← We Fixed It, You're Welcome
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- [00:00]
Aaron
Alright, everyone.
- [00:01]
Melissa
This episode became a season favorite because it's all about the money.
- [00:04]
Aaron
Ka Ching.
- [00:06]
Melissa
If you've ever listened to an episode and thought, you guys are awesome. If companies applied your hypothetical fixes and they worked, how much would they be worth? Well, we wondered that too. So we brought in Lucas Sundahl, cfo, data storyteller and friend of the show to tell us. And the answer knocked our socks off. Let's just say we'd be living the yacht life right about now. I won't spoil it. I'll let you listen. Here's us and Lucas talking about how much our fixes are worth.
- [00:32]
Aaron
Enjoy.
- [00:34]
Melissa
Welcome to we fixed it, you're welcome. The show where we take over companies, you come along for the ride, and we try to put them back better than we found them. This is a special episode of We.
- [00:47]
Aaron
Fixed it, you're welcome. And that means we have a special guest who we'll get to in a moment. Now you probably know how our show works. Every episode we take on a company in the public eye that's facing some challenges and we fix it. We can't help ourselves. It's what we do for a living. Under the pressure of a ticking clock. We apply our thinking, professional expertise, and the insights of our guests and we work our way into a solution. And you're with us every step of the way. At the end, we tell the company to their face how we'd fix the situation. Then we hand the company right back, give ourselves high fives all around, and job well done.
- [01:22]
Melissa
Now the fixes we propose on this.
- [01:23]
Aaron
Show are all in good fun, but we try to do some real good too. We've explored how leaders can show up better, how professionals can navigate tricky business situations, how companies falling out of relevance can evolve, even how we could all be better as a society. That's got to be worth something, right? Well, out of all of us, only our guest is qualified to put a number on that value. If you caught our Bowflex episode, you've heard them before. If you've ever typed the word accounting into LinkedIn, you've definitely seen them. Please welcome Lucas Sundahl. Hey, Lucas.
- [01:55]
Lucas Sundahl
Hey, how are you doing? Thanks for having me.
- [01:57]
Aaron
Yeah, thanks for coming back with us. So, Lucas, you've done a lot of things that are financial related. Why don't you share a little bit about about yourself for everybody?
- [02:06]
Lucas Sundahl
Yes. So I've been in the accounting space for about 15 years. It's funny because talked about Billaflex earlier. I was a personal trainer before changing My careers. But in that time, the last five or six years, I've been more heavily involved in leadership roles from the finance and accounting perspective, cfo, controller, all those type of things to really not only deliver the financial results, but talk through and help companies and leaders plan out their strategy to grow, continue to operate efficiently, and make sure they're managing costs and how to like grow revenues. A lot of different financial metrics and tying those back into the operations.
- [02:46]
Aaron
Very cool. Thanks, Lucas. I can't wait to quantify some things with you. So let's get into those dollar signs. So our show has fixed a few dozen companies by now and they should be thanking us. It's in the name of the show. But the question that we got to talking about is what exactly should these companies be thanking us for? What is the real quote, unquote, hypothetical value of our fixes? So you're going to walk us through some examples, right?
- [03:12]
Lucas Sundahl
Yes. Yeah. Pick three examples from the episodes through this point in the show and I'll talk through those next year.
- [03:20]
Aaron
Okay, let's do it.
- [03:22]
Lucas Sundahl
All right, Floor is yours. All right, so the ones I picked for the viewers that are just listening to this or the people listening to this, they won't have the visuals, but anyway, I'll talk through it.
- [03:32]
Kadira
So.
