YAGER: I’m one of those “get-go” guys. First, my father was in general management, and at some point during my high school days when he was talking to me about careers, he showed me a book that came from an executive MBA study program that he had been in, a book called Corporations in Crisis. They’re short stories. I read it, and it really captured my imagination. From the time I was 14 or 15 years old, I thought about this.
Fast-forward seven or eight years, and I graduated from college. It’s 1988, a recession is forming, and I’m on Wall Street at Salomon Brothers. Among all the things going on, there was a little feature called “Management Corner” in The Wall Street Journal—I think it ran on Wednesdays, on page B-12. Every once in a while, there’d be an interview with a turnaround guy. They were great, colorful short stories about things these guys would go through. They really captured my imagination.
That spurred a conversation, and I started looking around. I started asking questions and learned that there was a whole insolvency community. The Bankruptcy Court for the Southern District of New York was two blocks from my office. I found some turnaround people and harangued them until they told me what I needed to do to get into the industry. So, I reversed course in my career.
One of the things they said you really needed was an accounting background. I didn’t have one at all. I was pretty bad at that stuff. I went into commercial banking to understand credit. I got an MBA and then went to Coopers & Lybrand and studied audit for a few years. Then I called back the turnaround guys and said, “I want in,” and ended up at MorrisAnderson in Chicago in the mid ‘90s.
I thought about where I wanted to go in my career. What I was fascinated by was not only turnarounds, but also the fact that you could make money in different ways doing turnarounds. One of the ways you could make money doing turnarounds was by buying companies. I was very interested in doing that.
I set my career path around consulting, but I was also looking for a way to buy a company at some point. I didn’t know anything about distressed private equity. I just shot out on my own to try to do this without any other investors or people involved, and not really having much knowledge of the turnaround industry or the TMA, and was able to find a small metal fabricator to buy. It was very distressed. The way the purchase went down—it was a little more complicated that this—but essentially the guy said, “If you didn’t buy it Wednesday, we were going to liquidate it Thursday.”
My whole purpose was to buy a distressed company and turn it around. I went in, snatched it up, ran it. I moved my family and really made my whole focus making this thing happen A whole host of things went wrong, some of them from self-inflicted wounds for sure. A couple of things happened that I could not have planned for. Fourteen months later, I lost the business. Then I lost my home. And then eventually, through financial strife, I lost my family in a divorce.
It was a humiliating, very defeating moment in my life. I thought I knew more about turnarounds but found I didn’t know as much as I thought I should know. I certainly took on way more risk than was necessary. I ruined myself financially and questioned what my real worth was.
But during the process of that attempt to turn around the business, what was terrifying about the crisis was not necessarily the failure of the business. I was somewhat steeled for that. But as the plane was going down, I was passing through this territory of people who could help with distressed companies and seeing what my options were, how much they charged for their services, and how ineffective they were. It felt like I was just writing checks to people, and nothing was ever getting done. These were otherwise well-meaning people, but the results and the actions just didn’t add up to the equation.
I thought about that as I sat there wallowing in the disaster over the next couple of years. What happened had been terrible, but I couldn’t imagine not being in the turnaround space. I would go back and learn from other people. What did I miss? So, I went back and got back into turnarounds. I rejoined MorrisAnderson. I worked hard, really threw my shoulder into it. I was more successful and became a partner.
As I was rising to that level, I was looking around and remembering what had happened to me. The company I bought was a very small business. It did about $5 million in sales. I’d gotten a chance to work with other relatively small businesses during that period of time back at MorrisAnderson. Our practice was expensive for small companies, but I was able to find ways around that to help smaller businesses from time to time.
I thought, the world doesn’t need another turnaround consulting firm. However, from a practical standpoint, the very smart people in the turnaround space are just too expensive for the small businesses. The problem with that is, 50% of the jobs and 50% of the taxes in this country are generated by these small businesses, yet they don’t have a consistent and well-defined place to go when they become distressed. So, I decided, that’s what I have to do. I decided that if I were on my own platform, if I focused on small businesses, I could probably make more of a dent in this issue.
