calls the we don’t want to make, to create the relationships that have gone sour back into a position where people will again redeem trust in us. Human beings are amazingly giving if we offer the chance to them to provide that support. Sure, the first call may not be of the greatest response, but taking the step to say, “I can’t see my way forward with your bill, but it am committed to doing the best that I can for you.” That’s the type of hand that we need to give when we are moving into this type of direction. I urge you to take a look at therettigcorporation.com that’s T-H-E-R-E-T-T-I-G- corporation-dot-com. There you’ll find more information about what these amazing people, and you’ll see that they’re strange and wildly in how they do it and that is their formula for success. They believe in their clients when their clients have often stop believing in themselves. You know where to find me. I’m at Lesleysouthwick-trask.com and womenwholead.co, as well as “Women who lead radio show” on facebook. This was part two of our turnaround series. If you haven’t had a chance to listen to Patrick Rettig, take a visit at my website to see where you can find that show. And stay tune next week as art three comes into play, when I interview one of the CEOs that the Rettig Corporation has saved and continues to provide support. You know this is your show. I am your host Lesley Southwick-Trask, thanks for listening. See you next time.

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