- [03:32]
Lucas Sundahl
So the companies I picked for this example in these financial scenarios was Southwest Airlines, Party City and Jaguar. So as we know, Party City does not exist anymore. But I still wanted to quantify what could have been had they maintained being in business and what that could have been like for not only the company itself, but also for consumers to still if the company was still in existence. All right, so the first one is Southwest Airlines, a company that's well known for people like traveling, well known well, especially with their customers and their company, how it was run with the founder, very customer focused and the experience trying to differentiate themselves from other airlines. And one of the things recently as talked about in the show as well was what happened with their money, like the charge fees for bags and kind of like moving away and shifting from their thing that differentiated them from the other airlines. And so one of the things I did was taking notes from the show. I also brought in some financial analysis. So what we do a lot of times when we're building out projections for companies for the forward looking, let's say 12, 18 months, is we build a base case that's like the middle kind of at the road where we expect things to be like a worst case scenario, let's say sales tank, they go down like 10%. And in the best case. And so what this allows us to do is kind of really make a plan for things with sales revenue. If it goes up 10%, what are some things we can do operationally? Maybe you have more capital for capital expenditures, buying more equipment. And so that's what I kind of applied with the Southwest Airlines company first is just seeing like what would have been had they do like with some of these bag fees, implementing them and avoiding company and churn, if you will. So things they could do to make sure the customer's staying loyal to the brand while still bringing in the fees for the said airline. So what I have on the visual here is talking about, so the bag fee. If they did the bag fees, it could bring in additional $350 million of revenue or EBIT. So for a quick aside, EBIT is for earnings before interest and tax. That's a common metric for not only financial professionals, but business peers. They look at EBIT and EBITDA numbers that kind of help them quantify how they're performing against other companies in the industry. And talking through, listening through the show notes I this, I came to the conclusion that in the worst case scenario, having the bag fee uplift, so bringing in the bag fees but still doing things that were mentioned on the show to preserve the culture, preserve the customer experience, and avoid customers churning and going to other airlines, the worst case scenario is still brings in $354 million. So there's a way to still charge the bag fees without completely alienating your customers. A lot of times companies understand that costs go up, fuel costs, operational, but it's how you communicate it to your stakeholders, your customers. I mean, I understand as a consumer that costs are going up. We've seen that. So it's all about how you deliver the message. It's not just day one like, oh, by the way, you have to pay these fees now and we're taken away you preferred seating arrangements. So with this.
- [07:06]
Melissa
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- [08:09]
Lucas Sundahl
I have the worst case.
- [08:11]
Kadira
Because that's what their brand was built on, right? Exactly right. That was always part of their deal. So thank you for sharing this.
- [08:20]
Aaron
Yeah, yeah, yeah. And to offset it, we were talking about if the bag fees were a revenue driver or a necessary evil or a pass through to the customer. We. Lucas, you're right. We, we did find ways to offset that, at least from a messaging standpoint and a value standpoint and say, well, here's all the reasons and rationale behind it. So you're saying if consumers said yes to that and got on board, which we're seeing play out.
- [08:42]
Lucas Sundahl
Yes.
- [08:43]
Aaron
This is, this is the, we're looking at numbers of what the implications could be.
- [08:47]
Lucas Sundahl
Yeah. So this is kind of assuming like that customers were on board with the change but still staying like basically my assumption was always bringing in the bag fees but keeping everything else operationally the same. That's been like the Southwest standard, the Southwest way. So what I found is like, it leads to additional either worst case scenario of a 354 million uptick for the company base case is 382 million. And then the best case scenario is 458 million. So again, all that to say, like, there's ways to kind of still keep the Southwest methodology without alienating their customers and avoiding them, like jumping to like Delta American, some of the other competitors out there.
- [09:29]
Aaron
354 million. Worst case is not a bad place to be.
