The #1 Regret of Top Investors? Not Firing People Sooner.

Sean Weisbrot: What's the most important thing that you've learned so far in life?

Michael Appel: The most important thing is really, and it's gonna sound hacking, but it's all about the people. Okay. Because if you can't get the right people in place to, to, to, to build your organization, you're never gonna be able to make it happen. And the other thing too is don't be afraid to make a change. Right. So, so it's really, to me it's, it's, it's really, it's really about assembling the right team and not. Not being afraid to make the changes you need to make that happen.

Sean Weisbrot: So you've been involved in restructuring and retail for a long time. What's the hardest thing about restructuring that you've faced?

Michael Appel: Well, I think in terms of, of my many years of going into companies that are stressed and troubled, the, the hardest thing is, is really, uh, um. Really being able to evaluate, uh, the, the chances of success of the company. So that's the number one thing you have to do because you have to say to yourself, realistically, can you restructure a company? Can you, uh, turn it around or not? So that's number one. And that's tough because you have to do it and you have to do it quickly. And you have to get a game plan together. Um, once you've done that to, to move forward,

Sean Weisbrot: how long does it normally take to make that decision, whether it's, it's something that can be saved or not?

Michael Appel: Well, it all depends on, uh, it, it could be a matter, it could be a week, it could be longer depending on the company's financial position. So if you've got, if a company is up against the wall and they're running outta money. Then you've gotta make decisions quickly based on information that may not be perfect. Uh, if you've got the, if you, if you've got the luxury of being able to operate the company for a while, then you know, you try to, you try to use that time to really dig in and, and, uh, have a, have a, a plan that is you, you know, uh, much more. Uh. Fulsome and attacks all aspects of the business. But if a company is, is really outta money or about to be outta money, then you've gotta, you've gotta triage it, right? You've gotta get in there and you've gotta say, okay, uh, the most important thing is, is to keep it going. And so you're gonna make some quick decisions in that regard, and you're gonna look at what the levers are that you can pull to do that.

Sean Weisbrot: I love that you said that, that word lever. I've, I've never been responsible for like a restructuring, but I did help several small companies. They were doing less than a million dollars a year in revenue, um, to figure out how to kind of fix their problems and regrow and, and start to grow again. Right? And for example, with my dad's business, I found that there was this one thing that he was doing that was really holding him back. And that was his, his liquidity sucked because. The fact that they were doing paper claims for their insurance, uh, insurances. 'cause he's a dentist. Right. And I found that by switching to the electronic claims system that was embedded in their software, we were able to cut it down from 60 days to get money back to six days. And so the liquidity problem went away and it was just one thing that I did right. But it took me like two weeks to, to go through everything to figure out, ah, this is the thing that I can do, the easiest thing I can do with the biggest result. Right. So how do you. Discover or how do you let that information surface what that lever should be?

Michael Appel: Well, I mean, when, when you've been doing this for a long time, all right. What you learn is with all these companies, whether it's a, whether your back is up against the wall or you know, you have time to come up with a, with a, a, a much more, um, you know, comprehensive turnaround plan, liquidity is number one. So that, because basically if you don't have sufficient liquidity to buy you the time to fix the company, you, you know, you can have the greatest team in the world. You can have a great plan, but you won't be able to, you make it happen. So that's a, that's really the first thing. Uh, we, it's, I attack and it, you know, and my role at, at Getler Henrik, which is a financial restructuring firm, and in my. Experience working with companies, the first thing you really wanna do is do what we call a 13 week cash flow. All right? We wanna look at, uh, at, at sources of funds and expenses and, and figure out whether you know, what, what the pain points are to attack that. And then when you look at that and you see, you know, when you're gonna be running out of cash, which off often happens, or you're stressed, then you, you say, okay. I've gotta pull these levers to do it. Am I not gonna, am I gonna stretch my payables? Am I going to, uh, draw down on my credit line? Am I going to, um, look at, at reducing expenses, reducing head count, all those different things. And there's lots, again, as we were talking about the levers, there's lots of levers more than people think in terms of being able to access liquidity. So, and you know, every company and every situation is different. So you have to look at that, you know, uh, uh, a accordingly and, and tailor that to the situation. But, you know, the usual that, that the, the issues are usually, um, uh, pretty much the same from company to company. It's just a question of the de the degree.

