In this episode of the M&A Launchpad Podcast, hosts Feras Moussa and Casey Minshew sit down with John Martinka, a seasoned intermediary and advisor with nearly 30 years of experience in business transactions. John shares candid insights into how buyer and seller dynamics have evolved, the critical role of financial preparedness, and why experience is key to successful deals.
The conversation highlights the importance of knowing your numbers, preparing a business for sale well in advance, and making incremental improvements that build real value — whether you’re buying for the long term or planning a strategic exit.
For anyone thinking about buying, selling, or growing a business, this episode is packed with hard-earned wisdom and actionable advice.
In this podcast episode, we discuss:
- The Role of Intermediaries in Business Transactions
- How Buyer and Seller Dynamics Have Changed Over the Years
- Why Financial Preparedness is Essential for Both Buyers and Sellers
- Navigating Buyer Sophistication — and Unsophistication
- Buy and Hold vs. Quick Flip Strategies
- How Sellers Can Prepare Their Business for a Successful Exit
- Why Experience is King in Business Transactions
Connect with John:
- Website: https://www.martinkaconsulting.com/
- YouTube: https://www.youtube.com/@JohnAMartinka
- Podcast: Getting the Deal Done https://podcasts.apple.com/us/podcast/martinka-consultings-getting-the-deal-done-podcast/id1550396853
- Mention this podcast and John will send you a copy of one of his books: Buying a Business That Makes You Rich, Growth by Acquisition, or Exit with Style, Grace & More Money
Additional Resources:
Sponsored by O’Connell Advisory Group – Work with a trusted Quality of Earnings and Financial Diligence partner who focuses solely on business acquisitions.
Visit: https://www.oconnelladvisorygroup.com
Watch more interviews and episodes on YouTube: https://www.youtube.com/@malaunchpad
Learn more about Equity Launchpad: https://equity-launchpad.com
Get $150 off the M&A Launchpad Conference with code LAUNCH at: https://malaunchpad.com
Have a question or want to work with us? Reach out to Casey and Ben: info@equity-launchpad.com
🎧 Podcast on Spotify: https://open.spotify.com/episode/57c4YL8twYhQOx4SZ1ELIq?si=WkNC2_o_SOaFP16GgDFI4Q
🎧 Podcast on Apple: https://podcasts.apple.com/us/podcast/navigating-business-transactions-with-john-martinka/id1740382586?i=1000715619158
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Transcript
00:01 All right. On today’s episode, we interviewed John Martinka where we talked about what it’s like to be an intermediator, right? And really
00:07 representing buyers and sellers and what are some things that he’s seen in the industry around buyers and how that
00:12 changed over the past 30 years? And at the same time, right, what’s going on with sellers? What do sellers do well? What do they not do well? What should a
00:19 seller do in terms of preparing uh preparing their company for an exit? So, Casey, what were some of your takeaways?
00:24 It always comes back to the numbers, man. Yeah, I I just the thing I could say on every podcast, everything that we
00:30 talk to, you know, you’ve got to know your numbers. You’ve got to take care of your accounting as it’s the most
00:37 important thing in your business, right? I mean, I know sales is always important. Trust me, sales trumps everything, but at the end of the day,
00:43 you’ve got to do your accounting right. So, if you shortside your accounting, you’re going to be you’re going to pay for it on your exit. You’re going to pay
00:50 for it at some point, right? So, know your numbers, grow your numbers. Uh, man, I took that from John in a lot of
00:56 ways. Yeah. And then the kind of some of the funny things is really talking about, okay, on the buy side, right, we know that space has changed. There’s
01:02 more unsophisticated people coming into the market and that’s a given, but on the sell side, right, sounds like not
01:08 much has changed and you still have sloppy sellers, right? Regardless of having better tools out there. It’s just
01:14 that most businesses, especially in the small and medium space, just aren’t that sophisticated. And I think that’s the
01:19 opportunity, right? That’s what we look for whenever we buy a business. It’s really taking those family-owned businesses and making them management.
01:25 And so lots of information on that topic.
01:31 Welcome to the M&A Launchpad podcast with your host Casey and Ferris with Equity Launchpad. On this podcast, you
01:37 will gain insights on acquiring, investing in, and selling profitable businesses in the lower to middle market. Whether you’re a business owner,
01:42 investor, or spying entrepreneur, at Equity Launchpad, we will provide you with the knowledge, guidance, and capital to navigate the world of mergers
01:48 and acquisitions. All right. Hey, it’s Casey here. Mark your calendars for November 1st. It’s
01:54 going to be another M&A launchpad conference. This is going to be power-p packed. We continue to add incredible
02:01 value around independent sponsors, the ETA, women in entrepreneurship, anybody that’s thinking about buying, selling,
02:07 acquiring, growing, anything around your business. This is going to be very, very nice there in Chicago on November 1st.