- [09:33]
Lucas Sundahl
Exactly. So, yeah, some of these companies are so large that, yeah, they're even their worst case scenarios are a dream for a lot of other corporations out there. All right, so Party City. This one hits for me because I have young kids. And now whether we have like birthday parties or other things, trying to find a local store that has the things you need for party supplies. Costumes are pretty easy. There's other costumes stores that pop up Spirit Halloween, if you will, probably was jumping into these empty Party City locations for sure. But what I took the show notes again, talking through and similar to like what happened with other retailers in this same kind of space. Toys R Us, for instance, is they really kind of just can't really focus on making the shopping like an experience. That's what could have been with Toys R Us. Party City, as talked through with the show, is just having like the experience in the store and not just around Halloween time or Christmas time, but all throughout the year. Different festivities, birthday parties are throughout the year. But there's different ways that they could have more localized inventory. Some of the stores did an okay job with that, but I feel like more of them could have done better with keeping their inventory localized to like, sports teams, the town, like what the city of the US like, or wherever it is, what it kind of represents, like geography, those type of things. And then having like community tie ins, there's so many things for these chains that they could still offer things that were interesting to the people in the community. You could go with like the, like this time of year, you've got Friday night football games for local high schools. So there's a way throughout the year, like coming up on things in autumn, pumpkin patches, all that kind of stuff. So there's so much that they could have done had they stuck with what you all talked about on the show. And so what I did in my analysis is I took their annual net sales and I did like a comparison with their ebitda. And so taking what everyone talked about on the show and applying it to the financial model, their worst case scenario is that they could have had like a $43 million savings and like still been in operation. So they could have brought in, they could have like had a $43 million lift in their company, still pay off all their debts and everything, and still be in operation. So in the base case was 86 million. And then the best case is $130 million. So had they done all these things that we talked about on the show, increase the foot traffic, localized inventory, all those community tie ins, the company has still been in operation, and this has been their uptick and their sales and the EBITDA to help continue to fund their operations.
- [12:20]
Aaron
So even in the worst case, the $43 million, you always have to think about the worst case scenario first, right? So even if $43 million would have bought them some time, allowed them to go potentially into financial turnaround, and they could have done that potentially, hypothetically, by doing some community call outs. So a party city in Michigan is different from a party city in Austin, Texas, because you feel like the location where you are, there's a embracing of the local community. We talked about maybe maximizing the footprint of the store and optimizing that, maybe using it after hours for party actual throwing parties at a Party city. Who knew? So if they'd gone into those types of roles, revenue models, because they had a little bit of breathing room to. To carry those out. So you're saying worst case, they'd be sitting at 40, 43 million dollars. Best case, the fixes again on a hypothetical 130 million.
- [13:18]
Lucas Sundahl
Yeah, exactly. That's the one thing too.
- [13:21]
Kadira
There is an issue with the. How big an organization is versus the franchise. Right. So, like, when you look at something like Party City, like, for the. The ability for them to pivot to some more regionalized, localized, different seasonality based on where you're at. So right now it's homecoming for most of the high schools and colleges. So, like, that's a great opportunity for them to do, you know, the. All the homecoming banners and things like that. But it feels like Party City. I hate to say this, but I feel like they were kind of not in a mind space of they were just drowning. So they weren't even really thinking about, like, what could we do to pivot to try to end in like a corporate type of setting is regionalization and. And looking at different types of things throughout the season just. Is that seem too minor? Right. So it's interesting that they actually ended up failing Lucas. Right. Based on what you're providing, because I. I feel like it seemed like common sense when we talked about Party City. And. And yet. And we also had one of our panelists who said, like, she exclusively would go to Party City, like, physically go. So there definitely had a loyal customer base and foot traffic. It was just that the inventory within a Party City is so large, like every single color of paper plates and every. You know what? You know, it's just. It's. It was a lot. So I appreciate seeing it with these hard numbers because it makes what we're doing seem more real. I know that we're espousing our opinions on what we think they can do to fix, but this is. This has been really helpful to see it this way.
- [15:12]
Lucas Sundahl
Yeah. And another thing I just think of also with Party Cities, my balloons sometimes now, like, where do you go now to get your, like, balloons inflated that you buy for a birthday party or any other activity or event that you have? So there's so many things like you mentioned that they could have done to increase. And that's the thing too sometimes with these turnarounds is if you can show some changes that you're making, are making the improvements. Then your creditors, you could renegotiate terms, bring in some other investment partners that maybe kind of give you a lift at least to get you to that turnaround point, really make it successful.
