October 30, 2024
Exit With Style, Grace, and More Money:
Creating a Large Exit for Your Small Business
John Martinka with Jessica Martinka
Nokomis Advisory Group (2024)
ISBN: 979-8335847636
New Book Teaches How to Sell Your Business Gracefully and Profitably
John Martinka is a consultant who assists people in buying and selling businesses. He is also the author of four previous books, including If They Can Sell Pet Rocks, Why Can’t You Sell Your Business (For What You Want?) and Buying a Business That Makes You Rich. Now he has published his fifth book, which he coauthored with his daughter, Jessica Martinka. Exit With Style, Grace, and More Money: Creating a Large Exit for Your Small Business focuses on the process of selling your business so you know what to expect, how to be prepared to make the transition as smooth as possible for you and the new owner, and how to ensure you get what the business is worth.
This book is not for selling large corporations but rather for the small and lower middle market business owner. That said, while all businesses are different, the Martinkas note that all business sales have one thing in common: frustration. Most business sellers are not prepared for what the process entails. In fact, an article in the Wall Street Journal once showed only 10 percent of medium-size businesses are ready to sell for full value.
The Martinkas walk the reader through what to expect so they are ready, beginning with some key questions business owners need to answer to be prepared to sell, including “Why are you selling?” It can’t be because you’ve had a bad year, which is the worst time to sell. It needs to be because you’re ready to retire or another answer that will not scare off the buyer. Part of that answer includes knowing what you will do with your life once you sell. You need to plan for life after owning a business. Plus, you need to make sure your spouse is ready for you to be retired.
The Martinkas then present an ACTION™ plan for selling a business. I won’t discuss it in detail, but I will mention a few highlights among the important information. One key point is you must make the business attractive to the buyer. You need to know how you think a buyer can add value to the business because, otherwise, potential buyers won’t get excited about owning the business.
Also, you need to start thinking years beforehand about what you need to do to sell; that way, you can resolve any issues you currently have before the sale. One issue is getting all other owners on board to sell, though if you’re a sole owner, you will have less hassle. You also need to delegate so the company is dependent on you. You want key employees in the right places, you want to ensure they will be retained by the buyer, and you want to know they are willing to stay and work for the new owner. You also want to ensure you are on good terms with your vendors so they will work with the new owner; plus, let the buyer know what your relationships are with your vendors, such as payment agreements. Finally, you want to avoid being dependent on one dominant customer who brings in the majority of your business because if that customer fails or does not want to work with the new owner, the company’s attractiveness to the buyer will be diminished.
Of course, money is a huge issue when selling. Not only do you have to figure out the price you want to sell the business for, but you have to provide the financial statements to support the numbers you give the buyer. You’ll need things like three to five years of profit and loss statements, tax returns, balance sheets, and cash flow statements, plus financial systems that work well and are accurate.
One thing that amazed me was the discussion about keeping clean books. The Martinkas reveal how many business owners have what’s called a “lifestyle business” where they write off trips, boat gear, and almost every meal as a business expense. This leads to inaccurate account keeping, and business owners later trying to retract some of those expenses to claim there is greater profit than actually represented. Such dubious bookkeeping is discouraged since it muddies the business’ actual value, plus makes the seller seem untrustworthy.
You also need to be prepared to understand the different types of buyers who might approach you. Strategic vs. financial buyers are discussed. A strategic buyer is one who already owns a business and sees your business as something they can use to expand their operations, enter new markets, or gain a competitive edge; they are looking for synergies between your business and their own.
The Martinkas discuss how to screen buyers appropriately. You want to sell to someone you like who is a right fit for your business. You want to act responsibly toward your employees when selling the business rather than just take the money and run. You also want to stick around to help train the owner so they can transition smoothly into managing the business after you leave. And, of course, you want to make sure the buyer has the money to do the deal rather than waste your time on a deal that is never completed.
Other sections of the book discuss the practicalities and terms you need to know. For example, a full explanation is given about the Letter of Intent to buy, a Purchase Sales Agreement, and where both fit into the sale process.
Finally, the Martinkas remind owners to be prepared for roadblocks, deal fatigue, and frustration. You have to remember the buyer is feeling just as overwhelmed as you, so you shouldn’t get frustrated if they keep asking you the same questions. Sometimes they’ll do it to ensure you give them the same answer each time. And you need to make sure you keep the business running smoothly while going through the entire process.
In addition, the book includes several appendices on such topics as rating your readiness to sell, loan data requirements, and purchase and sale agreement definitions.
Overall, Exit With Style, Grace, and More Money is the perfect book for anyone planning to sell their business in the next five years or sooner. It will tell you what you need to do and what you can expect, plus offer ideas relevant to your specific situation. Reading this book will minimize your frustration and, hopefully, increase your final profit.
For more information about John and Jessica Martinka and Exit With Style, Grace, and More Money, visit www.NokomisAdvisory.com.
— Tyler R. Tichelaar, PhD and award-winning author of The Nomad Editor: Living the Lifestyle You Want, Doing Work You Love