02:14 And you can find us at the maunchunchpad.com. You’re going to use the code launch and
02:21 this is going to give you $150 off of the event. We look forward to seeing you out there November 1st in Chicago. M&A
02:27 launchpad. John, welcome to the show. Glad to be here. Yeah. You’re So you’re
02:33 joining us from Seattle, huh? Outside of Seattle, Kirkland, Washington. I know exactly where that is. I’ve driven by
02:39 that Costco a million times. The Rose Hill Starbucks there was my favorite place to go sit and work for hours upon
02:45 hours. Uh but John for listeners right so you obviously work really closely with
02:50 buyers and sellers so you want to just give the listeners a little bit of background about yourself. Sure. I’ve been doing this for a long time. I got
02:57 into it through serendipity. Uh timing was right when uh a guy I had become
03:03 friends with said you I’ve always thought you’d be good in this business. And we had got to know
03:08 each other as back-toback presidents of a small local Rotary club in Kirkland. and you know you go to all those board
03:15 meetings and all the other stuff and you show what you know what you can do and you know he just said in the timing was
03:21 right that was back in the uh mid 90s so actually it’s about 30 years and I
03:29 that’s how I got into it have done a lot of work with buyers my daughter started
03:34 working with me seven and a half years ago that’s great and uh she actually uh
03:39 came to the conclusion I like the southside better and So, uh, you know,
03:44 while she helps out when we have some buyers, we really, you know, concentrate on the lower middle market selling and,
03:51 uh, and she likes that a lot. And, and are you focused primarily in, you know,
03:57 Washington, Seattle? Is that where you’re focused or are you nationwide? How are you how are you your projects
04:02 usually run? Yeah, had we’ve had clients in at least 15 states. Uh, most of what
04:08 we are focused on is in the Northwest, Seattle, Portland, etc. Uh
04:14 it the world is getting smaller, the country is getting smaller with things like we’re recording online and Zoom and
04:21 Teams and all of that that I used to think, well, why would anyone here in Seattle be listing with an intermediary
04:28 in Denver or Chicago and but we’re getting we’re getting leads in different
04:34 places and it’s even with even with some a local client and a local buyer,
04:41 we’re doing Zoom meetings to start off. Yeah. You know, and and and and you think about it from an owner side, I
04:47 don’t want that. I don’t want too many people coming through the business unless I’m sure who they are. And Zoomer
04:53 Teams is a great way to do that. Yeah. It’s a nice little introductory touch. And then you got to get belly. Yeah. We
04:58 always preach you got to get it out of the Zoom, right? You got to get in front of them in person just to really solidify that.
05:04 You have to But it’s better than a phone call. Yes. Got it. So, so John, I mean,
05:10 you’ve been doing this for a while, right? Maybe before we kind of hop into buyers and sellers, the question I have actually is like, what have you seen
05:17 change in the industry, right? You know, in the ‘9s, what were the buyers and sellers? What did they look like in
05:23 2000s? What did they look like? And, you know, we’re in 2025 now. What What are the transition that you’ve seen? Because
05:28 I’m guessing it’s been very different. Or maybe I’m wrong. Yeah. Oh, yeah. Things are different. technology back in
05:34 uh the ‘9s in the as how you want to sell a business. You you run, you know,
05:40 as an intermediary or an owner, you ran an ad in the newspaper.
05:46 Now, where do you go? You go online and you know, you got the you got the bisby sells of the world, which as you know,
05:54 there’s a lot of junk, a lot of small stuff. And of course, it’s evolved into other sites like Axio, which is aimed at
06:00 the PE world and and buyers like you. Uh
06:05 it the fundamentals of business haven’t changed that much though, and and of deals. You still have to get a return on
06:12 investment. You still have to get working capital. I I heard you say on
06:18 one of your podcasts, you know, working capital is the fuel that runs the company. Yeah. Uh, and you you still
06:25 have to get that stuff and you still have to investigate the books and uh talk to the employees and talk talk to
06:32 some customers blindly. Of course, you don’t you I’m doing a reference check or something like that. But those
06:38 fundamentals haven’t changed. What has changed is
06:43 the I the plethora of younger inexperienced buyers and that
06:50 whole search community and uh you know I got into this business and
06:56 people were saying 90% of buyers individual buyers never never buy
07:04 a business. I don’t know if you guys know Richard Parker written.
07:16 I have heard of that one. Yes. Yeah. And he’s an he’s an investment banker uh uh
07:22 in Florida. And I asked him a you know a while back, Richard, you always said 90% never buy. What do you think it is now?
07:28 He goes, I’m saying 94 because there there are more tire kickers than ever.
