How to Increase the Value of Your Business Before Exit with John Martinka, Co-Founder at Nokomis Advisory Services
In this episode of Exploring Growth, host Lee Murray talks with John Martinka, Co-founder at Nokomis Advisory Services about how to boost a company's value ahead of a future exit. John outlines seven essential factors that make a business more attractive to buyers: strong financial systems, reduced owner dependency, proven growth, employee retention, customer diversification, supplier management, and favorable leases.
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John Martinka
00:00:00
You know, I can't blame owners who say, I've been doing this for 20 some years. I am making, you know, plug in a number. It's all relative. Half a million, a million. 2.5 million. I like that. I don't want to work any harder. I don't want to stick any more money into it. I don't want to hire more people, get more vehicles or equipment. I like the money I'm making. And a buyer looks at it and says, how do you grow this thing? Oh, you can grow it easy. There's so much potential. And the buyers thinking, they've tried everything possible to grow it and it hasn't worked.
Lee Murray
00:00:37
A lot of my listeners are planning for a future exit at some point. And so I want to have more conversations around exiting. And I'm going to do that through the this new year. in light of a future exit, probably the number one thing a founder CEO could do right now is increase the value of their company for a future buyer.
Lee Murray
00:00:56
So today, I have the privilege of talking with John Martin, Marchenko, co-founder of Nokomis Advisory Services. And we're going to look at the seven key factors to increasing the value in your company. So welcome to the show, John.
John Martinka
00:01:10
Thank you, Lee, and I'm glad to be here.
Lee Murray
00:01:13
So like always, I ask my guests to give a little background to how did you end up here?
John Martinka
00:01:18
Well, I'd say I've always been a small business guy. I think in my whole life I've worked, you know, maybe other than a summer job in school, six months for a big corporate entity. It was always working for small businesses. I actually started a a painting company in college with a friend. And how I got into what I'm doing now, I was doing some sales. A friend I had met, his back to back presidents of a local rotary club. Got to know each other pretty well. Said something along the lines of I've always thought you'd be good in this business. And that's how I ended up in the world of helping people buy and sell companies.
John Martinka
00:01:58
And, you know, M&A, all of that. I really like the variety. It's a variety of people. It's a variety of daily challenges and things that you're working on. I am not the engineer type who could work on the same bridge project for three years in a row, every day.
Lee Murray
00:02:15
Yeah. Yeah. So M&A is the space that you're playing in and you're working with companies every day helping them understand the value of their companies, exiting their companies, buying companies. Is that right?
John Martinka
00:02:28
All of that, buying, selling, figuring out what to do to make it more valuable for when they want to sell. And I will say we don't do a lot of we don't do really any project work on, you know, going in and saying, over the next two years, we're going to get in here, you know, we're going to have someone in here every every week helping you do all these things. But we do coach people on it sometimes. You know, a couple of my best ones have been I haven't even charged for it.
John Martinka
00:02:54
But they say, you know, when I, when I sell, you're going to sell it. And you've helped me increase the value over the last few years. I just have to get it to a certain point.
Lee Murray
00:03:04
There you go. Yeah, I like it. Yeah. Well, so let's get right to the conversation of, increasing value. I think if I were to poll my audience at some point in the, you know, the day to day, you get your head down, you're working on growth, at different stages. At some point, you're going to pick your head up and say, what is this worth? And what do we need to do to make it worth more if exiting is in our front windshield? So seven key factors to increasing value. Let's jump into those.
John Martinka
00:03:34
Let's jump in. Yeah. look, there's a there's a lot of value drivers. You can hear a lot of, you know, different advisors and valuation people. Now, you know, if you combine them all, you'd probably get a list of over 20 things that could be considered value drivers.
John Martinka
00:03:48
But in my world, which is the lower middle market, we don't work with the, you know, the Main Street businesses and we stay away from what the, you know, investment bankers are working on. So it's, you know, good solid owner operated family businesses, etc.. and it all starts with what everyone wants first. The numbers. Yep. It's the financial statements. It's the system. So I like to say and all these things we're going to go through could go be in any order. But everyone asks for numbers first. Solid financial systems. So you have accurate financial statements. Now I noticed one of your most recent podcasts had about, personal liquidity and business liquidity, and I will change that a little bit to don't blend your personal and business checkbooks.