- [15:48]
Kadira
Yeah, that bridge loan.
- [15:49]
Lucas Sundahl
Yeah, exactly.
- [15:51]
Aaron
Yeah. And that's where you bring in the right investors, not just the ones that want to gut you for parts.
- [15:55]
Lucas Sundahl
Yeah, exactly. Ones that want you to be around in five to 10 years and not just the quick cash out.
- [16:06]
Melissa
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- [16:28]
Aaron
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- [16:29]
Melissa
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- [17:09]
Lucas Sundahl
All right, so the other one that was pretty interesting was Jaguar talking about their electric vehicle and kind of talking through, like, with what was discussed on the show. And I think a lot of times, like, it's one thing to have electric vehicles, that's great, but you don't want to move away from the heritage of the brand. And also they kind of like, they kind of lost the trust with their end consumer, end customer. There's also, like the creative misfire with marketing and whatnot. So I kind of took all that detail and I brought it into some of the sales analysis and then also, like doing like, different margin projections. And so with Jaguar, these are the numbers that I came up with on, like, with the marketing, sales, rebuilding the customer loyalty and branding is the worst case scenario. It still would have brought them $35 million. Best case, $91 million or base case, I'm sorry, 91 million. And in the best case scenario, 179 million. So again, not pocket change at all. With Jaguar, there's different ways to go about, like what you would do electric vehicles, but you can still tie to that racing heritage, those kind of things that the customers, the company is known for. And you can do different marketing, but you also, you can change marketing a little bit, but you don't want to alienate your base customers. So that's the thing that you can kind of experiment, see what works. But yeah, I just, I found it interesting to the, their change with electric vehicles, inventory, pricing, everything. So I'm curious, like, what you all think about these numbers from the Jaguar perspective.
- [18:46]
Aaron
I mean, it's, it's interesting, it's. And because it's interesting, they keep doubling down on their existing strategy, right? And the CEO and the company, from everything I've seen, they just, maybe they know something we don't. You know, when, when EVs were new, they knew it was going to take a long time, consumers to come around and they just had to train consumers into a new, a new category and out of something that they already knew. And, you know, now you got to shift your mindset. Now everyone's going to be buying EVs. Well, okay, all right, well, tell me in 10 years, right? But now, yeah, EVs are a point of preference for a consumer. So maybe Jaguar is onto something that we haven't seen play out yet. On the worst case, the 35 million that could come and go and, and add dollars. You know, I hate to say it, but they could, they could be spending that to get market adoption. 179 million. On the best case, that's pretty substantial. Like they can make some serious company decisions and pivots and change the trajectory of where they're headed. That's, they could be putting that to work for them. So. Yeah. What do you all think?
- [19:49]
Kadira
Yeah, you know, go ahead.
- [19:51]
Melissa
Well, just very briefly, I was going to say, I mean, I think the numbers, whether it's the worst case or the best case for any of these examples is, you know, speaks to the power of the pivot. And knowing, you know, like, we've gotten a little bit too far down the pike and it's okay to turn, it's okay to go back, it's okay to take a couple of steps, you know, in the other direction. I mean, we know these are again, based on kind of our assumptions and opinions and all these things, but. Wow, right? It's pretty amazing to see these numbers on screen based on our fixes.
- [20:28]
Kadira
I also think, and I love what you said about the power of the pivot. Kadira. Kadira is always bringing things up. Power of the playbook, power of the pivot. I love all those things.
- [20:37]
Aaron
I want T shirts for all of them.
- [20:41]
Kadira
But I. I guess I question to Aaron if it's doubling down because they made a decision and that was the campaign they were going with versus listening and assessing and hearing and kind of being like, whoa, we're not getting the traction we thought we were going to get or the excitement and enthusiasm around EV vehicles and Jaguar. It seems like a perfect fit, and it's not hitting. Right.
- [21:07]
Aaron
Right.