Sean Weisbrot: So I recently interviewed someone who, uh, had $3 million in debt for his business, and he realized that if he could just. Convince his customers to pay him upfront that he would get out of his problem. And so he went to one of his biggest customers who was paying him half a million dollars a month, postpaid, and he convinced him to do prepaid. Now, his business is on track to do 70 million in revenue this year from 3 million. Right? Just because of one thing.

Michael Appel: Right. Right it, but, but that was one thing that made all the difference, right? That changed the trajectory of his business. I mean, I had a situation many years ago where I was running a company in San Francisco and they were totally out of cash. They had drawn down on their bank loan. The bank really wanted to foreclose, but they, they didn't want to do it because. It was a very high profile business and they didn't wanna be accused of, of putting the company into liquidation. And the key to the success of this business, which was a very high end specialty retailer, was flow of goods. Right. And nobody was shipping because the, the, the CEO and founder of the company, you know, was, was wouldn't reach out to the vendor community to tell him he needed help. Right. And so basically what we looked at is we said, okay, the only way this is gonna work is if we get the vendors to, um, uh, to give us more leeway on payables and also agree to ship. So we came up with a construct and we said, okay, uh, and, and this was a very special company and, uh, you had long relationships with the vendors, you know, all designer. Super high-end companies and many of whom he had introduced to the American market. So, you know, after, after calling all of them and having, having them yell at me, all right, uh, so that they could vent, and, and they, they, you know, and, and I could apologize for our lack of communication, we came together, we came up to, we came with them to a plan and said, you know, if you want this company to go out of business. Fine, but you're not gonna have this company to sell to, and it's an important resource for you if you wanna, if you wanna make it work. Here's our proposal. Our proposal is to, to do a, a one year standstill on all outstanding debt, most of which was a year old. Okay. Which is kind of unheard of. And, um, we can, we can. Uh, uh, you know, we'd like you to resume the flow of goods and we'll pay you 50% upfront and then we'll pay you every week based on, on what was sold by, by item, and we could track that on our computer systems. And then at the end of six months, we'll true up whatever we owe you. And we were able to get them to, to agree to that because they wanted to support the company. And, and that gave us, bought us enough time to have fresh goods in, to get the customers back and to eventually sell the company. So, you know, it's like each situation is like, you've gotta, you've gotta figure out what, what levers to pull, to pull to, to keep it going so that you can, again, it's all about. Buying the time to fix the company. It sounds like in the situation you were talking about, it was a pretty, pretty easy fix, right? That, that, uh, uh, that was, you know, you were able to turn that switch on and that made all the difference. Um, most companies, it's a lot more complicated than that. So, um, uh, so you, and you're try and you, what you have to do is you've gotta put together a plan, right? And a bunch of initiatives. And you can, usually, you can't do more than four or five things at the same time. Get the organization to do it. You've gotta really narrow it and say, okay, here's the 80% I call it the 80% solution. Here's the four or five things we need to do to get 80% of the way there and all the other to-dos. Alright, are are nice to have, but not essential. And so, and that, and when you can, when you can, when you can identify what those initiatives are and you get the organization. And the stakeholders, and there are many stakeholders in turnarounds right behind you, you can, you can make it work. So

Sean Weisbrot: yeah, with the, with my dad's business, I, I tried to do many things, but when I realized that that was the most important one, I had to tell everyone from the team, like, look. We're not doing paper claims anymore. This is how we have to do it. I had to train them all. I had to work with them on it multiple times because there were, it is software, you know? Right. There's P parts, parts of it they didn't understand. There were also, I was 25, a lot of them were in their fifties that were working the software. So I had to go slow with them and it took, it took a month or so at least to get them to be like, okay, I got it. I understand I'm not gonna do paper claims anymore. Um, and all that. I. I think for the other guy I was talking about that I interviewed with his business, he, uh, the one who was 3 million in debt, you said that, um, it's typically, uh, a simple fix, but at the same time, he may not have either thought to do that or maybe he was afraid that they wouldn't wanna support him, or maybe he was afraid of telling them the truth that their business was having financial problems. And so I think it's really important. What you said after that, which was you have to be willing to be, look, I'm sorry. Like we're trying to fix this. You know, we made mistakes. We're sorry that this, you know, the previous CEO. Didn't do his job very well, but we're here now. We're trying to fix it. And, and hopefully we can maintain good relationship and,