Lee Murray
00:04:48
Right.
John Martinka
00:04:48
You know, the owners who everything is about. Can I run it through the business? can I pay less tax? And then you get to the end and someone says, no, I'm not sure that's a personal expense.
John Martinka
00:04:58
That's a business expense. And the bank says, no, you want to add back 50% of what's on your tax return to add make more profit. Now we're not buying into all of that, right.
Lee Murray
00:05:08
So yeah, we had another I had another guest on since you mentioned it, Jason Chabot, who just started and exited his, aviation company, and he talked a lot about that, that same thing where he got himself in a situation where he had a buyer and they weren't interested, because really, when it came down to it, because they had the personal business commingled and they couldn't figure it out, what was, what were the real value was. So he went back to the drawing board and did what you said, ended up getting another buyer on the line and sold it for so much more.
John Martinka
00:05:41
Yeah, I, I feel very fortunate. Our last three clients that have sold their businesses had such clean statements. One of them to the point that in our first meeting I asked him about that and he said, I actually reimbursed a company for my two kids cell phones on the company plan.
John Martinka
00:06:03
I mean, that might be extreme. Yeah. You know another one I asked. I was sitting there with the owner and his controller, and, you know, she was part of the sales process. And I said, okay, any personal expenses in here? And he goes, even if I wanted to. And he turns and says she wouldn't let me. And that's what you want when you're presenting a business to buyers. Yeah. These things are clean. We're not you know, we're not trying to, make things up and put lipstick on the pig. No. And it it's comes down to the people. A lot of things in business, you know. You know, one of my things, you know, people are your number one asset. Really. And in the financial department, it's too often looked like the, you know, Cinderella story. The weak little stepsister off in the corner. Yeah, we gotta do the accounting. Okay. You know, my my niece will do it.
John Martinka
00:06:54
My. Someone in the family will do it. And, you know, I think of one client years ago and the they're, you know, quote unquote, in-house accountant was really a bookkeeper. And the bookkeeper was a data entry person. Yeah. And you had an owner, the owner's wife and a general manager. None of them knowing anything about accounting, all giving different directions. Yeah. And it got, you know, one of the things we did for that company I worked with, a CFO I brought in is because it was on that. And the the owner had said, the statements say we're making a lot of money, but there's never any money in the bank. And, you know, that's, that's a classic case. You know, you see, you know, you can't track, you know, you can't track expenses in some things from year to year because they have, you know, they they changed the, you know, they put in a new account number or name and, you know, you're wondering, where did that come from? It wasn't there the last three years and, yeah.
John Martinka
00:07:57
and I'll finish on this subject by saying I was talking to someone last year and I said, how much faith do you have in these financial statements? And I get a blustery. Oh, 100%. Yeah. And I said, why are there balance sheet items on the income statement?
Lee Murray
00:08:14
It doesn't work.
John Martinka
00:08:15
I never noticed that. Yeah. Okay.
Lee Murray
00:08:19
Yeah. The confidence goes down real quickly when you have that conversation. Yeah. So the moral of the story is get your books in order.
John Martinka
00:08:26
Get them in order. Get the right people. You know, there are so many fractional, accounting types. Bookkeeping. Yeah. Count. Accountants, controllers, CFOs, CFOs look to the future. You know, your controller. CPAs tend to look to the past. Bookkeepers are your, you know, Let's make sure everything in there is accurate. And if you don't have them on staff, get a fraction of a part time person who knows what they're doing because they'll do it so much faster and much more efficient than your your niece will do or the receptionist will do.
Lee Murray
00:09:01
Yep.
John Martinka
00:09:02
And then you don't run into problems. And, you know, I was on the board of and I'm on the board of a nonprofit for many years ago. I said, we need a financial person on the board. We need to really look at your systems. Oh, no. No. Everything's fine. Three months later, it was our, young bookkeeper had just embezzled $50,000.
Lee Murray
00:09:20
Oh, man. Red flags.
John Martinka
00:09:23
Yeah. Which ended up getting paid back by her dad. Oh, instead of going to jail.