- [21:08]
Kadira
And sometimes I feel like the. The folks at the table and I think this is. Sometimes we direct. You know, here on this podcast, we try to direct this to them is listening. Right. And actually assessing what's really going on. Because to me, base case scenario that Lucas has shared here, $91 million. That's. That's great. That's fantastic.
- [21:32]
Aaron
Yeah.
- [21:34]
Kadira
I don't think it would take that much because their brand was so. Is so strong. Right. And so, like, what they've done is kind of diluted something that is a strength of theirs. Their brand is their strength. And you could make the EV sexy, You could make it powerful, you could make it all these things that they've kind of, like, said, oh, well, now we have an ev, and it's not that different than, you know, Tesla, whatever, whatever, and, you know, all the issues they have with these. So I guess I really feel like. I wonder, too, Aaron, if it's not that they, you know, think that their campaign is going to be great, but I think it's kind of just not having hubris, not understanding that, like, goodness, you kind of need to take the power in the pivot.
- [22:23]
Aaron
Right, right, right, Absolutely.
- [22:25]
Kadira
You need to, like, see what's going on and. And seeing the campaigns that are successful, like, of the brands, you know, like, why is, you know, so. And so why is Audi's working? I'm not saying it is, but let's pretend or whoever else, you know, and. And do some, like, comparison assessment. Right. And I mean, that's the. The customer's voice is very important. And so it feels very like they're. They're being very deaf about it, and they're not really taking advantage of what they should be.
- [23:01]
Aaron
Yeah, well, unlike so many others, that's what we called them out for. It's great. Great brand, great company, heritage brand. They changed too much at once. They changed their. Their product line, they changed their image, they changed Their campaign to something that didn't, didn't have much of any substance to it. And consumers said, where's our Jaguar? And they didn't have an answer for that. And they haven't come up with an answer for that. Now it's pretty simple. We've seen other companies where they say, we, sorry, we changed too fast, we did something you didn't like, we're back. And then the price, you know, surges. They get the audience back and their sales surge. They haven't done that. And all they'd really have to do on a. Probably to get to the worst, or maybe the base case is say, you know what, we're bringing back the Jaguar Classic. And you can have the classic, you can have the classic EV. And then we're going to do more experimental EVs or modern futuristic EVs and those are going to be Jaguars too. They have a chance to, they still have a chance to do that. People are still watching what they're doing, but it's not. And that's the baffling move about all this.
- [24:03]
Lucas Sundahl
No, I think it's a good point. And they said they could still make the change, make the turnaround and like you said, come back to the customers and showcase like, hey, we've made the change too fast. I think a lot of these companies too, that made a huge jump to EVs, maybe made a jump too fast, but also could bring in more of the hybrids and still like, hey, like still got that Jaguar under the hood. But we also are like working on things to promote environmental consciousness and kind of meld it together. So there's so many different options. But yeah, that's why I like, that's why I liked quantifying what you've all talked about because you all have some great ideas and it was fun to really put numbers to it and kind of see like what they could like have achieved, like using some of your feedback input.
- [24:47]
Kadira
This is great.
- [24:48]
Aaron
Thank you. Yeah, they still might. We'll see. But those are three, three great examples. And you looked at all of ours, right?
- [24:57]
Lucas Sundahl
Yeah, so I, I went through all of the episodes. I try to pick ones that I feel like were well known brands but also very relevant. And the current, like I think part C just recently went out of business. Jaguars are recently like a very hot topic right now. And then Southwest Airlines, that's so well known. I mean all the episodes are great, but I feel like these are three really well known brands that have, I've been in the news and very relevant recently.
- [25:24]
Aaron
Nice. Thank you. Yeah. No, really, if you're listening. So it's the Jaguar episode, the Party City episode, and the Southwest episode or three to revisit, because you can put these back in context from what we talked about initially. And I appreciate this because from a, you know, from a marketing perspective, of course, you. You get into financial modeling and projections and. And balance sheets and all those things, and sometimes you want to be shielded from it. You want to have a creative process, and you want to say, don't tell me the numbers. I. It's going to distract, and it's going to pull us off course, and. And it's. We're going to wind up watering down what we set out to do. So don't tell me what. You know, we'll all celebrate someday, but don't tell me the implications right now. So it really helps to bring this, you know, this side of the equation into the table. I like it a lot.