Michael Appel: and, you know, people respond to that because, you know, it's like, all right, here's the bad news. All right? And, and here's the good news, all right? And we, and we need your help. And when you pe tell people, most people, we need your help. All right. They usually respond because they appreciate the honesty and the fact that you're in a partnership, right? You've got all these partnerships with all different stakeholders, and when you do that, uh, you'll get usually a good response if, if they believe that the, the, the company has a sustainable business proposition. Alright? They have to believe that, that there's a co there's a go forward company here. If they don't think so, then they're not gonna do it. I mean, when you look at what happened at Bed Bath and Beyond, you know, the vendor community basically said, you know what? You, you know, you got, you got rid of all of us. You went to private label and now you want us to come back and, you know, we've already, we've already readjusted our business and you know, we're not gonna give you credit. We're not gonna do the things that, you know, you would you want because we, we don't believe that this thing is gonna fly. So, and that's unfortunate. You know, it's really unfortunate because it was a fabulous business for so many years.

Sean Weisbrot: I think one of Bed Bath and Beyond's Death Nails was their 20% off coupon all the time. Ah, well my, my mom lived by it. I know, I know. And maybe it was their way of getting people in the door. Or, or maybe, maybe they were overpricing their products so that the 20% off actually didn't cut into their profits. Maybe they were, they were clearly still profitable for a time until they started making mistakes. Yeah. Well,

Michael Appel: the problem with Bed Bath and Beyond, unfortunately, was that they had a very specific business model and people came to Bed Bath and Beyond because they were, you know, they were a category killer, right. They had huge assortments of branded merchandise. And an activist investor got involved, uh, changed the whole board. And, and believe me, they weren't doing, they weren't doing great, uh, at, at that point in time, but they, they, you know, they were, they were doing okay, but they, you know, it was a public company, so obviously the scrutiny was very different than if you're a private company. Uh, and, and so, you know, he was able to completely change out the board and they brought in a, a, a, a very talented merchant from Target. But his strategy was was that we're gonna basically get rid of all the brands and we're gonna do all private label programs. Which is not what people came to Bed Bath and Beyond for. They came to Bed Bath and Beyond because if you wanted Cook Way cookware, they had all clad, they had calphalon, they had, you know, the brands that they wanted at, at decent prices. And, you know, the look, the 20% coupon was, was kind of like, uh, it was kinda like a drug addict addiction, however, and it was, and, but what they realized is when they, when they tried getting rid of it. That you, that was a disaster. Uh, and so with the 20% off coupon was, was really 20% off on one item, all right? And the idea was you're gonna buy more than that. But what happened is if you shopped in the store, you go to the register and the cashiers would give you 20% off on the whole damn order. And if you didn't have a coupon, they'd give you a coupon. So, and part, so part of that is, is really making sure. That your associates, you know, are, are executing the program correctly and not giving it away. So, you know, and, and, and the, those, those are, those are problematic issues, you know, when you, when you're dependent on that. But they made a lot of money with those 20% o co off coupons for a lot of years. And also the Bed, bath and Beyond situation was that, you know, they had a CEO who had been there for many years and, you know, they, they didn't really evolve. The merchandise itself was not as, you know, as, as on trend as it used to be. So it's a combination of a lot of things that got together and then they changed their, their strategy, and they changed their strategy without testing it. They had like a thousand stores they could have, you know, they could have taken 50 stores and tried it this way to see whether it would work or not. And you know, that's the same situation that happened. I don't know if you remember JC Penney many years ago where they brought in a new CEO had come from Apple and he changed the whole strategy of the company. And it was the, the strategy JC Penn strategy was they had a circular every week. Everything was on, you know, everything was on sale and whether it was on sale or not, you know, and that's what brought the customers in. And he decided to go to for everyday low pricing. And it's, my experience is there has never been a company that has gone from high low pricing to everyday low pricing that that succeeded. You know, it's a really tough thing to, once you've trained your customers for decades to do that to all of a sudden, uh, you know, put down a light switch and say, oh, we're gonna do it this way now. And the customers are saying, well, that's, that's not what we expect. Right. So, you know, that, that it, it's amazing. Again, you're talking about doing, doing one big thing that can really, can, can really hurt your company. And it did. You know, they almost didn't survive.