Lee Murray
00:09:29
There you go. Okay. So, financial systems that create accurate statements. Yep. Awesome. All right.
John Martinka
00:09:40
So next, I attended a an industry event last year and it was a small panel discussion. One of the people on the panel. The main person was, is a partner who had recently sold a their business for $70 million, 70 million. He he said as they went through the process, he and his partner realized how overly important they were to the day to day operations.
John Martinka
00:10:11
So owner dependency, it is a tough one. I don't know what your other guests and you have seen, but delegating when you're the owner of founder is is tough. You know, I can tell my daughter works with me. And, you know, at some point, I just have to say, do this. Come to me if you need help.
Lee Murray
00:10:36
And if she.
John Martinka
00:10:37
If she takes two days instead of one day or you know, she's stumbling around. You're the safety net, not the doer.
Lee Murray
00:10:47
And I've seen even very successful, you know, big, you know, high cash flow companies, with big margins, having a bottleneck with a CEO or founder. And it's just they have their hands in too many things, and they have not delegated. They haven't given over that ownership to other other people and created departments and that kind of thing. I would say that's the number one thing that I see out in small companies.
John Martinka
00:11:13
Yeah. You know, a quick story. I company I really like the owner.
John Martinka
00:11:18
I did five different kinds of projects, some acquisitions, a potential sale that got derailed by outside forces during Covid. But one of the things I did was he said, I'm not making enough money. And I came in and did some analysis and etc.. Met with management team on many of the 40 or 50 employees A's came back to him and said to a person, they say you are the bottleneck. Everything has to go across your desk and of your input and approval. You need to start delegating. We put in a delegation plan. Within one year, his profits quintupled.
Lee Murray
00:11:56
Yeah. That's amazing.
John Martinka
00:11:58
And then his complaint was my people are coming to me and whining. They have too much to do because I'm delegating. I said, well, teach them how to delegate. Yeah, like I did you.
Lee Murray
00:12:10
Next level.
John Martinka
00:12:11
Yeah. So owner dependencies a can be a it can be a big impediment to increasing value. Or you'll get the value if the owner stays on and or if there's some, you know, contingency payments and or not to make sure the owner does stay on.
Lee Murray
00:12:31
Yep. Which may not always be a great deal.
John Martinka
00:12:34
Right. It may not be a great deal, but it may be not what they want when they think, you know, I want to sell and retire and move away. And nope, you're going to you're going to stay here for a couple of years.
Lee Murray
00:12:47
You created a job for yourself. We need you.
John Martinka
00:12:49
Yeah. And then can you work for somebody else?
Lee Murray
00:12:55
Yeah. Okay. So reducing honor dependency. That's a tough one. Tough. Tough pill. Tough pill for a lot of people to swallow.
John Martinka
00:13:01
It is. You know, because ego gets in the way.
Lee Murray
00:13:05
Yes.
John Martinka
00:13:07
If I can't, if I'm not doing it, what value am I? Well, value is you're not doing it.
Lee Murray
00:13:13
That's right.
John Martinka
00:13:14
Yeah. Okay. Should we move on?
Lee Murray
00:13:19
Let's move on. Yeah. I don't know if I'm looking at the same list you are, but the next one on my list is growth.
John Martinka
00:13:24
Growth. Grow the business. Keep growing the business.
Lee Murray
00:13:28
That's what we're here for.
John Martinka
00:13:29
Yeah, but. And, you know, I. You know, I can't blame owners who say I've been doing this for 20 some years I am making, you know, plug in a number. It's all relative. Half a million, a million. 2.5 million. I like that. I don't want to work any harder. I don't want to stick any more money into it. I don't want to hire more people, get more vehicles or equipment. I like the money I'm making. And a buyer looks at it and says, how do you grow this thing? Oh, you can grow it easy. There's so much potential. And the buyers thinking, they've tried everything possible to grow it and it hasn't worked.
Lee Murray
00:14:06
Yeah.
John Martinka
00:14:07
So? So you can grow it. I don't care if you grow it 5% a year. You don't have to grow it. Ten, 15, 20 show it can grow and show what you did to make it grow.
Lee Murray
00:14:16
Yeah.