07:34 and they also have a way to get out there on on different sites like search
07:40 funer and uh you know other communities that they’re more visible. Uh so that’s
07:47 something that’s changed. Got it. So I mean ultimately you’re saying less basically more noise right maybe less
07:52 sophistication and I think it’s you know with technology right there’s more
07:59 information out there like this podcast right it’s easier 10 years 20 30 years ago you couldn’t find information on how
08:04 to buy business so now people find it and people are infatuated it’s sexy buying a business is the
08:09 entrepreneurial’s dream right it’s but then they kind of you know ignore how hard it is right and so it’s a lot of
08:15 people get out there they’re infatuated with the idea but once it comes it’s time to put pen to paper and commit and maybe put money up and go close on
08:22 something or act. They they stumble, they don’t act, right? And you know, you see that kind of rinse and repeat itself. It’s usually when they have to
08:28 sign for the personal guarantee. It is a it is a common thing. Uh
08:35 it it this is I I’ve written a you know one one of the books I’ve written the first one is called Buying a Business
08:41 That Makes You Rich. It’s aimed at the individual buyer. And then the preface it says you you’re going to make a leap
08:46 of faith. You just want to you do your homework and do it off a chair, not the rough. I like that. And they get in
08:52 these a lot of these buyers get in their their little groups and communities and uh to politely say that it can be like
08:60 the blind leading the disabled that they you know they start talking about certain things and that have no basis in
09:06 reality and they convince themselves that’s the way to do it. Mhm. And that’s
09:11 where, you know, whether it’s some of the other people I’ve heard on your podcast, the due diligence Q of guy, the
09:18 attorney, people like us, that’s where, you know, the experience that those of
09:24 us have that can say, either slow down, you’re moving too fast, or speed it up,
09:31 you’re going to drag this out, and the seller’s going to kick you out. So, John, you make a point here. Um, and
09:37 and this is so you know our listener base, you know, we’ve got a large amount of people that are considering buying a
09:43 business for the first time, right? And for you that dealing with thousands and
09:48 thousands of different buyers and sellers, what can these listeners do today to when they work with a guy like
09:56 you on a deal for you to respect it, for you to be like, “Yes, you know, I understand this is your first time.” And
10:02 like what are those what are those norms that we need to do in order for them to validate to you? because there’s look
10:07 there’s a lot of new searchers and there’s a lot I was I was a first-time searcher and uh and and I had to close a
10:14 deal. Um so what what can they do? What are those steps? What are those little check boxes you think when you talk to
10:19 these people that you’re like, you know what, I’m going to help this person or I believe in them. Well, I think one big
10:24 thing is to realize sellers control the deal on a good company. The buyer controls the deal
10:32 when it’s a a lousy company. And you know, you can’t convince yourself that just cuz you’re there and
10:38 you’re smart and you got an MBA or uh or whatever that you know, they’re going to
10:44 give you the deal of a lifetime because if it’s a if it’s a good business, they control it and there’s going to be multiple buyers for it, qualified
10:52 buyers. I mean, you guys, as I you know, as I see you, you’re not looking, you know, like you, you know, this is the
10:58 your first rodeo on on business. you know, you uh uh of course you went you
11:03 worked at Microsoft, you got experience, you worked with other people, you ran things. Uh you know, that that’s really
11:10 important that that experience. Uh, another thing is, you know, don’t get
11:16 buyer fever. You know, don’t get so enamored with something that you suspend common sense.
11:23 And, you know, realize that you are, you know, turnarounds make a make headlines
11:30 for a reason. They’re rare. So, if you’re looking at this break even, but I can fix this pretty easy. Uh, okay. Hope
11:38 you have a lot of cash to fix it. Yeah. No, and and people people need to understand, I mean, it’s it’s all
11:43 statistics, right? Most businesses fail, right? So again, the business you’re going to buy, if you’re buying any
11:50 business, it’s most likely to fail. So if you buy a business with a track record of success for many years, well,
11:56 now you’re reducing the odds, right? Well, in addition to that, not only do most businesses fail, now the ones that
12:01 fail, the turnaround is even harder than the business. So you know, why make your first acquisition a turnaround, right?
12:06 Like it’s really hard to do that. And so statistics are not in your favor. And yes, sometimes they work out and they could work out really well, but at the
12:13 same time, you still probably if it’s your first acquisition, you probably have a lot more to learn. And so why do that on turnaround that’s going to burn
12:20 you out and you’re probably never going to do an acquisition again versus something that’s steady Eddie and you’re just looking at and making incremental
12:25 improvements. Yeah, I I mean, you’re right. Uh, you know, another thing is uh
12:31 too much debt. and I I’m sorry, but there are lenders out there who will go to very low debt
12:38 coverage ratios. Uh, and they just want to make the loan. Uh, good bankers, good
12:46 lenders will insist on a solid debt coverage ratio. I say at least 1.5 to
12:52 one unless there’s some extra extraordinary circumstances to make it a little lower. But in the you know the
12:58 SBA world where individuals are uh it’s 1.5 to two should be mandatory
13:07 you know that’s how you that’s how you you know grow the company is having some working capital. Yeah. Yeah. I was
13:12 hearing the other day I was talking to somebody and I thought this or maybe a podcast or something I was listening to
13:17 but uh I thought it was very astute. The guy said, “Assume the first year that you buy a company that whatever multiple
13:24 or whatever your EBIT was, it’s going to cut in half. If you assume your business
13:29 that you buy just that first year change, switch over and all that. Can
13:34 you make it work if that cuts in half?” And that was really, you know, because I’ve now experienced on three
13:40 acquisitions on two of them, you know, that that’s kind of been kind of the trend. it it doesn’t stay that
13:45 consistent growth model uh because there’s change, there’s now debt, there’s there’s all these things that
13:51 you’re adding to it. So, what are your thoughts? What have you seen over the years? What have you seen in in in the
13:57 in that first one or two years after these guys close or or do you even stay in contact with these guys once they buy
14:02 the I do uh get repeat business too on the buy side. Uh just had a past client
14:10 call me the other day and say, “Yeah, I had dinner with a you know, my number one competitor, he
14:15 wants to sell to me. Can you help me? Uh, of course I can. Here’s the information you need to get. Uh, have I
14:21 se I haven’t seen too much that drastic as cut in half. But any kind of stress test, I know banks will run a stress
14:29 test. What happens if the business goes down 20%. If they have a top customer, what happens if that t top customer goes
14:35 away? And that’s part of due diligence because, you know, you say, well, this this one customer is 22% of our sales.