Sean Weisbrot: That reminds me of Costco's, CEO, pledging to never raise the hot dog above a dollar 50, even if they lose money.

Michael Appel: Yeah. And, and you know what? They can afford to do it because they're, they're, they're on, on their hand. You know, Costco, Costco's delivers on their promises, right? They mark it up, I don't know, 15 or 17% above cost, and you know that, and, and they a great merchants. So when you go into, when you go into Costco, right, and you've got your little shopping list of what you need, you invariably, uh, uh, leave spending a lot more money than, than you expected to because, you know, uh, they, they have great, they have great stuff and great deals and, you know, people can't help themselves, right? They, they see it and they, they go ahead and do it. So the, you know, the basket is, is bigger, uh, than what their shopping, your, your shopping list was. And, you know, and the quality of the product is fabulous. So, uh, they really deliver. And just the way they run, you know, it's such a well run company. And the other thing about Costco that's really, really interesting, um, which I think is really important today, is they really, they really respect their employees and they tr they pay them better than the competition. They treat them better. You know, Costco is closed on the major holidays because they feel that they're. Their associates should be home with, you know, with their families on Thanksgiving and, you know, Memorial Day and July 4th. And the result is, is that they have very, very low turnover. They have the, the, the, the staff know loves the company and the productivity is there when you go in there. Everybody's really helpful. Everybody's happy to be there, you know, they get you in and out fast. They, you know, they, they do it all. And, uh, uh, it's, it's a great, it's a great lesson on how important you know, don't forget the people that work for you, okay? Treat them with respect. Pay them fairly, and they'll, you know, they'll stick with you and they'll go the extra mile. I.

Sean Weisbrot: I think they pay for people's college degrees.

Michael Appel: Yeah, they may do that too. I mean, that, all I can tell you is, is that we, we've been shopping at Costco for years and no matter where you go, the experience is pretty much the same. And the, the, the, the, the staff is really helpful and you know, and they're efficient. And the shelves are always stocked. You know, they, they execute against the basics so well, but it also starts with the merchandise, right? They've got great merchandise, uh, and they get great deals. So it's like, and consumers today, you, you know, that's what they expect.

Sean Weisbrot: Hey, just gimme 10 seconds of your time. I really appreciate you listening to the episode so far and I hope you're loving it. And if you are, I would love to ask you to subscribe to the channel because what we do is a lot of work. And every week we you a new guest and a new story, and what we do requires so much love. So that we can bring you something amazing. And every week we're trying really hard to get better guests that have better stories and improve our ability to tell their stories. So your subscription lets the algorithm know that what we're doing is fantastic and no commitment. It's free to do. And if you don't like what we're doing later on, you can always unsubscribe. And either way, we would love a like if you don't feel like subscribing at this time. Thank you very much and we'll take you back to the show now. Yeah, I remember watching a video on YouTube about Costco, and I believe they, they don't care about the pricing on each product because they make the bulk of their profit from the memberships. Right. I think they make about, I think they made four or $5 billion last year just from the memberships. Right. Profit.

Michael Appel: Right. Absolutely so and so basically, and the other thing too about their model is, is that the velocity of their sales is fantastic. So basically it gets on the shelf and is sold probably most of the time before they have to pay the vendor. So that, so from a cashflow perspective, it's, it's an incredible thing. And, and because they have so much, you know, so much traffic into their stores and they sell this stuff so quickly, you know, uh, they're, they're able to do that. So it's a very different model and, but, but it really, you know, tapped into, uh, uh, what consumers really value in delivering on that, on their promise.

Sean Weisbrot: So what's a company that you were tasked with restructuring your, your, um, modeling? Says it was possible. And it failed anyways. And, and why do you think it failed?

