Turnaround/special situations investor rebuilding American SMBs one deal at a time.
New York, NY
Joined December 2017
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There are two types of people in this world: those who’ve sweated payroll, and those who haven’t.
Happy Friday to everyone waiting on a big customer payment on Monday so Tuesday’s payroll funding clears. Hope you get some rest this weekend.
One of the brutal parts of distressed investing is the esoteric tax and accounting that comes with it.
Cancellation of debt income (CODI), NOLs, section 382 limitations, tax attribute reductions, debt-for-equity conversions, fresh start accounting, F reorganizations, entity conversions, and on and on.
Huge shoutout to @BoilerPlateCPA and @smbtaxattorney at Edler Zain who’ve been unbelievable in helping us navigate all of this.
We throw their team into fires all the time (sorry guys!) and they without fail deliver with clarity, professionalism, and speed. Can’t recommend them highly enough for anyone dealing with complicated business taxes, accounting, or M&A.
In a cash crunch? Before borrowing expensive money, here are 5 ways your customers can fund your turnaround:
1. Offer a discount for quarterly or annual prepayments
2. Get deposits on new business or large orders
3. Shorten payment terms (Net 30 to Net 15) in exchange for a discount
4. Switch from billing on completion to milestone billing
5. Ask about early-pay or supply chain finance programs. Many large customers offer them but never mention them.
These can unlock material liquidity without adding debt, and can even strengthen customer relationships and commercial stickiness as a bonus.
Great piece on Section 1111(b) in bankruptcy. Often a very misunderstood risk or opportunity when carving a path out of Chapter 11, and especially Subchapter V.
Section 1111(b): A Secured Creditor’s Leverage in Chapter 11 jdsupra.com/legalnews/sectio… | by @AdlerPollock
If you can’t pay your debts (loans, vendor bills, taxes, etc), pick up the phone, let the creditor know, and show them the path forward.
See a shocking amount of companies shutting down every month from not doing this soon enough
SMB Turnaround Guy retweeted
Friday Thought:
One thing I’ve learned in distressed/private deals - Under ~$1m, assume the docs almost don’t matter.
Good docs help. You should still have them. But you cannot contract your way out of a bad counterparty.
If someone wants to steal, lie, delay, hide assets, or play games, they will. The documents just determine how expensive the fight becomes later.
At the end of the day, investing is mostly trust. The legal docs are there to memorialize trust - not create it.
At @HoldCoConf yesterday I met 6 people under 45 who own 100% of $10m+ EBITDA boring biz holding companies. Unbelievable roster, the quiet young legends of the ETA model.
Also had fun chatting e-comm turnarounds with @kelceylehrich
This chart explains why business ownership is so hard. In 2026, SMBs have 3 options:
1. Grow through product innovation and tech/AI efficiency
2. Sell to a buyer who will do #1
3. Get pushed out
The US economy now rewards scale, tech enablement, and specialization. Many 1-49 employee businesses are under-resourced, under-capitalized, or both.
Also, a hidden driver here is the capital vacuum for stressed SMBs. When trouble hits, they’re shut out of capital markets and left only with vampiric MCAs. This pressure is accelerating as COVID-era rescue financing comes due.
A recurring pattern in elite founders/operators: maniacal focus + credible aggression.
Neil Mehta says it best in his interview with @patrick_oshag.
Focus isn’t “working hard.” It’s choosing the one thing that matters most and saying no to everything else.
Credible aggression is what separates ambition from fantasy: clear sequencing, proper resourcing, and explicit tradeoffs.
The best people pick a constraint, swarm it, and move to the next one only after the first breaks.
This is why some teams look “lucky.” They’re not lucky; they’re disciplined and relentless.
People hear “bankruptcy” and think death. Pros hear “bankruptcy” and think surgery.
The illness = insolvency (can't pay debts as they come due)
The emergency room = chapter 11 bankruptcy (reorganize and emerge)
The morgue = chapter 7 liquidation (shut down and fire sale)
Restructuring is trying to save the patient, not bury it!
When a business defaults on an SBA loan, the underwriting bank can completely change the outcome, for better or much worse.
Two real-world cases from 2025:
Scenario A: We served as restructuring advisor for an industrial laundry doing ~$20m in revenue.
The SBA lender's lawyer fought hard and was frustratingly stubborn on concessions for months, but stayed rational.
We ultimately reached a 100% consensual restructuring: amended and extended the loan on better terms than the original debt. Going concern preserved, jobs saved, the world better off.
Scenario B: We were working to invest up to $3m to fund the reorganization of a manufacturer with $25m of historical revenue.
The SBA lender did everything possible (within the law, and brushing aggressively against it) to accelerate a shutdown and liquidation.
We submitted four restructuring offers at fair market terms. Each was dismissed outright. No negotiation. No dialogue.
The business was rushed into liquidation despite clear going concern value.
Same SBA rule book, wildly different outcomes.
The lesson: An SBA loan is not inherently good or bad in distress, but the bank and their counsel can make it either a bridge or a guillotine.
I’m excited to be speaking at HoldCoConf on February 9-12th in Sundance, Utah! Interested in joining 100+ HoldCo operators from all across the globe? Use my code SUNDARA to receive $500 off your ticket.
Fun fact: the United States was basically bankrupt within 15 years of its founding.
Alexander Hamilton fixed it with what we’d now call a restructuring: debt exchanges, creditor prioritization, and restoring confidence.
Then in 1792, two guys (Duer & Mocomb) tried a leveraged distressed debt trade that nearly blew the whole thing up anyway. They ended up in debtor’s prison.
Finance never changes.
SMB Turnaround Guy retweeted
Henry Ellenbogen has one of the best track records in growth investing, yet he has kept a notably low profile.
He built his reputation at T. Rowe Price, where he ran the New Horizons Fund and turned it into one of the best-performing small-cap growth portfolios in the country. He backed more than 50 companies through IPO before leaving in 2019 to found Durable Capital.
Henry believes great investing is about understanding people and change. He spent his career studying the 1% of companies that drive nearly all long-term returns, which led him to a simple philosophy: invest in small companies that can become large ones.
He built Durable to uniquely support a company through its full compounding journey. A single team can invest early in private markets and continue owning businesses as they scale into durable public companies.
He talks about investing in and learning directly from founders like Jeff Bezos, Reed Hastings, @tobi, @mlevchin, and @LuisvonAhn, and watching how they adapt and rebuild as their businesses scale. He is especially drawn to "Act II" entrepreneurs, founders who have already built one company and return with sharper judgment and execution the second time.
We also discuss Durable itself, which is Henry's own Act II. He explains how he has built the firm around developing talent, measuring people by how much they make others better, and his discipline of writing memos and doing multi-year lookbacks on every investment.
What comes through most clearly is how much Henry loves the craft of investing, and how seriously he takes building something meant to last.
Enjoy!
Timestamps:
00:00 Intro
03:02 Origin of an Investment Philosophy
07:02 The "One Percent" of Stocks
13:17 Domino's
19:10 Betting on "Act Two" Teams
24:31 Building Durable Capital
34:46 Market Structure and Time Arbitrage
52:49 Adapting to Discontinuous Change
1:03:19 Physical Moats vs. Soft Moats
1:11:52 The End of Free Money
1:37:35 The Argument for Going Public
1:46:43 The "Warriors" Mindset
1:51:17 Kindest Thing
One of the best parts of my job is seeing just how g*d damn resilient business owners are.
Most companies I talk to are:
- In default on millions of debt
- Staring at insurance cancellation notices
- Facing landlord lockouts (or already locked out)
- Behind on payroll tax remittance
And they just… keep fighting.
Pretty sweet.