14:42 uh what is it to your gross profit? I’ve got a prospective client and he you know
14:49 he keeps talking about I’ve known him forever. His latest classic entrepreneur his latest business is really doing well
14:56 and he goes I go you have a dominant customer they’re 20ome percent. He says yes although their their margins are so
15:04 low if I lost them I could recoup that pretty easily. That’s different than if your top customer is your 20ome percent
15:12 has a high gross margin. Yeah. Yeah. I mean a sophisticated buyer understands there’s a difference between top revenue
15:18 and top profit and those are two different lenses to look at it and it’s not about just hey I lost my biggest customer now it’s terrible. Well that
15:24 you’re not making much on them to begin with. It’s not so bad. Maybe your second largest customer is actually the more important one. So yeah. Yeah. Yeah. You
15:31 know and we’re you know it’s all those things. We’re working with a company now. Um,
15:38 let’s put it the owners are of an age where they don’t want to do much but check in.
15:44 And they make that very clear. And so says, “How would you grow this business?” They say, “Well, the first if
15:50 we were younger to don’t want to grow it, but if we were younger, we wanted to grow it. We would replace, you know,
15:57 this segment of business that’s commodity, very low margin, and go after the higher margin stuff that’s out
16:02 there.” Uh so that’s the kind of you know that’s due diligence that buyers have to go into not just get enamored by
16:10 here’s my bottom line and you know I heard your your one podcast you’re
16:15 talking uh with the QV guy you’re talking about IBIDA and one of you interrupted him and said no IBIDA is not
16:21 profit in a capex intensive business.
16:27 Yeah. And you know a little later he said uh IBIDA is cash flow and I would disagree with that too. It is not always
16:33 cash flow because you know I’ve seen you know you’ve seen it too but people they
16:38 go out and buy a new piece of equipment for half a million dollars and the CPA says well you got a 5-year note and you
16:46 should depreciate this over five years. And they say no I want it all now. Well years 2, three and four you’re making
16:53 principal payments with nothing to write off against them. Yep. No, I mean and again IBIDA like you should not base
16:60 your buy on the IBIDA. You really got to look at net cash at the bottom line because otherwise again it depends on
17:05 the business. Software company great your IBIDA is very reflective and you’re in a manufacturing company it is the
17:10 worst number to even really base anything off of right and so you really have to dig in and understand the nuances and that’s what experience
17:17 matters and that’s where you know having a good intermediary helps guide you that to some extent too.
17:23 So, um, John, I think, you know, from, if I’m hearing you right, it sounds like you’re seeing less sophistication from buyers. What about sellers though,
17:30 right, with technology, with ease of accounting, all these things, are you seeing over the years, have you seen
17:35 more sophistication come from there or is it been kind of the same thing? Can I laugh out loud? Sure, go for it. I use
17:43 the phrase small business accounting because you never know what you’re going to get. Uhhuh. It’s the, you know, too
17:50 many small businesses, the accounting department is, you know, I call Cinderella syndrome. The weak little
17:56 steps stepsister off in the corner. The owner wants to manage the customers, the product, the sale, whatever, the
18:03 operations. And yeah, the accounting is a necessary evil. And,
18:09 you know, there’s some really good ones. You know, we’ve been fortunate. A lot of the companies we’ve represented lately
18:14 have been clean as a whistle. No personal expenses, good books, but
18:19 there’s one now and you know the the the two owners, the wives do the books and
18:27 the CPA told me, “Yeah, they do the books, but they’re not bookkeepers.” So, he has some work to do at Yeah. when he
18:33 when he gets in there. Uh yeah, it’s uh I wouldn’t say it’s
18:39 improved much at all. just just because you’re in QuickBooks uh doesn’t mean you’re entering it into
18:46 the right accounts, etc., etc. Still kind of a mixed bag. So, John, here’s uh here’s kind of my uh
18:51 my big question here. So, over the years, you’ve seen people buy companies,
18:57 grow them, and try to sell them in five years, flip out of them, try to make profit. And then you’ve seen people buy
19:02 companies and then they have the the hold mentality. They want to hold them and grow them. Yeah.