Michael Appel: Oh, okay. Well, I, I can't, uh, there was a, a very famous, uh, and I wasn't the CEO of this company, but I was on the board and I was very actively involved. And, um, it was a very well-known name in retailing, had been around for a hundred years. They were one of the first, uh, uh, apparel discounters, and, um. They had been through bankruptcy twice before, but the, but the business itself was unique and customers loved it. And a couple of things happened once was when they went through the second bankruptcy, they were acquired by a private equity firm, which isn't necessarily a bad thing. Right. But, um, uh, because they really understood the retail business. And I had been involved with them with other. With, you know, with other situations that were very successful. And what happened was, number one, they had too many stores. When they, when they went through the second bankruptcy, they didn't close enough of the underperforming stores. That's number one. Number two, and most important was they brought in a new team. Uh, a management team that was just the wrong team, and they basically drove the business into the ground. And when I got there, I had, I went to, to, you know, the owners and I said, you need to hire these people and bring in people who can make it work. Okay. They just, they, you know, and they, they, they just didn't get it. And so, so we didn't have the right team. And if you don't have the right team, you're not gonna be able to affect the turnaround. I. All right. And so you had a, you had a situation where you had too many stores that were not productive, but more than that, you had a team that just didn't understand the business and how to, to resuscitate it. And um, and. So unfortunately, uh, it was a, you know, it was a tough retail period as well. And so, you know, the, the, the owner ran out of, you know, ran out of patients. And so you, you know, and that's what happens very often. It's like, well, am I gonna, the company's continuing not to perform, and am I gonna put more money in or am I just gonna, you know, liquidate it? And, and you know, that's it. And that's what happened. And it was, it was really very sad because there are still many, many customers today. That, remember that custom, that that business, uh, you know, high-end designer apparel discounted, and I'm really, you know, and you know, there's no place else that's doing it. So that was kind of a shame, you know, because, because it was a good business and they could have. You know, it could have been, it, it, it could have been resuscitated with the right management team.

Sean Weisbrot: So if it seems like such a golden goose, why not start it from scratch yourself?

Michael Appel: Because, be, well, because the cost of doing it, the locations, the investment you, you wouldn't get anybody to, to, to do it. Because, you know, they, they were the original off pricer and you've got so many other people now, like, you know, TJ Max and Burlington and whatever, even though they don't go up as high, all right? Uh, you know, there. And believe me, when things were getting tough, uh, we, you know, we went to them and said, you know, would you consider buying it? And the business wasn't big enough. For it to be important enough for them to do it. And they said, you know, you know, unless it's a billion dollar business, we're really not interested. So, you know, and, and also timing is important too. It was a, it was a rough time for retail and so people were not of a mind to, to, you know, to invest or do a, a transaction. So a lot of these things are, are, um, uh, uh. Uh, you know, our timing related as well.

Sean Weisbrot: What's a company that your modeling said could not be saved and you said, screw it. Let's do it anyways, and you succeeded. I.

Michael Appel: No, no, no. That doesn't work that way. If I believe, if I, if I do the analysis and I say that, you know, that there's, that, you know, there's, there's, it's funny in, in the business, it's kind of like the, the, the, the thing is, is that. If this company went outta business tomorrow, would anybody care? And if the answer is no, then it's not a keeper. The other thing too is, for example, I was involved with the company years ago, many years ago. Uh uh, and um, my client was, you know, a, a distressed debt fund that was basically owned the, the, the, the company that did the photo studios in Walmart. Okay. And

Sean Weisbrot: I think it's one hour photo.

