456 John Martinka

Jeffrey Feldberg: [00:00:00] What if your exit strategy was more important than your business strategy? 

For over 25 years, John Martinka has helped entrepreneurs, not just build businesses, but exit them with clarity, confidence, and real financial reward.

Known as the Escape Artist. John has guided hundreds of business owners through the most emotional and misunderstood chapter of entrepreneurship: getting out. He's not a flashy VC or a startup guru. He's the guy behind the scenes helping owners transition their life's work into lasting legacy. Whether that means selling to the right buyer, preparing the next generation, or buying a business the smart way.

With three best selling books, decades of consulting, and a firm grasp on the psychology behind acquisitions and exits. John has built a reputation for asking the right questions long before most people realize they need the answers. But this conversation isn't just about the technicals [00:01:00] of buying or selling a company.

It's about identity letting go and what happens when the business you built no longer needs you. If you're a founder, an acquirer, or just someone who wants to own a business without starting one from scratch, John's perspective might just change how you think about the end. and the beginning. 

And before we start the episode, a quick word from our sponsor, Deep Wealth and the Deep Wealth Mastery Program. Here's Sanjay, a graduate of Deep Wealth Mastery, and he says, the investment I made in the Deep Wealth Mastery Program, it's a rounding error compared to the value created today and the future value I'll receive.

Or how about William, who says, and I love this, A company that's attractive to sell is also a great one to own. The Deep Wealth Mastery Program gives me the best of both worlds. 

Now speaking of growth and adding value, check out what Leon says. He says that the Deep Wealth Mastery Program changed how and who we hire. We've now begun to hire talent today that we never would have hired if it weren't for the [00:02:00] program. The talent we're hiring today is helping both increase our growth and profits and our future enterprise value. 

Man, I love that kind of feedback because it's that kind of feedback that's what gets me out of bed every day.

Deep Wealth Mastery System, it's the only system based on a nine figure deal. That was my deal. And as you know, I said, no to a seven figure offer, created a system that we now call Deep Wealth Mastery, and that's what helped myself and my business partners all welcome from a different buyer, a different offer, a nine figure deal.

So if you're interested in growing your profits, preparing for a future liquidity event, whether that's two years away or 22 years away, and if you want to optimize your post exit life, Deep Wealth Mastery is for you. Please email success at deepwealth. com. Again, that's success, S U C C E S S at deepwealth. com. We'll send you all the information about Deep Wealth Mastery, otherwise known as the Scale for Ultimate Sales System. 

That's where you want to be. You want to be with other successful business owners, entrepreneurs, and founders, just like you, who are looking to create market disruptions. [00:03:00] Whether you're a startup, whether you've been in business for three or four decades, whether you're manufacturing, whether you're high tech, SaaS, low tech, whatever the case may Come in and network with other business owners, with other businesses, just like you, because they all want to lock in their financial freedom and enjoy both success and fulfillment.

Again, that's the 90 day Deep Wealth Mastery program. It has your name on it. All you need to do is take the next step. Please send an email to success at deepwealth. com. 

Welcome to another episode of the Deep Wealth Podcast. For all you business owners, founders, entrepreneurs out there, as you're looking at the next chapter, perhaps you're gonna exit. Maybe you're raising some capital, but you're looking at your exit. What do I do?

Where do I begin? We have a very special guest today in the House of Deep Wealth, John, an absolute pleasure to have you with us. You're a fellow podcaster and author. You're an m and a advisor. I just love all those check boxes that I'm ticking as we're calling this out. But John, let me ask you this.

There is always a story behind the story, so what's your story? What got you from where you were [00:04:00] to where you are today?

John Martinka: I would say it's the serendipity is a big word in that for what I do now. It came about through a person I befriended when we were back-to-back presidents of a local rotary club and got the line something like, I've always thought you'd be good in this business. And it was, right time, right place.

I do not have a big corporation background. I think in my career. Six months is all. I worked for a huge corporation. Most of it was small business. my first real job out of college was with a, I grew up in Wisconsin, was with the major local concert promoter. So I spent a bunch of years in my twenties. Having a lot of fun. You used the word fun when we were talking before. You have to have fun. And when you're in your twenties and you're working in the entertainment concert business it was fun, but that wasn't gonna last because it's maybe some people listening to this. Can I identify? The owner was only five or six years older than [00:05:00] me and I had reached a number two position and we were in a.

Mid-market us and so something had changed and my wife and I, we moved from Wisconsin to Seattle. There were a couple kids in tow, and then it came to that serendipity point and it was the right time, right place, which I, you know, in business just talking to someone yesterday.