19:08 Where have you seen the most successes? Right. The is it the is it the buy hold mentality, the evergreen to buy it, grow
19:14 it, continue to go or are you seeing more like, hey, get it to where you need to go. The best time to sell it is when
19:20 you’re at the top and get out. Yeah. Uh so we can differentiate if we
19:26 have on one end we have private equity family office buyers and there are different private equity does a lot of
19:33 the your true private equity with the fund wants to buy and get out and if you
19:38 have a 10-year fund and they buy you in year four they’re going to start selling you in 5 years later. Family office you
19:44 know professional buyers but they want to hold. individuals tend to want to hold and uh I’ve had numerous clients,
19:52 buyer clients that have bought multiple companies. Uh I one of my favorites is a
19:59 guy who bought four in his one industry. Another client who’s become a good
20:04 friend has bought three. Uh he’s grown it he’s grown from first acquisition was
20:11 a $5 million a year sales company. Last time we talked he was at 50 and huge
20:16 chunk of that came from a couple acquisitions and and that creates gener generational wealth right I mean when
20:22 you see these buyers that that are trying to just hey let’s make some money let’s get in let’s buy let’s pay out our
20:27 investors but I at least my experience from the the people I have seen that have had the buy hold mentality they’re
20:33 focused more on creating wealth um than just trying to generate you know a
20:38 return so you know it’s and it’s also a different way of how you’re going to enter the business. Yeah. And the last
20:45 one I mentioned, he’s he’s brought his two sons in to work in the business. Uh,
20:51 one of them from uh a very took took took a pay cut from a very lucrative
20:57 position in the tech industry to come work in dad’s company and he hopes they will take it over someday. Yeah. I love
21:04 it. I I have that conversation with my wife. You know, I always tell her, I’m like, I would love the kids to come. I’m
21:09 building Enterprise so the kids can come. She’s like, “They’re their own people. Do not force them to come work
21:15 for you.” And I’m like, “But why is it like me?” I’m like I’m thinking legacy, right? I’m thinking like, “How hard is
21:20 it to been an entrepreneur?” You know, my dad was get a job, go to school. You know, that was his mentality. When I
21:26 said I was going to be an entrepreneur, he just was like, “You’re crazy.” Uh, and then all the work that I’ve done
21:31 over the last 25 26 years an entrepreneur to stabilize and grow a business, I want those kids to be able
21:37 to to take advantage of running a business, right? And then uh not not the idea of that, hey, let’s just, you know,
21:43 go out and it’s one of those mentalities when you when you talk to people, but having them come work for you. So, it’s it’s a big thing for me is legacy, you
21:49 know, that and I I buy on legacy. When when Ferris and I are talking to customers or we’re talking to a seller,
21:54 you know, we want to respect the legacy, respect the business. I mean, that’s a big conversation piece that we come from. Um, so I I I think it’s always
22:03 nice, especially for our listeners. You know, everybody wants to buy something, clean it up, and make a quick buck. But
22:08 that generational wealth usually comes from that mentality of let’s buy a business. Let’s get it into a position
22:15 where hey, it could be sold because we’re doing the right things, but have
22:20 the mentality that that first five years, you’re probably not going to make a ton of money. Um, but then after you
22:26 get the debt paid down, then after you got things cleaned up, you get the right people in the right seats, right? It’s
22:31 that fiveyear on is where that that generational wealth where that money starts to come in where you can make another acquisition where you can
22:37 develop and grow your enterprise. Is that kind of what you’ve seen for some of your long-term customers that have
22:43 continued to buy? Yeah, I I would say that uh although a
22:48 lot of them it’s been quicker than 5 years and you know maybe it’s because
22:53 we’re we tend to be pretty fussy and we screen buyers hard to get the people who
22:59 can who can do that. Does that mean they all do it? No. I I think of some of my clients that have businesses now for 10
23:06 or 15 years that haven’t done much and often it’s they’re getting in their own
23:11 way. Yeah. They just can’t make a decision. Uh yeah, just don’t aren’t
23:18 growth oriented. Maybe say I big risk was buying the business. I don’t want to take too much risk growing it too fast.
