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The Magic of Music: Richard J. Szekelyi

Richard Szekelyi © 2019 Eric Mull, ericmull.com

Q: How did you gravitate into turnaround/restructuring work?

SZEKELYI: I didn’t have this as a career path. It just emerged. That said, much of what I did before that was very helpful, from my time in commercial banking to private equity. The most helpful thing was having the opportunity to run
some companies as the president or CEO. That was invaluable to what I do today.

I was at an accounting firm, and I decided to make a career change. Soon after leaving the firm I was engaged by John Widdicomb Furniture Company, which made high-end furniture. At the time, John Widdicomb was the oldest furniture manufacturer in the country. I was engaged as interim president and was off on one of my first turnaround assignments. After completing that job, I hung out my single shingle and just kept picking up jobs here and there and made a career out of it until one day I met a guy from Phoenix Management Services. He said, “Hey, did you ever think about joining a larger firm?” That’s how I ended up at Phoenix. So, the path was a crooked one that ended at a turnaround firm.

I forget how I got in touch with the Widdicomb folks, but they had been trying to sell the company for quite a while. The people who owned Widdicomb also owned an industrial manufacturing company. Their dad had bought Widdicomb based on the fact he loved furniture. The dad passed away, and the sons, less passionate about furniture and tired of funding losses, wanted to sell the furniture company. To achieve a successful sale, the company’s performance had to be turned around. Fourteen months after being engaged, we successfully sold the company for a reasonable price, so I consider that engagement a success.

Q: What did you have to do to turn it around?

SZEKELYI: There were three levers. One was pretty straightforward. I noticed that 50 percent or more of the sales were to one customer, which had showrooms all over the country. Those sales occurred between the president of Widdicomb and the president of the customer. We would meet to work out the buy plan for the year.

However, all of the sales reps in our various territories were getting a 10% commission on the sales, the same rate as if they were responsible for obtaining and managing the business. While they did not initiate the sales, they were important in providing service to the various showrooms and training showroom sales staff. Given their role, we reduced their commission rate from 10% to 3%. Interestingly, I did not get much pushback on the change. This one change saved a considerable amount of money.

Next, prior management had a consignment program that placed a significant amount of inventory out on our dealers’ floors throughout the country, tying up a significant amount of working capital. I made a deal with our dealers: they could either send the consigned furniture back or buy the furniture they had on the floor at a deep discount from their usual cost. Interestingly, I didn’t get any of the furniture back. Instead, we received a lot of checks. A plausible explanation was that in many instances, the furniture had already been sold. I knew this based on my visits to the dealers. I would note that a consignment piece was missing, to which they would reply, “Oh, we just sold that. We’ll be sending you check.”

The third lever was the size of the labor force. Prior management wanted the factory to always appear busy so that the workers and everybody in the company felt that they were successful. So, they were frequently building furniture that ended up in inventory or on consignment at dealers. They were building so much more than what we were selling, it was crazy.

So, we implemented a pretty major RIF (reduction in force). We cut the labor force and brought production down to a point where it balanced with sales demand. This move reduced costs significantly and further reduced working capital.

Those three moves brought the company’s operations back to a profitable level and stemmed the cash burn. About one year later the company was successfully sold.

Q: What milestones in your career helped make you the professional you are today? You mentioned your diverse background. What made you move on after starting in commercial banking?

SZEKELYI: While in banking, I received an offer from what was Arthur Young at the time, before becoming Ernst & Young. I had my CPA, although I’d never worked for a CPA firm. My dad was an accountant, so I was able to satisfy the work requirement for my certificate by working with him.

The managing partner of the Cleveland office of Arthur Young was looking for somebody to run a practice segment called the Entrepreneurial Services Group, or ESG. ESG focused on working with entrepreneurial businesses, growing businesses. The managing partner thought it would be helpful to hire someone with experience at raising money, a resource that growing businesses always need. Therefore, he had the search firm focus on the banking industry to find a candidate.

After being contacted by the recruiter, I got together with the managing partner. We worked it out, and I joined to manage the ESG practice in Cleveland. We were able to grow the practice significantly in a little over a 3½ years. So, I left banking for an opportunity to do something different that sounded exciting. And it was. Always glad I made that move.

Richard Szekelyi © 2019 Eric Mull, ericmull.com

While at Arthur Young, I never really practiced as an accountant. My charge was to build the practice. We accomplished this by helping people acquire companies, after which they would become clients. We would assist with due diligence, arrange financing, and develop post-acquisition strategies and integration plans. When I joined the firm, I was the only person in ESG. After 3½ years, the ESG staff was up to 14.

I moved on from the world of public accounting when a private equity firm called to see if I would be interested in joining the firm. My job at the firm was to find deals, analyze them, perform due diligence, and negotiate and close the deals. After closing, I also was involved with the integration of the acquired companies into the company. Frankly, that job was a blast.

That’s probably the first time I was involved with a turnaround situation. We had acquired a furniture company. After closing the deal, we recognized that management had misrepresented inventory. In addition, there were other issues. I had the opportunity to be involved with figuring out the problems and fixing them. I found I enjoyed the challenge.

Q: How long have you been with Phoenix?

SZEKELYI: It’s going on 11 years. I love this kind of work. It’s frustrating at times and it’s stressful, but it certainly is interesting. My first encounter with Phoenix was at a ski outing in Colorado, where I ran into one of Phoenix’s partners, Jim Fleet. A few months later, I joined the firm.

Being a single shingle, due to having limited resources you don’t really have the opportunity to work on larger jobs that can be a little more interesting and challenging. At Phoenix, we have a decent-sized staff with diverse experience bases and skills. For me, it is incredibly valuable to have other experienced people to bounce ideas off, to validate and improve on my own ideas. It is also very helpful to have a group of talented analysts to assist on projects. I avail myself of those resources frequently. We have a lot of smart people in the firm. That is one of the reasons I have been at the firm for over 10 years.