Jeff that a business owner, and we were talking about how when he did his, started his business and when he also took it to the next level by making a strategic shift, you can always point to one or two things and say, boy, if those hadn't have happened, so this was right time, right place.

And you can always think if I wouldn't have got that job or that client, or whatever it is, where would I be? But they put me over That top deal tipping point and it's been a fun ride.

Jeffrey Feldberg: It's so interesting. You know, John, as you're talking about this, you're taking me back. Actually, just before I got into business, I was wrapping up my MBA program and one of my mentors, actually one of my professors as well, became my mentor. He said, [00:06:00] Jeffrey, very successful guy by the way. He said, Jeffrey, I.

Given the choice. I always want to be both lucky and smart, but if you force me to choose one, I'd always be lucky. And it is interesting you have all those things out there. The harder I work, the luckier I get and everything else. But John, you talked about serendipity and let's talk about that for just a moment.

I. What are your thoughts on the serendipity and what's going on out there? I mean, so many people have different takes on it. I have my own and I'll intermingle that, but where are you on luck or serendipity? Especially as an entrepreneur and we're doing all kinds of different and unique things out there and putting ourselves out to the world and taking our chances.

John Martinka: You talk about being in the right place at the right time and luck. Sometimes you can't control that luck. But you have to have an attitude that good things are gonna happen.

 I tell clients all the time, if you do the things you're supposed to do, good things will happen. And luck is part of that. It's interesting you mention that. I was just reading an article yesterday about how Jeff [00:07:00] Bezos would always in interviews would ask people do you think you're lucky?

He felt people had to feel they had luck on their side, they could make things happen.

Jeffrey Feldberg: Yeah, and I believe it was Woody Allen. You can correct me if I'm off base. 90% of success is just showing up. And I think for me that the takeaway is we're not gonna get it right. We're gonna make so-called mistakes, really opportunities in disguise, but. If we're in market, if we're creating, if we're putting ourselves out there, getting the feedback, and we're constantly, I'll use an over word, P word pivoting from a few years back.

If we're constantly pivoting because we're out there, because we're not dreaming, we're doing, that's when the opportunities come. That's when we're ready. That's where we're positioning ourselves to be at the right time. Should that opportunity come along. Thoughts about that?

John Martinka: I think you're absolutely. I, many, many years ago at the time, a much more experienced business person that I, than I said, told me, he said, I'm good at making decisions now. If I get half the decisions right, I'm doing wonderful, but I make decisions that I don't [00:08:00] stew over things.

Jeffrey Feldberg: Yeah, absolutely. Being decisive going out there. Oh, okay. Made a mistake here, let's. Do a course correct. But we're gonna keep on going out there. Now, speaking of course, corrections. John, given your experience where you've been, what you've done very high level, and with the question I'm gonna ask, I would completely agree with you.

If you said Jeffrey, I. Everyone's journey is unique. No two people are the same. And when it comes to businesses, it's the same thing. And I hear you on that very high level though, and maybe it's a Frito's law, the 80 20 principle. Are there certain patterns that you're seeing of why, generally speaking, entrepreneurs wait far too long to plan their exit and oftentimes it's a ready, fire, aim approach.

John Martinka: the, one of the key factors is that, is there are a lot of business owners who they're very proud of what they've done and what they have. and before I get to my main thought, I'll just say I found over the years that people with a lot of what I call micro businesses, maybe doing half a million dollars a year in sales [00:09:00] to have more pride than people that are doing five 25 million.

They think what they have done is just phenomenal. Which is great. It's a great attitude. And, but that attitude that they have is that my business is the best thing since, and you could, whatever cliche, sliced bread, cold beer is like, oh, of course, whenever I wanna sell, people are gonna come rushing with those high offers and they don't realize that there are a lot of other good businesses out there.

and you have to find the right buyer, not just someone who says, I can give you the money.

Jeffrey Feldberg: Absolutely. In fact, in our nine step roadmap, step three future buyer, you're exactly spot on. As one would expect, if I had three offers and top level, they're all pretty much the same, similar numbers and everything else I. The buyer, their culture, what they're bringing to the table, they can be worlds apart and completely different and couldn't agree with you more.

We're gonna talk about that. And by the way, deep Both Nation, when you go to the [00:10:00] show notes, I want you to click on the link for John's books. He has a number of books, the most recent one, exit With Style, grace and More Money. Hey, who wouldn't want that? Creating a large exit. For your small business, click on that, buy it, go through it.

You'll be far better off coming out of it than when you went into it, but I wanna ask you that because you're spot on with that. My experience as well. So John, when we're waiting too long, because we are the business is us, and we can't get outta that. Oh, I just can't imagine my life if I didn't have the business.