John Martinka
00:14:17
Document.
Lee Murray
00:14:18
That's a great point, because I think a lot of people get complacent when they find a certain measure of, fluency or wealth and, and stability or comfort in their life, and they know what they're going to do every day. They're satisfied with it, and it's not. It's fine. Actually, that could be fine for a lot of people. But if you actually want to sell it to a certain buyer, that buyer is going to have a different perspective.
John Martinka
00:14:39
Yeah. it's we call it coasting. And unfortunately you coast downhill. Yeah. You don't coast uphill.
Lee Murray
00:14:50
No.
John Martinka
00:14:51
You got to pedal.
Lee Murray
00:14:53
So if you said to grow it you know by x percent, just some measure that shows that it's growing. Is that what you need to show a year or two years, three years of of that growth for a buyer to be changed their mind?
John Martinka
00:15:06
Well, three would be great because buyers and banks usually ask for three years of financial statements. And if you can say over the last, you know, I decided I was going to sell and I want to prove I could grow this thing.
John Martinka
00:15:15
And here's what we did. Yeah, but if we do it for two years, you do it for one year. It's better than not doing it at all. Yeah. And let's face it. we talk about all this, getting it ready for sale, and we're going to sell in three years. Five years, we're going to do all these things. Pretend Tend that you're going to always be selling it because you never know. We had a client last year, got approached by a private equity backed firm in his industry. and then he hired us to put the deal together. he wasn't marketing the company. He wasn't thinking of it, but it was ready. the people were in place. it was growing. His financials were, you know, in great shape, great, in-house accountant person, good tenure and retention of his employees.
Lee Murray
00:16:09
Yep.
John Martinka
00:16:10
All of that. So if you say, I'll wait till three years before I want to sell, and who knows what can happen?
Lee Murray
00:16:17
That's right.
John Martinka
00:16:18
or I just made a phone call yesterday to a guy I, I've known for quite a few years. He had asked me to contact him in January. He's the CEO of a company. He was the CEO until a number of years ago. His his CEO, who was in in the family, died of a heart attack unexpectedly. You don't know when that stuff's going to happen. That's right. And what if he was? He and his other family member weren't there. And if someone's. We gotta sell it, but the CEO is gone.
Lee Murray
00:16:49
Yeah.
John Martinka
00:16:50
What's happening?
Lee Murray
00:16:52
Yep. That's. That's a tough position to be.
John Martinka
00:16:55
You got to be ready.
Lee Murray
00:16:59
I like that. I hey, that resonates with what we're doing here. You know, we're always looking to for more and better ways to grow.
John Martinka
00:17:07
Yeah. You have to.
Lee Murray
00:17:10
Okay. So moving on to number four. What what is what's your fourth one.
John Martinka
00:17:16
It's being able to hire and retain good and great people.
Lee Murray
00:17:20
Yes.
John Martinka
00:17:22
People are the business.
Lee Murray
00:17:24
Yes.
John Martinka
00:17:29
You're buying. You're buying the people. You're selling to people. The package. So the best way to explain that in big picture is, a number of years ago, it's a seller. Did not want the buyer to talk to a management team prior to closing. Sitting down together. Buyer looks to seller in the eye and says, you may think I'm buying your business. I'm really buying your people. He got to talk to the management team.
Lee Murray
00:18:00
That's true.
John Martinka
00:18:01
The deal closed. This was a service business but it could be a manufacturing business a distribution business a retail business. You want the buyer wants to make those sure those people are going to stay. They usually want to they the people work for a small business for a reason. They could, you know, they could work for a big corporation and be a number.
Lee Murray
00:18:24
That's right.
John Martinka
00:18:25
You know, but they they may not get paid as much or have the fancy retirement plan, but they have a culture and they have, a little more freedom.
Lee Murray
00:18:35
And, you know, I would underscore that with, from my perspective as a marketer, and have done some marketing strategy consulting with, you know, a lot of companies here, same, same sort of, trance of companies. When I go in and look at their brand, what I'm seeing is a lot of their brand is their people and their service that's being shown on the outside. It's the it's the visibility of that. And and so, you know, I'm, I'm coaching them on seeing that and bringing that to the forefront. So, you know, from a buyer's eyes standpoint, if they can see that connection very clearly from customer reviews, you know, net promoter scores and all the things that are happening on your customer success side, they're seeing that flow through to the people and you've got great people, then you've got a double, you know, a double whammy there.