YAGER: When I failed, I was not a member of TMA. When I came out of that experience, about a year later I found TMA. I had known of its existence but just didn’t know what it could do for me. I joined the Chicago/Midwest Chapter and immediately started meeting new friends—people I could understand and trust, who could train me and show me the way.
I joined the chapter’s Membership Committee, then the Awards Committee, and then the Education Committee. Then I went from the Education Committee at the chapter level to the Education Committee at the TMA Global level, and all along, I met more people, thickening my network and giving me more resources and more confidence about my ideas, which were these crazy ideas about working with smaller businesses.
I left the partnership at MorrisAnderson in late 2012 and started Newpoint Advisors Corporation in February 2013. I decided we’re going to focus just on small businesses and find a way to be cost-effective and affordable for those people. We work with companies of $1 million to $50 million in revenue. We don’t go above that threshold, and our average client has been one with about
$9 million in revenue. We now have 30 professionals and 10 offices around North America with our eye on a much bigger prize so that we can solve more problems for more small businesses.
YAGER: I have referred to it a number of times as my “capstone course.” I have an MBA from the Kellogg School of Management at Northwestern University. It certainly helped me, but it didn’t fill in all the blanks for what I needed to know about the world. I found that out by falling down.
Most turnaround firms don’t deal with small companies.
It’s a very awkward dance. Some of them try, but the quote I always use is, “The medicine will kill you before the disease.” Generally in the insolvency space, professionals are so expensive relative to these small businesses. Newpoint is a complete reengineering of that process that we all call the turnaround process so it can be affordable for small businesses.
YAGER: We created a highly structured approach that allows us to marry up a fixed cost approach to the highly variable issues that you run into in turnarounds. We partly contained some of the variances and variability by only focusing on small businesses, which takes a few elements of complexity out, but we also created an approach.
We as an industry are blessed with a great deal of intelligence but also an incredible independent spirit and streak. A lot of people I meet and have a lot of admiration for are quite independent and would never be told what to do. We actually created a process where we did tell ourselves what to do and that we could only do it this way. While every train wreck is different, the approach is always the same. It allows us to take cost out of the process.
While there are lots of financing alternatives for small businesses, there is a huge need for are a lot of turnaround work. We do a lot of operational work because you can’t shed a bunch of assets in the middle of the transaction like you can today in larger companies. There’s a lot of turnaround work in what we do. It’s exciting.
YAGER: The impatience in larger cases comes from knowing the alternatives, knowing that they don’t have to sit there for nine months watching you try to turn something around. Instead, in nine weeks they can have cash in hand. But when we show up in these small business situations, the lenders say, “Is there anything you can do?” because the alternatives are limited and less understood.
YAGER: That and wily entrepreneurs for whom everything is about growth, going full bore, and the bottom line be damned. Some of them have been doing it for decades. It’s amazing that they’ve lasted as long as they have. For them, the situation is confusing. “Why would I need a turnaround guy? I’ve always been able to solve my problems.” You come in and say, “You’ve got to change. You’re going to kill the company and lose all these jobs.” Their attitude is often, “I think you’re the one who’s mistaken.”
That’s one of the hardest things for them to accept. “I’ve been doing this for at least decade, and now you’re coming to tell me I’m doing it wrong?” We explain, “The stats show it. You look like you’re about ready to blow up.”
YAGER: That’s a little tricky for me to answer because we do receivership work as well as turnaround work, so it’s a mixed bag. But if you followed our formula, we’ve had a 78% success rate. If you include people who refused to use our strategy, it’s 61%, which is to say 78% of people who followed the formula succeeded; only 22% of the people who ignored us actually survived.
YAGER: For small businesses, where they all are supposed to go out of business, it’s not bad. I think we can do better. We think it’s a good formula. I was hoping for 80% or better return, where I’ve been told 50/50 is pretty good.
YAGER: One of the most gratifying things that we’ve done is to keep count of the number of jobs saved and the amount of money repatriated to senior lenders. That’s $381 million so far, and we’ve saved 6,316 jobs across many, many businesses. Every six months, we update that number to see the growth in what we’ve done.
From an individual case standpoint, we had some crazy home runs. There was one case about four years ago where we were called into a tiny supplier to the aerospace industry. I don’t know how they got them, but three of their direct customers were tier one aerospace suppliers.