Michael Appel: Well, no, it's, it's, no, they, it's not one hour photo. They were photo studios. And if you had kids that were in school and you had, you know, parents used to do this, they used to do it at, at Sears, at Walmart, um, and they were other individual photo studios that did it, where you would, you know, you would take your kids in when they were infants, you know, you'd do, there'd be family occasions where you'd take photos, stuff like that. It was a big deal. Right. And Walmart had hundreds of them. This company was, and at one time it was very successful because you couldn't get a professional, uh, photograph, which was very important. You see there's a photograph on the wall behind you there, you know, uh, uh, it's like those post photos, you know, parents love that. Okay. And so, uh, it was a great business for a long time. And then what happened? What happened is digital photography came in. Right. So you were able to take photographs and have them printed, you know, that were good enough, right? That you weren't gonna pay that amount of money to do it. And, you know, that was a business that was not gonna, you know, uh, succeed. And we were lucky enough at that point in time that our biggest competitor, uh, wanted to buy the business. And so at the time, you know, we were talking about it and I'd say, get out. Get your money back. And they did. And that was, and of course, uh, you know, and they were the people that did it at, you know, that did the Sears one, and that ended up being, you know, a, a liquidation. So, so from that perspective, it's kind of, you gotta know when to, when you know when to get out as well. Or say, you know, you're, you're better off to liquidate for the benefit of your creditors than to continue to put more money in. And that what's happened is, I don't know if you even remember this, but there was a whole, um, channel of retail called, um, uh, um, oh gosh. Um, catalog showrooms. Did you ever hear of catalog showrooms?

Sean Weisbrot: Uh, maybe I, I think I know what you're talking about, but then the word is, is not Well,

Michael Appel: catalog showrooms were, and they were one of the first discounters too. So you'd go into these stores and you'd see one of each item. And you know, you, they, they get it from you in, from the back. Okay. And you pay for it, and you get a discount. And that was good. Well, that was good until the big box retailers and the discounters came into business and they, and they basically, you know, it was, it was a concept that was no longer valid. All right. Uh, in that regard, because customers prefer to go to the Costcos and the Burlingtons and the TJ Max's of the world, et cetera. So, so that's what happened. You know, retail has a continual change. It's always changing and evolving. You know, you have to remember that, you know, before Saul Price started, what, what they call Price Club, which became Costco, that, that, you know, he invented that concept of, of, uh, of clubs, which resonated and still does resonate with consumers.

Sean Weisbrot: So without sharing any sort of proprietary information or insider knowledge, obviously, 'cause that would be bad. What's a retail company that exists today that you feel highly confidently is gonna go out of business in the next few years and why?

Michael Appel: That's, that's, that's, I would say, I, I, I, I wouldn't. I would say that you're gonna see a lot of direct to consumer, uh, um, uh, companies go outta business a lot because the model

Sean Weisbrot: a Best Buy.

Michael Appel: No. Best Buy is no. I think Best Buy is good because see, best Buy is good because they're the last man standing and in the electronics business, right? People still wanna go into stores and, and see the product and also have help. Have qualified help that can help them make their decisions. And I think they, you know, they were in on the rocks at one point in time and then they brought in a new president and CEO and he did a fabulous job turning it around. And, you know, the thing about, about these companies are, you know, I. Uh, they were doing gangbusters during COVID, right. And then, and people, 'cause people were buying big ticket items for their homes and stuff like that. And now, you know, they're suffering, they're suffering to some degree, but now it's starting to come back. So Best Buy, it's a well managed company, you know, and they'll be fine, you know, they'll be fine. I think, you know, if, if it weren't, for example. If it weren't for the fact that JC Penney is owned by Simon and Brookfield, who are big mall operators, they would've gone out of business. But they, they've, they've stayed in business because the mall operators want them in their malls because if they lose an anchor, what happens is it, it triggers what they call a use clause. And what it means is that they can, the, the, the specialty. Uh, retailers, you know, the hundreds of those that are in the mall, you know, the small retailers, uh, can go on percentage rent, so, so they're, they're being supported. Pennies is being supported because it supports the, the, the landlord's rent rolls in that regard. But if that hadn't been the case. You know, pennies. There's no reason why they, they, they couldn't have gone out of business. And that's, you know, look, Sears has, Sears has gone out. Um, Kmart's gone out, those types of people. So, and it's an evolving, it's an evolving situation, uh, for sure. Um, but there's always companies that, that, again, they lose their way or, you know, that they're, they're kind of. Selling commoditized products. The companies, the retail companies that are, that are in the sort of the middle, you know, and a lot of those department store companies are there, are very vulnerable today because what's working with consumers is luxury of course, because there's, people always have money and off price or value priced retailers. So, so I think that's what you, what you know, and so the people that are in the middle, right, where, you know, aspirational customers would rather go up or, or go down and get a better deal. Those are the companies that are gonna survive one company. Okay? One company, uh, that I think is very vulnerable is Rite Aid. Okay. The, uh, the, the drug company, not

Sean Weisbrot: the one outta business.