John Martinka
00:19:30
You do? And I'll tell you three of the deals we worked on last year. At least three of them, had a retention bonus for key people, of the company.
John Martinka
00:19:43
One owner, he said I'm putting 50. You guys have helped me build this business. I'm financially secure with this. 15% of the proceeds are going to to you, over at the end of one, two and three years. So they will stay. another one. the top handful of people got retention bonuses. I think it's it was done over after one year. And the third one, it was the it was the CEO who really ran the business because the owner was the point. He wasn't too active. Yeah. He got a, he got a nice chunk of the sales price.
Lee Murray
00:20:22
I like that structure. That's good.
John Martinka
00:20:24
But that keeps people if you're doing that along the way. Yeah. Instead of just saying, oh, you got paid X dollars a year. that's, you know, that you're getting paid X, but here you did a great job. Here's a bonus. And and and I'm on the board of a company. One of the big things is, is the bonus plan and making sure people understand the plan so they know what they and the company have to hit to get that.
Lee Murray
00:20:55
Yep. Yep. I like I like it and that's a that's a huge deal as I'm looking forward looking at the list here I'm looking at number five. This I'm actually getting excited about this one because I think this is really is where it separates companies that are just naturally good to companies that are strategically great for a buyer. So tell us about number five dependencies.
John Martinka
00:21:20
Can we talk about an owner dependency. Tendency. Usually it starts out with people asking about the customer concentration. Yeah, they really should be asking about customer diversity.
Lee Murray
00:21:32
Yeah, right.
John Martinka
00:21:33
But if you have one customer that's, you know, 43% or two customers, 67%, you have a lot higher risk. Yeah. And to a buyer especially then if you have 70 customers that are your top 70%.
Lee Murray
00:21:51
That's right.
John Martinka
00:21:53
And you know, you hear the oh what? They've done business with us for 20 years. And I you know I know the CEO I know the owner. That's right. You know them.
Lee Murray
00:22:02
That's right.
John Martinka
00:22:03
The buyer doesn't know them.
John Martinka
00:22:06
Yeah. And you know, and it's scary. I, you know, prospective client the other day and she she knows it. She says our top customer has grown to be 40%. We're doing more business with others, but they've grown so much faster. And her job right now, we'll call it, is to not reduce what they're doing, but get more other business. So it's a smaller percentage.
Lee Murray
00:22:33
Yeah. To get more new businesses and increase what other other current customers are doing. You're right. And that's a that's a form of growth right there. That's going to map to the buyer to see. Oh wow I can actually expand on current customers immediately.
John Martinka
00:22:48
Yeah. And then we have suppliers I have I knew I know a banker. She's a good friend. A number of years ago she told me she she was working on a loan. I don't even know if it was an acquisition loan or what kind of loan. Yeah, but the company had one supplier. One the bank did due diligence on the supplier.
John Martinka
00:23:11
Make sure they were stable. Now that can't control what the supplier does because last year, Jessica, my daughter and I sat down with an owner and he told the story about how a couple few years prior, his main top dominant supplier came to him and said, we need you to buy this much product over the next year at this price. If you won't do that, you're not getting any. And it was his worst year just about ever because of those. He had to make all those purchases and yeah. And it was a high price. And you just don't immediately flip the switch and say, oh, someone else can provide it. You don't know what their capacity is, their pricing. Right?
Lee Murray
00:24:03
Yeah, I like this. So lowering other lower lowering your dependency on other parties. customer base. We talked about suppliers. This one is interesting to me. Landlords not renting and.
John Martinka
00:24:17
That one could be a key to.
John Martinka
00:24:20
A deal or deal. Not happening. Yeah. So a smart buyer will generally want a lease, including any options to cover the term of any debt they have.