What role has your TMA membership played in your career?

SZEKELYI: TMA provides the opportunity to build a network within the industry through various TMA meetings and outings. You have the chance to meet new people and reconnect with people you haven’t seen in six months or a year. Being a TMA member identifies you as someone who’s in that industry, which is important. Even though, in some regard, a lot of us are competitors, it doesn’t hurt to know each other. Of course, you also have the opportunity to meet other folks in the industry, such as attorneys and bankers. TMA has been a great resource.

I’ve been on the board of the Ohio Chapter for a number of years. For five years, I chaired what was then called the Great Lakes Regional Conference, which is a two-day conference/golf outing, and, by the way, I don’t even play golf. That experience was great because I got to know a number of people well by working with them on committees as we put the annual events together. TMA is probably one of the better organizations I belong to. I have gotten a lot out of it.

Q: What advice would you have for someone who is new to the industry or was thinking about getting into it?

SZEKELYI: You don’t necessarily need an accounting degree, but having a good grasp of accounting and a good financial background are important. Before you join a firm, I think it’s helpful to go out and gain hands-on experience someplace so you can have a better understanding of how things work. The experience I’ve had in running various companies has been invaluable to me. I’m not coming in as a consultant who’s never faced challenges before. I have been there, facing problems and challenges, developing and implementing solutions, and, even occasionally worrying about making payroll.

Another path is to work at a bank. Many of our analysts come to us from the banking industry with two or three years of experience. That may be a more typical career path. If that is the path someone is on, one piece of advice I would have for them is to always be inquisitive. If you don’t understand something, ask. You can learn a lot more that way.

I have a psychology background, which I probably use more than I do my accounting training in dealing with people. You have to figure out who you’re dealing with, how they function, and how to get them to buy into what you’re trying to do. The president of a company rarely welcomes us with open arms. To be successful, you have to work through that barrier and build common ground. They want the company to do well; you want the company to do well, and you have to get them to honestly understand that. At times, that is a process.

Process is also how to effectively sell your ideas and recommendations. Starting with, “This is what we should do” likely is not an effective approach. The process may involve asking 20 questions so that when you finally present your idea, the client is on track as a result of the discussions. To be successful, it is important to develop trust. Typically, trust is not there at first; you have to earn it.

Richard Szekelyi © 2019 Eric Mull, ericmull.com

Q: Outside the office, I understand you’re into music. How long have you been doing that?

SZEKELYI: I’ve been playing guitar for 60 years. In high school, I played in bands. I played a little bit in college. Then I had family and was starting a career, so music took a back seat. It’s really been during the last five years that I came back to it.

During the years, I’ve always played my guitar, but I didn’t take it seriously enough to perform. About five years ago, I decided I was going to refocus on music, so I took a couple of workshops and started fiddling around with songwriting, something I’d really never done before. I started going to open mics and getting more comfortable onstage. I then teamed up with a couple of folks and started playing out. My friend Amanda Walsh, who plays piano and violin, and I started the band City Limits with her brother, GB, on drums and a bass player and lead guitar player. It’s been fun.

Amanda and I play out as a duo, Bridgetown Junction, about twice a week, sometimes more, sometimes less. Last week we had four gigs; this weekend, we have three, so we’re pretty active. We both write music individually, as well as collaborating on songs.

I also hold songwriting rounds, where you get three or four songwriters together and take turns playing your original work. If you play in a bar, you’re lucky to have a handful of people listen to you. People are there to drink, eat dinner, and talk to their friends. The songwriter rounds are fun, because people come to actually listen to the music. Playing venues were folks come to listen tends to be a little bit more rewarding. That said, the bar gigs are fun, too. People frequently say, “You guys look like you really enjoy what you’re doing. You look like you’re having fun.” The reason is, we really do have a lot of fun playing together.

I can have the worst day, arguing with attorneys or workout officers, trying to fix the next crisis. But, when I fire up the sound system and start playing, everything else disappears from my mind. I’m not thinking about the crisis. I’m not thinking about the next phone call. Those thoughts take a break while we’re performing. It’s the most relaxing thing. It’s magic for me. That’s why I keep doing it, and hopefully I can keep doing it for a long time.

Q: Have you recorded any of your music?

SZEKELYI: Yes. You can find our album on iTunes, under Amanda and Rick. We’re making another album now. We’ve been at it almost a year, which is embarrassing. We went to a recording studio to record the first album. It took us about three months. For this one, I decided to buy the equipment so we could record it ourselves.

What we have recorded sounds as good as what we recorded in the studio. The problem is, when you own the equipment you can keep coming back the next day and change it, and then the next day, and change it again. You can come up with an idea and say, “Let’s re-record this one,” or lay in another track. That’s what’s happening. We’re having a hard time finishing it. I’m half tempted to say, “Let’s scrap this ‘do-it-yourself’ idea, and take what we have and go back in the studio to finish the album.” Seems like if you’re paying somebody, you’re a little more focused on getting it done. I’m a pretty disciplined person generally, but not necessarily on this project.

Q: It’s creative and there’s no end to creativity.

SZEKELYI: There’s no end to creativity, and there’s no end to self-assessment. “I can do better. The harmonies were good, but we didn’t hit each syllable at exactly the same time.” That’s Amanda’s thing. You’ve got to make sure when you’re harmonizing, the phrase is exactly the same. Every syllable has to match up. She’s right—it makes a big difference—but there’s a point at which you’ve got to move on. We’re both to blame for not finishing the current album, but we’ll get it done.

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