23:24 Who knows? And that but that’s every that’s every situation there start people start a business traditional
23:31 business not a tech business and some of them make it and most don’t. Yep. So to
23:37 the other part of it so I buy a business what are those things that we should be doing in those that at that time to get
23:44 it ready to sell? Yeah, I was ask what is the mistake most sellers make, right? How do you ultimately like so I did
23:50 startup for 17 years and you know what it was in our second startup when I met
23:55 a guy that said listen you’ve got to start building your data room today to get ready to sell you need to be
24:00 thinking about what the exit looks like and so you know make sure you put your data room when you do your financials
24:06 make sure you get a reviewed financials or an audit or whatever these things are that then allow us if when someone does
24:11 tap on our door they come and buy it and with energy funders you know we built that over five years and I had built
24:18 such a great data room. Uh we did get our financials reviewed. We did all these things and when the buyer did show
24:23 up, they were very impressed and we were able to get the deal done. So what what is that mindset we need to have as we’re
24:29 buying these businesses? Well, you hit on one is financial. We talked about that a little bit before and you know
24:34 good systems, accurate statements, uh don’t run personal expenses through the business. Make it clean. I think on one
24:41 of your podcasts someone was saying there some buyers who would say you run personal expenses through the business
24:47 we don’t we don’t consider them which they shouldn’t they’ve already been paid for that by not paying tax which is
24:53 shortsighted by the way because if you know the you you know just use round numbers $100,000 of personal expenses on
25:01 the federal level it’s maximum 37% tax and that $100,000 at a fortified
25:07 multiple is a lot more 37,000 for a few years. Uh
25:13 well, let me ask you as I’ve prefaced this next one. What do you guys do on a daily basis in your companies?
25:20 So, I I I can let me speak because Ferris could talk about the side he is as the CEO. He’s over several uh
25:26 different types of businesses including property management, but um I’ll take H&M for instance. Um and in the early
25:33 days, right, I was the integration. So, I got in there to get the right teams moving. We’re now 26 months later now
25:40 I’m working with audit to get ready for an to get do our opening balance sheet audit to recap the business to to do
25:48 these things because as more of an independent sponsor we brought in an executive level management team to run
25:53 the business. Um and so we’re looking for the next acquisition. We’re making board meetings. We’re doing those kind
25:59 of things. So that at H&M is a big play. Yesterday I was at our our smaller business we bought in the wastewater
26:06 business and I was sitting at the Quickbooks because the lady we hired quit after a week. So I was doing the
26:11 basic stuff. So you kind of got a little bit of everything from us over here. Yeah. And and I think well other than
26:17 that last one be you know your first part of it. If I had a bell I’d ring it and say you know
26:22 you know basically kaching because you’re not working on in the business in
26:27 the dayto-day. And that that’s the thing I hear the most from uh attorneys and
26:34 other investment banker types uh accountants is the you know their
26:39 clients the business is too dependent on their clients the owners and it’s you know so
26:45 you asked about that what else get as a seller you have to work yourself out of it otherwise you know you’re too much of
26:52 a valuable piece and no one’s going to want to buy the business right if the business can’t yeah support you not being a part of it well then you really
26:59 have a business. That’s great. Right. So, well, you’re working on, you know, what uh uh Casey said, and that is, you
27:06 know, he’s he’s up he’s up there in working on the big picture. You know, that’s what that’s what an owner should
27:12 get themselves in the position to do and they have to delegate and it’s tough to delegate especially if you’re a founder,
27:19 less so as a buyer. Uh but that’s a you know that’s a really big one is that uh
27:26 no matter what size company uh the less the owner is responsible for on the
27:31 dayto-day the better you know agree and another another way
27:38 to maybe look at it too you know we were talking about sellers and getting it ready and ultimately as a seller if you
27:44 don’t have a way to value your business meaning like today if I can’t tell you my business is worth 20 million and
27:49 here’s the reasoning behind it well how do you expect a buyer to, right? And so if you don’t have the financials, you
27:55 don’t have the organization, you don’t have all the things to be able to answer that question, well then again, you’re
28:00 not ready to sell. And so that’s kind of really another lens I look at like we have multiple different businesses and some of them are in, you know, better
28:06 state than others financially, profitability, all the above, but like there’s some of them like I can’t even
28:12 really quantify in case they were having this conversation earlier today. So then what is that business actually worth and
28:17 how do you explain that to a seller? So or a buyer. Uh it’s definitely another lens that kind of people need to
28:22 consider. You know, I’ve we have a prospective client and uh when I first
28:28 met him through his attorney a couple years ago and I said, “Well, send over your financial statements.” He said, “I
28:33 don’t really I don’t have financial statements.” He said, “My my uh CPA takes the stuff and does the taxes.” I
28:38 said, “You know, you’re not going to sell your business without financial statements.” And I’m serious. He said, “I don’t have them. We just track
28:45 revenue.” Wow. And he’s worked with his CPA who uh who is a with a really good
28:50 firm, good guy. He now has financial statements. The first batch he gave me. I’m, you know, I’m not an accountant.