- [26:13]
Lucas Sundahl
I think.
- [26:14]
Melissa
You know, of course, I'm biased. I'm really. You know, I came in for season two, and I've just. I think the thing that separates us is. Exactly. Lucas, what you've been able to pull out, right, is that we talk about the challenges, we talk about the issue, but our focus is on the solutions. Right. And they are real, they're tangible, and you just showed they're quantifiable. Right. So, I mean, that is just so amazing to see. You know, definitely for our listeners. You know, if I was thinking about this the other day, that, you know, sometimes when you're thinking about maybe engaging, you know, and we all, of course, are out there working with clients and in different spaces, I would actually think about this podcast almost as, like, an intro session. You could pick up any one of our episodes and, you know, listen to our approach, listen to some of our recommendations, and again, you can see that there's actually a real value here to what we're suggesting. So, you know, again, I've got a little bit of bias there because, you know, we're this panel of fixers. But, you know, Lucas, you really have helped to kind of bring this home and, like, put a rubber stamp on how I've been thinking about it in the short time that I've been here that, like, this is. This is real, right? Like, we're not just sitting around kind of dreaming about this. This is stuff that we do every day in their real world solutions. So thank you again. This was excellent to see.
- [27:36]
Kadira
Yes, totally agree. And I also want to thank Aaron, because I think, Aaron, one of the one of the hallmarks of this podcast has been really focusing on a company or brand because there are times there are lots of hot topics out there that we could cover. But I don't think people are as interested in hearing just our opinions and hearing us just talk about something in general. And when you actually talk about a specific, specific company, like a party city, like American Eel, like Starbucks, you know, that really kind of is much more specific in what the fixes could look like. And I think it's really, to me, that's the feedback I've received from listeners. And the audience has been, they've really enjoyed it being something that's more tangible than just commentary, which all of us have a lot of that, too. We could do that too, if we want.
- [28:36]
Aaron
Yeah, no thanks, Melissa. Yeah, we, we all have opinions and strong ones sometimes.
- [28:41]
Lucas Sundahl
Right?
- [28:41]
Aaron
But, but grounding it around a company at least as a jumping off point, gets us talking and thinking about, you know, not we, we're of course going to fix the company we set out to fix or the situation, but we get into other, you know, pretty weighty topics along the way, too.
- [28:57]
Kadira
Yeah. Yep, yep. Thank you.
- [29:01]
Aaron
Yeah, no, thank you. All right, well, that's going to do it for a very valuable episode of We Fixed It. You're welcome. Lucas, great to see you again. And I always appreciate how generous you are in sharing your financial tips and insights online. And you actually make sense out of complicated principles, which is something we try to do here, too. If our listeners want to keep up with you, how do they find you?
- [29:22]
Lucas Sundahl
So the best place to find me is active on LinkedIn so you can search Lucas Sundal out on LinkedIn, posting content about accounting and finance articles, news updates, those type of things. So for me, this is a lot of fun. I like, I geek out on numbers, so this is like, it's fun diving into your episodes and really trying to extrapolate the potential savings and whatnot.
- [29:44]
Aaron
Fantastic. Thank you so much, Melissa Khadira. It's good to know what our fixes could actually be worth. I'm going to go cash some hypothetical checks. How about you?
- [29:53]
Melissa
Cha ching.
- [30:00]
Aaron
To our listeners, our fixaholics. As always, thanks for listening and we'll see you next time.
- [30:06]
Melissa
We hope you enjoyed this episode of We Fixed It. You're welcome. We go into every episode somewhat cold, and nothing we say should be construed as legal advice, financial advice, or anything that would get us in trouble. All trademarks, IP and brand elements remain property of their respective owners.