They were in so much trouble. They had gotten a letter from the Department of Defense. I got a call from an investment banker at 1 o’clock, and he said, “I need you to be on a call at 2.” I thought he and I were just going to talk. I jumped on the call at 2, and I think there were about 20 people involved. Without my prior knowledge, I was introduced as the CRO who would be taking over the business.
We were basically facing a liquidation. The bank had pulled the plug. All the money was draining out of the business. The customers couldn’t have that. People who have done turnarounds in the aerospace space know there’s a lot of customer issues with small suppliers going out of business. We were able to cobble together an agreement and fix the operational issue that was killing it. Sixty days later, we were turning cash flow positive. I never had a story like that, one that moved so quickly, and probably will never see one again, but it was very gratifying. It saved all the jobs.
YAGER: My “capstone course” for sure. That failure is indelibly marked on me. Also very formative was finding the TMA. The broad network of friends that I have in varying degrees thought I was completely crazy for stepping into this niche, but they also were supportive and said I was an entrepreneur and should go take that entrepreneurial shot. And hats off to Dan Dooley at MorrisAnderson, who gave me a second chance in the industry.
YAGER: I tell everyone, “You get out of it what you put into it. Dive into TMA as an industry trade association headfirst. There will be no regrets.
YAGER: It really did pay off and really helped me. Newpoint today is more appreciated because there’s a broader audience who knows who I was and what I did, as opposed to me showing up from the outside one day and saying, “I want to do this TMA thing, and by the way, I’ve got this business that I run, this wacky consulting idea.” I think there’s far more acceptance and appreciation for what we do because I’ve been a long-term TMA member. People get it.
YAGER: No, you don’t. People need to see you. One of the best ways for people to know whether you are trustworthy is to spend time with you in a safe environment, which is on TMA committees. Word gets out very quickly that you’re someone who keeps their word, who follows through—or doesn’t. That would be my word of caution. Do not bite off more than you can chew. Do what’s appropriate and acceptable to you, given the hours in the day that you have. Don’t overdo it. You’re being judged. You’re being measured. This is what people are going to think of you when they think about trusting you and your ability to work with you on engagements in the future.
YAGER: I try to do a lot of exercise. CrossFit, which I’ve been doing since 2013, is my “junkie” thing. A couple of years ago, when I had more time on my hands, I got into Tough Mudders. I did about five of those. Those were fun. I’m thinking about getting back into that. We’ll see.
Exercise is a big thing for me outside of work. It’s a great release, and it keeps me balanced. There’s nothing like sticking your head into a CrossFit exercise and getting so focused on it that you lose yourself for an hour. It’s a great stress reliever. It’s a great balancer of life. I can’t really say that I have a lot of stress doing what I do because I enjoy it so much. It’s not like I’m barely surviving until 5 o’clock Friday. I get to Friday and think, “Wow, that was fun.”
YAGER: It’s a lot of people to keep focused and to keep on a mission. Making them successful personally and part of a successful team takes a wee bit of energy. I find myself spending more time making sure they’re doing their thing and feeling good about it than doing actual projects myself. But obviously, we’re not that big. I’m still involved in some projects.
YAGER: I moved to Florida and am a member of the Florida Chapter now. Most people think of me as a Chicago guy.
YAGER: About four years ago. Being where we are, in Jacksonville, Florida, is certainly a change in latitude from Chicago in weather. But it also had a lot to do with testing the boundaries of our business model—not just being a Chicago firm but a North American firm and trying to find out how far could we go geographically with our message and our product.
YAGER: Yes. We’ve seen all of our growth since that change. It does not seem to have slowed us down. It may actually have helped us. One of our largest offices is still in Chicago, but I’m just not there.
I think the other thing that might be a surprise is I’m actually from the South. A lot of people think of me as a Chicago guy. And even though I got to Chicago and New York, I was born in Charleston and raised in New Orleans.
YAGER: My bones like it. My bones are far more appreciative of this climate than Chicago’s, although Chicago definitely is home and has a place in my heart. It was the longest I lived anywhere.