28:57 I’m really good at seeing inconsistencies. And you know, the other, you know, last week I took some financial statements and just marked
29:03 them up. What’s this? These uh these items on the balance sheet look like P&L
29:10 line items and stuff like that. scanned them in, sent them to the sent them to
29:15 the owner. But, you know, you see that all the time. And he he now his financial statements make sense. There’s
29:21 no goofy stuff on the balance sheet. The CPA did what he was supposed to do. And
29:27 that’s, as you said, that’s a huge difference. No, I completely agree. What do you think about reviewed? If you
29:33 you’re so somebody called you and says, “Hey, you know, we review our financials every year or hey, we do an audit every
29:40 year.” I mean, do you feel like those give th that those businesses much more value to the buyer, more trust in the
29:47 process? I think the reviewed statements really make a difference as you get into professional buyers
29:54 and that would be whether you call private equity family office, the you guys called yourself independent
29:60 sponsors. Now, now everyone who doesn’t have money says I’m an independent
30:05 sponsor, but uh the say they’re searchers, too. I mean you could put you could put whatever bucket you want. We
30:11 call the independent sponsor uh basically the mindset of a you know we’re not we are not actively running
30:16 the businesses dayto-day. Our intention is to buy scale with a you know really
30:22 with and we don’t raise a big fund. We we are project by project fund raise. the more you get into buyers like you’ve
30:28 bought a couple companies and you buy more you get into the you know people use the term micro PE or or private you
30:35 know there are different it used to be private equity was big private equity you know 5 million a dollar or nothing
30:40 and now there’s you know different stratas five three two whatever but you get into those kind of buyers versus
30:47 John or Jane do who’s going to buy and run their own company reviewed statements will make a difference
30:53 that is an important thing because I you know being, you know, accounting is where I ti typically go to in that first
30:59 year when we get into a business is to really get that accounting down to a science. Yeah. And uh and then getting
31:06 it reviewed. U so like right now at H&M, you know, we had we had a great start in
31:11 the first six months. We we dealt with Murphy’s law in year number two. Um it
31:16 happens. We we got a ton of deferred maintenance, hurricane, everything you could imagine. Kind of punted the audit.
31:22 So right now we’re we’re cleaned up our balance sheet. We’re now going into the opening balance sheet audit and auditing
31:29 2024 so we can recapitalize and it’s a bigger business. It’s around 25 million revenue. So these are those steps that
31:37 we’re doing and we’re doing it internally for our partners and our investors and our people. It’s not just so we can turn around and sell it. I
31:43 feel like these are the right things you do in a larger business or at least a more of a middle market business to to
31:49 to create that that trust in what we’re doing and it gets you more sell ready, right? That’s the other piece of it too. So, if we ever did, again, we were more
31:56 long-term. But if we did want to make an exit, it’s a lot more, you know, straightforward to value and a lot more
32:01 straightforward for a buyer to go pick it up and go get the financing they want or whatever else they need it for. So,
32:06 yeah. Well, I have a friend who, uh, six years now, right before CO, uh,
32:13 60-year-old family business. He was third generation. Uh, done very, very
32:18 well. uh he you know he had a private
32:23 equitybacked firm in a complimentary industry say
32:28 we want you uh we want to you know we want to grow into your space it’s
32:34 similar to ours but not the same and he was ready his financials were ready because he paid attention to the
32:40 statements his KPIs everything else he was meticulous on it yeah he got a big exit no so for those listeners I mean
32:47 you know he got he had an offer he couldn’t not refuse, you know, and being
32:53 guys that are aggregating and talking to sellers and doing this stuff, you know, I meet so many people that haven’t
32:58 reviewed their financials. Uh there’s there’s there’s all and we see those as we see that as potential buying
33:04 opportunities, right? Things that we can do if somebody’s still using paper for a lot of their their customer
33:09 relationship. We see these are all opportunities for us to bring in tech, bring in these resources and add that
33:15 value. and then we’ll do the review and uh and and make and make the value of that business better. Yeah. And then for
33:22 those that do have their KPIs, I do know their stuff. I mean, we we respect that and we give that a value, right? And so
33:27 that makes Hey, there’s less of the sausage making to be built. Instead, we can focus on actual just growth.
33:33 Absolutely. Yeah. I like you talked about paper. I think back to a guy who
33:38 bought a company uh it was a lower middle market deal was 56 million.
33:45 really nice company and they it had I the ownership was a mess. They had
33:51 brought in the seller, the original seller to run the company cuz they they were trying to run it blindly absentee
33:59 and she liked paper checks. Everything was paper checks. She had to
34:05 sign them. He immediately switched over to electronic payments, either a or
34:11 credit card. uh a coming in. Uh what a
34:16 difference. Yeah, that’s what we’re doing right now over at But it freed up you freed up
34:23 people freed up time. You have a better way to audit and track it and see it. All the above. So, and you reduce theft
34:30 because man, check theft is surprisingly it’s a real thing. Until you experience
34:35 it, you don’t know. Yeah. He also put in uh wherever he could pay by credit card. He he had two
34:41 credit cards with like half a month apart on when they were due. And so certain times you would use one credit
34:47 card then the other one so he could get the float and uh the same time he accumulated he was accumulating a lot of
34:55 points or cash back or whatever else. Yeah. Awesome. Very nice. You know it sounds small but no it’s all those
35:02 incremental improvements and again for those of you listening right that’s how you get your business ready for a sale right. all the incremental improvements
35:08 to clean it up, get it going, and that way you can make it opportune for the next buyer. So, right. All right. So, I
35:14 guess with that that with that said, I guess you know, we can go ahead and shift on to a rockaround where we ask our guests the same three questions.