Michael Appel: What? No, they're still there. Okay. And the reason for that, that I think that they're gonna go out alright or be be sold in pieces is that, you know, you've already got CVS and Walgreens that do a much better job. And, you know, they can just, they can just take, take and, and, and Rite Aid's been struggling for a long time. So they'll buy their prescription business and they'll pick up the locations that, uh, work for them. And, you know, that'll be that. I just don't see them. I don't see them survive. 'cause they're like the third wheel. And you've got two strong, nationwide well run, um, uh, competitors. You said CVS and Walgreens? Yeah. Yeah. They, they, you know, they're, they're very well run. They've got a huge footprint, you know, huge prescription businesses and they're also innovating in terms of wellness and things like that,

Sean Weisbrot: of the strip malls and shopping malls that. Still are open. What do you think? Is going to replace those big box stores that, that fell apart inside of those, those malls.

Michael Appel: Well, that's a very interesting question, and that's what a lot of, of, of mall operators are thinking about. All right. You're gonna see a certain number of the, the A malls and the B plus malls and a mo. A lot of the B malls will be okay. Right. Uh, but even with them, if they lose a big box, they have to decide how they're gonna re-merchandise their, their, uh, their properties. And a lot of them are, you know, and they're doing things like, you know, more, um, uh, urgent care facilities. Uh, they may be, uh, they, they're doing, they're bringing in a lot more food, a lot more restaurants. Restaurants are, are, you know, they, they, that, that seems to broaden the appeal of, of the malls. Customers really like it. Um, and then, you know, some of the malls that wouldn't bring in a Costco before are bringing in a Costco or, you know, um, you know, not, not a, what we call full price retailer because they built or a target 'cause they bring in traffic. They're, and they're well run. So they're rethinking, right. What's, what's gonna make that, that property attractive to their, to their customers, you know, for some of the lower, lower, and oh, and also in some of the, the, the malls, they're also looking at the amount of property they have, right? And they're saying, okay, we can, we can build condos. You know, we can put in a hotel, we can do all sorts of things with the asset to, you know, improve the return and, and also help drive traffic to those, to those locations. You know, the, the, the, the, uh, the a malls and strip centers, they're fine. And if anything, what's interesting is, you know, among the better properties, the, the occupancy rate is almost higher than it's ever been. Because everybody wants to be where the, where the, where their shop, you know the shopper is.

Sean Weisbrot: Yeah. There's a company in Canada that I have invested in, uh, or at the beginning of the year that does e-commerce liquidation. I mentioned to you during our intro call, and they moved from a smaller town on the Vancouver island, the center of it to the port area, which is 10 times the population of the town they're originally in. And we now have an opportunity to get a space in one of the most busiest malls in the town. And so he's like, Hey, I want to do this, but we need like another $20,000 to do that. You know, what do you think? And I'm like, well, let's try to get a loan because. It's the only way to make it happen.

Michael Appel: Yeah. And you wanna be where the customers are. Right? And, and it, it's, what's so interesting is when you look at companies that have, you know, fleets of stores, the, you know, you know, the, the top producers are usually in. The, the, the, the malls trips that have great traffic and great traffic with your demographic. Okay, that's important. It's gotta be aligned with your demographic. Who is your customer and where do they shop and are they gonna come to you? And so, and you know, there's, there's plenty of real estate consultants out there that you can hire to help you. Understand that and also help you, help you negotiate a good, um, you know, as good a deal as possible in that regard. But very often what I've seen is that the most profitable stores can also have the highest rent per square foot because, you know, there's a direct relationship between that and, you know, traffic and sales.

Sean Weisbrot: So normally when someone does consulting, they either get paid a flat fee or maybe some sort of percentage of upside. Um, I know that's what I look for. How does a company that helps other companies or restructure g generally get paid?