John Martinka
00:24:31
Banks will, with few exceptions, want the same thing. They had won a number of years ago as a plumbing company and the landlord. Only one is a ten year loan. The bank wanted. The bank wanted at least to cover that. The landlord wouldn't give it. The bank finally gave in and said, okay, you can take a five year lease because we realize you are in a, you know, small industrial park. You got a couple bays and warehouse space. That's all you have. You can move a lot of different places without a big cost.
Lee Murray
00:25:02
Yeah.
John Martinka
00:25:03
But what if you get a manufacturing business and you got CNC machines all over the place? Yep. And you have to move them and find a space and and the power that can run those machines. And then you have to recalibrate them. ET cetera, et cetera, etc.. And will your employees like where the new facility is?
Lee Murray
00:25:24
That's right. Lots of variables.
John Martinka
00:25:27
Yeah.
Lee Murray
00:25:28
So it's not just owning and renting. It's all the other nuances of the space that you occupy.
John Martinka
00:25:34
Yeah.
John Martinka
00:25:35
And you know, we read about all the office space a lot in places. And yet warehouse and industrial space does not have that glut. And most of these small businesses are not in a high rise. And even was it yesterday the Wall Street Journal had something about how companies are, you know there's a lot of office space available at the companies as they bring people back. Want class a space. They want amenities. They want a gym in the building. They want, you know, this, that everything.
Lee Murray
00:26:05
Yeah. And it's.
John Martinka
00:26:09
Yeah. And then we talked about people before. But, you know, key employees can be a dependency. Yeah. If you have a person that's the only one who can bid certain kinds of jobs. You know, the lady I just mentioned before, she said one of the things they did over the last few years was, make sure two people in the company do every job are nice. So one of them leaves or is out. It still gets done.
Lee Murray
00:26:40
Yeah. And that's a good one for just day to day, too. I mean, if you have one person that's locked in on doing this one thing, then, you know, you're you're kind of held prisoner to them on a day to day, not even if you're trying to get sold.
John Martinka
00:26:53
Yeah. I mean, it could be a salesperson that brings in 50% of your revenue.
Lee Murray
00:26:57
That's right.
John Martinka
00:27:00
And it takes time. You know, a small business, small businesses have to be growing because then they can fill in these things we're talking about. If you keep it at 10 or 20 or whatever, people 50 and you, you could grow it to, this, you know. Double that, triple that. And have those redundancies. That's all you know. All those things. We're talking about the tie together. These are not separate issues packages. You know it's like making bread. All the things come together in the dough.
Lee Murray
00:27:28
Yeah that's right. And I think we'll see that here play out again in number six.
John Martinka
00:27:34
Yeah. You know I came up with this one, the three eyes. And it's not people it's IP it and incentives. Are if you have IP protected trademarks patents patents do have value. Trademarks help you know what is your IP. And you know not every business has it. But if you have it, protect it.
Lee Murray
00:27:58
Right?
John Martinka
00:27:58
But then we get to it. And if that's not a mess, that's exploding faster than ever with, cybersecurity and hacking and Ransomware. You know, I think about a client that they dealt in sensitive information. They did everything right. Their MSP managed service provider got hacked and all their customers login was available. They logged into my client. Got a ransomware attack. it cost him like $500,000 because sensitive information he was getting. He got fined even though it wasn't his fault.
Lee Murray
00:28:43
Yeah. Yeah, and it could have cost him $5 million. I mean, yeah. You know, what's the price tag? It could be anything.
John Martinka
00:28:52
Yeah. I talking to a owner of an MSP recently, and you, you know, is looking at another one to buy.
John Martinka
00:28:59
And he said, well this MSP got hacked. I mean that doesn't speak highly for the work they do. That's right. They got ransomware.
Lee Murray
00:29:10
Yep.
John Martinka
00:29:11
And then the other eye is incentives. And we talked about it on the sale. But it's taking care of your people along the way. So I'll give you an example. A friend of mine and George bought a company a number of years three years ago. Four years ago. Time flies. Right. And the owner, he's he's one of these guys who, you know, he really protected his dollars. And as we looked at the company, I looked at it. I was helping George buy it. And we looked at the company, and he said, these people don't get paid very much. And, he came in. George came in with his partner. First thing he did is changed a comp plan, put in a bonus plan. They did a lot of inside sales because people were more productive. They were excited to work. He grew the company 75% first year.