35:20 Yeah. So, first question for you, John, is what do you like to do in your free time? Well, the uh the day-to-day stuff
35:28 in my free time is uh we’ve got a couple dogs. We love playing with them. We take them for walks just about every day. Uh
35:35 and uh I do pay attention to working out like five times a week. Nice. And and
35:41 you know stuff like that. But the big picture is I have been very involved for the last 20 years with my Rotary Club.
35:48 We do a project uh now every year we have lately last 15 18 years we’ve been
35:56 going to Antigga and Barbuda in the Caribbean. Nice. We take high school students in a Cisco, you know, Cisco,
36:02 the networking company and they take a curriculum of how to network things. Uh
36:08 we’ve donated well over 10,000 laptops to the schools down there, including 3,000 in the last two years. And the
36:14 students go down there, they get hosted by local families for 12 days. They work
36:20 not only distributing computers, but setting up Wi-Fi networks in schools and nonprofits. Incredible.
36:26 I put a, you know, I put a lot of very rewarding time in that. In fact, in uh an hour and a half, I have a meeting
36:32 with someone from Antigga about our next year’s project. Awesome. That is incredible. That’s an awesome story. All
36:38 right. Next moment. Most memorable moment in your business journey. when I realized that
36:45 I could not I did not need to I should not emulate the guy who got me into it because his I tried to be like him and
36:52 his personality is uh much different and much more direct and I’m really more of
36:59 a relationship guy. He’s more of a transaction guy to get clients. And once I realized I can’t be like him, uh it
37:07 life was better in business. Makes it find what you do well. Find what you do. Well, and all right. And what is your
37:14 favorite tool or resource? My experience.
37:20 Fair enough. I mean, it’s funny. I used to be young and naive, right? Like I had my own, you know, I had made money playing with off of games of anything in
37:27 in middle school. Then high school, I had my own web company and, you know, did well with that. My friends were flipping burgers at Walmart or whatever
37:33 Walmart, sorry, McDonald’s. And I was making good money on the web. And you know, there was a point in time where I
37:38 was just like, man, like people give too much value to experience, right? Just very naive. And as I’ve gotten older, I
37:44 realized, man, experience is king. There’s a lot of things that you don’t know that help you make the right
37:50 decision. It’s not about just being able to learn something. It’s about being able to choose a thing that you shouldn’t choose because of your
37:56 experience. Yeah. And you’re right. And and you know, you know, this whole scale of that leads up to unconscious
38:02 competent that you you just know what what to do. My daughter says that to me all the time, you know, can you explain
38:08 that because you just know it. But and we found that in uh business buying and selling, it’s really important to
38:14 explain that because you buyers might get frustrated. Why didn’t they tell me that before? Because they don’t think
38:20 about it. You know, it’s just on autopilot that they do those things. So,
38:25 what we do when we’re marketing a company, we tell buyers, you’re going to expect this, but we put out a
38:31 supplemental form to the memorandum that is like, you know, follow-up Q&A,
38:37 all the things the sellers have shared or buyers have asked or we’ve asked after it’s been written and here’s this
38:43 list of stuff. Uh, because they never thought about it before. It was just,
38:48 you know, so second nature. It’s pretty amazing. That’s awesome. Awesome, John. Well, thank you very much. And I guess
38:55 to to maybe put a wrap, I mean, how can listeners get a hold of you? They can go to uh our website,
39:01 nakcomomasadvisory.com. N O K O M I S uhadvisory.com.
39:06 I’ve got, you know, I’ve got a YouTube channel and a podcast channel. Uh our
39:13 podcast is called Getting the Deal Done. And if they reach out to me and uh
39:19 mention this podcast, I’ll send them uh ecopy of one of my books either on buying a business uh growth by
39:26 acquisition or our latest book, Exit Risk Style, Gracing More Money. Awesome. Oh, I want a copy of those. So, I’ll be
39:32 emailing you. Okay. All right. We’ll make it happen. And we’ll put that in the show notes for those listeners. All
39:37 right. Hey, and John, just note, November 1st, we’re having our conference in Chicago, and we would love
39:43 to have you come out and participate or be involved. So, we’ll we’ll send you an email about it, but it could be a way to get your new book out. Okay. Awesome.
39:50 All right. Perfect. Well, bye, John. Thanks for being here with us. Really appreciate you very much. Yeah, this was this was really a good conversation. I I
39:57 I enjoyed uh you know, your questions, your input, and the pace. You bet.
40:02 Outstanding. Thank you, John. Thank you for listening to the M&A Launchpad podcast. If you’ve enjoyed today’s
40:08 podcast and would like to support us, please leave us a rating and a review after you listen. If you’re looking for guidance on your next business
40:14 acquisition or sale, capital to support your next business transaction, or to invest in a private equity opportunity,
40:20 visit equityaunchpad.com to learn more and to connect with our team. If you know of an individual who would be a
40:26 great guest for the show, head over to equityaunchpad.com/nominate where you’ll have the chance to refer
40:32 yourself or someone else to be a guest on our show. I’m Casey Mchu and I look forward to talking with you next week.