Michael Appel: Well, it varies. Okay. Some companies just do it on a, uh, an hourly rate. Right, based on hours billed. Alright. Some do a combination of that and a success fee. So it, it, it's the, you know, the gamut. Some will also, some will also actually, if they believe in it, they'll say, okay, uh, we'll, we'll do this at X rate, but we want a certain amount of, of, of ups in the equity of the company. Or they'll do, or the, and the success fee thing could be, let's say, um, you're going in there to, to improve profitability. They may decide to say, uh, I've worked for a company where, where we got a percentage of the upside in savings so that, so we'll we lower the rate. Right, because, you know, customers always feel that the rates are too high. And, you know, that's, that's a situation where, where the proof is in the pudding, right? You, you don't, you don't know whether it's worth it until, until you get the results, right? So sometimes, depending on the situation and the analysis of what we think the upside is, we'll say, okay, we're, you know, we're willing to, to bet on our being able to help you, and we want to share in the ups. So it's all, it's, it's sort of all over the place in that regard. But normally, normally restructuring firms, it's really the, the core is, you know, uh, billable by the hour. That's where it starts.

Sean Weisbrot: Sounds like that could be extremely lucrative.

Michael Appel: Well, it can. Well, it can. All right. It can be, uh, uh, the, you know, and, uh, but it also not, it's not always. Uh, you know, it depends too on, on, on whether the, whether the company is really embraces your, your, um, uh, your, your assistance, right? There's some companies where we see opportunities to improve their business, and they're very entrenched. And they don't want to do it. They don't want to change, you know, and I always say if you, if you're, if you're having difficulties, all right? If you're really having difficulties, then you know, the, the management always feels, oh, all we have to do is do what we're doing better and we'll be okay. The answer really is, is that no, you've gotta start doing things differently, all right? Because what you're doing hasn't worked. So you have to be, you have to be open to, you know, new approaches, you know, et cetera. And also for retailers today, you know, there are a lot of, uh, you know, technology. Of course technology's changed everything, but there are are technology platforms and tools that retailers can, uh, avail themselves with that are not that expensive to implement that have great ROI and they have to be open retailers and, you know, companies in general have to be open to that, right? Because that's, that's changing how you do business. Right. But, uh, but, but it can have tremendous effect. Like one of the things that I've done in a couple of companies, um, immediately is, especially if. Well, it covers actually all gamuts. But if you've got a, a customer that's, you know, lower middle income and lower income custom, uh, customers who have difficulty accessing credit, uh, one of the things that that gives you an immediate boost is if you, if you put in, uh, one of the buy now pay later companies like Klarna or Afterpay, et cetera, because what it does is it gives the customers access to more credit. And it's linked to their debit card. So they're a, they're score, they're those companies, they're scoring the customer to make sure they can repay, but they're also giving that customer the ability to, uh, to purchase more. And they pay it off over, you know, four weeks or eight weeks or something like that. And I've been in a couple companies where it's, it's an immediate bump in revenues and it also sort of ties to customer, customers like it. And they like, and they like shopping with companies that offer that in that regard. So that's an easy, you know, it, that that's, that's something and, and, you know, it's, it's become a very, very popular, um, methodology and, and companies of almost, you know, any, um, uh, serving other income level people as well. So it's an example of something like that, you know.

Sean Weisbrot: What's the most important thing that you've learned so far in life?

Michael Appel: You mean about business? Well, the most important thing. Anything. The most important thing is really, and it's gonna sound hackney, but it's all about the people. Okay. Because if you can't get the, if you can't get the right people in place. To, to, to, to build your organization. You're never gonna be able to make it happen. And the other thing too is don't be afraid to make a change. Alright. One of the, one of the things I've run a lot of private equity conferences and one of the questions we always ask the, the private equity people, um, uh, on the panel is, you know, if you had to do something differently, what would it be? And they say, we would've made personnel changes sooner. And, you know, you gotta be willing to do it right? I mean, you don't want to, but you've gotta evaluate and say, you know, can these people make it happen or not? And if, and, and what you find is if you, let's say you have, it's, it's so if you, if you put the right person in place, right? It's amazing how quickly things can change. And the perfect example for retailer is the store managers, right? Is that you might have a store that's in a good location and it's not performing and you know, the store manager needs to be replaced, and you bring in a new store manager and who's really, you know, knows what they're doing. It's almost instantaneous how the business changes. So, so it's really, to me it's, it's, it's really, it's really about assembling the right team and not being afraid to make the changes you need to make that happen.