Lee Murray
00:30:01
That's awesome. So that's pretty amazing. Oh, I think you're on mute. Yeah. There you go.
John Martinka
00:30:13
Sorry. Yeah. Hit it by mistake. See the big picture? You know about this owner who is so into every dollar for himself? It's a, you know, the, guy who runs a CFO company here in town and had a client, and he referred him to me, and he said, here's this guy. Well, he will trip over dollars to save a dime. So see the big picture?
Lee Murray
00:30:37
Yes.
John Martinka
00:30:37
Yeah. Yeah. You may have to spend a little money, but it's going to be worth it in the future. Yeah. May have to pay your people a little more, but they'll be more productive.
Lee Murray
00:30:45
Yes.
John Martinka
00:30:46
And then, as you see that, I mean, you have you have my list. And it's this last line came to me from a guy who was a president of one of the divisions at Expedia. And he said, growth hides a lot of operational warts.
John Martinka
00:31:02
then when you grow, you fix the warts.
Lee Murray
00:31:04
Yeah.
John Martinka
00:31:05
You don't worry about them when you're growing. Yeah, and it doesn't mean we're like a tech business. It's revenue, revenue, revenue. You still got to make money. Yeah, but when you're growing, you have time to handle those things instead of worrying about every dollar again.
Lee Murray
00:31:18
Yeah, I think that's a great perspective. That's a good big picture. Perspective is just to grow and let these problems, if they're not out of control, let them exist and you can come back and fix them in a more systematic way. that sometimes, you know, I kind of like I don't know why this pops in my head, but, you know, you can rent your house and rent a house for 5 or 6 years and have mortgage rates be up, and then you can buy a house and have like, you know, five, six, 7%. And then the rates drop and the amount of money you save in years on your amortization schedule can make up for all the years that you were renting.
Lee Murray
00:32:01
Right? Yeah, it's like that. That time of renting seemed like you were losing out, but just a simple rate drop can help you make up for the time that you know your total mortgage is going to be. And I think I think that's very similar. It's just you just grow and don't worry about every little detail until those details become words. And those words need to be taken care of.
John Martinka
00:32:23
It's yeah. It's great. Great way to put it.
Lee Murray
00:32:25
Yep. I love it. This is awesome. Thanks for sharing this list with us. I mean this was seven seven key factors, but it really was about 15 when you get down to it I mean it's a lot baked in there.
John Martinka
00:32:38
Yeah there's a lot there's a lot in there. And I guess my one of my final pieces of advice for owners who are growing their business and doing it is, you know, just it's like take it's the old how do you eat an elephant? One one bite at a time. You don't you can't do everything at once.
John Martinka
00:32:53
Right. And it takes time and you're going to stumble and you're going to do a couple things and say, I wish I would have done it different, but now I know. And the other thing, when you know, when they're looking to sell your business isn't that special, it's it could be a great business. But there are other great businesses. And you know, when it comes to we talk about increasing value. There are valuation methodologies and ranges based by size industry. These factors you know the company with one customer at 70%. Yes. They're going to get a lower price all things being equal. and and when we talk about growth it comes back in in two ways. when you are a larger company, obviously you should have more profit. But if you're a larger company, you're going to get a higher multiple of that profit, because the $5 million business has more risk than the $15 million business, which has more risk than the $25 million business. And And up. Because as you get larger, you can have these teams and you can have all the other infrastructure things, and you can have the owner not doing as much or should at least can have the opportunity to not do much.
John Martinka
00:34:16
They should jump on.
Lee Murray
00:34:18
Right? Yeah, this is awesome. Thanks again for sharing this list with us and all your wisdom. we want to send people your way. Where should we send them?
John Martinka
00:34:27
Send them to what? Two things. our website is Nokomis advisory. Nokomis advisory. Com and, we have a new book out, Exit style Grace and More money, and they can get it on Amazon.
Lee Murray
00:34:42
I like that. Exit with style, grace, and more money. That's a great title. Yeah, that's what everybody wants. Right, right. All right. Well, thanks again for being on and sharing all your wisdom.
John Martinka
00:34:57
It was a pleasure being here. Lee.