How do we begin to decouple ourselves from the business? Realizing everybody has an exit at one point or another, and we've. Got to be prepared, and the sooner we can start doing that, likely the better enterprise value we're gonna have, the more success we're gonna have, and the better off the business is gonna be.

How do we start doing that though, psychologically?

John Martinka: I'll get to that. I wanna tell a quick story though. 'cause it's not just, the small business. About a year ago I went to an a CG meeting and it was a little discussion and the main panelist was the a partner in a business that sold for $70 [00:11:00] million. That's a pretty sizable business, $70 million.

And he said when they were going through the process, he and his partner realized they were way too important to the day-to-day operations. So it's not just the small business where the owner is the business. they liked what they were doing, but they had created, in this case, I would say probably a minor owner dependency.

They had enough of a staff and team, but it really comes down to let your management team take over things delegate. it is tough to delegate. in that position, I've had my daughter working with me and we've recently added a couple other people to the team, but especially with her, it's, please do this. go do it. And if you don't do it quite the way I would've done it, or you do it at the 70% level, nothing bad is gonna happen.

Jeffrey Feldberg: Absolutely and it's interesting before someone goes through our mastery program, do both mastery [00:12:00] or they're coming into the community, one of the questions that we ask them, please only answer with yes or no. No. Os or eyes, or well, let me tell you this. Does the business run without you? Even if you have a management team, a leadership team?

Does the business run without you? And John, what's interesting more times than not even with the management team, the answer is no. Because when you speak to the management team, yeah, we're on paper, the leadership team, but all the decisions still have to go through the business owner, the founder, and as entrepreneurs, to your point, we're not realizing we're giving ourselves the golden handcuffs.

And I couldn't be more with you where you're saying, Hey, even if someone does it, 70, 80% as good as us. That's all that they're doing. They're working on it all the time. It allows us to scale, to grow. And so let me ask you this, and I suppose we can flip the question on the head and maybe we'll do that.

When you look at deals where. It just blew up. It didn't work out. Or maybe even you said, Hey, thanks for coming to us. I take you to market, but no, thank you. We're gonna take a pass. Maybe here's someone else who [00:13:00] could help you with it. What would be some of the common factors that would have that kind of negative results, if we can call it that, be occurring again?

Are there some common themes or trends that you're seeing that you devise us against?

John Martinka: I'll divide that into two categories. First would be the ones where someone comes to us and we pass on representing them. And it often, it would be size too 

Jeffrey Feldberg: Mm-hmm. 

John Martinka: It could be too large, but usually it would be too small. Expectations are way off.

So if someone comes to us and says, look, my business has a million and a half dollars in profit, and I think I should sell it for, $20 million that's not gonna happen.

One, because if you're a SaaS business, it's gonna be probably a lot more. But for a, you know, a normal operating company, you're not gonna get 20 million. You're not gonna get a, 13, 14 times multiple. Of earnings. So usually it would come down to that. And then as you learn about the business you have to look out for all the traps that a buyer would be [00:14:00] looking for.

Is there customer concentration? Is there key supplier that Yeah. Well, As an example, last year we talked to a company and a few years before their, they had one supplier for their main product. With all the supply chain disruption that supplier said to them, you will buy X amount at Y price for this next year, or you don't get anything.

It took 'em from seven figures of profit to, as I recall, over half a million loss for the year.

Jeffrey Feldberg: Wow. Wow. People, it's a great skeleton. In the closet that you're mentioning, people think of buyer concentration. They often don't think of supplier concentration and what that can mean to them.

John Martinka: Yeah. So when do deals blow up? We've been really fortunate to not have that many blow up because of the prep work. We just don't take anyone. I mean, there are mainly in, call it the main street business broker world. They'll take a lot of stuff that really isn't [00:15:00] worth much. And it comes down to if you don't get good referrals, have to settle for the best of the worst. So I can only think of a couple in, other than something caused by covid and the economy shutting down five years ago. I can only think of two and one is looked really good for the last few years for their annual statements, CPA had done it as we'd started with them in February, I believe.

And we're getting monthly statements that make no sense at all. Gross margin would, one month would be negative, and next month it would be 80%. And the owner wasn't paying attention. Supply prices were going up and down. He wasn't changing his pricing. He wasn't tracking it.

it just became this is not the right time to sell it. You gotta straighten things out. The only other one I can think of was seller remorse.

Jeffrey Feldberg: And talk to us about that seller remorse because again, it is out there, it's really the last thing on someone's mind. Usually it'll be, oh, buyer's remorse, but seller's remorse. So what would you want the Deep Wealth Nation? To know even [00:16:00] before they think about going to the next step. Okay, I'm gonna have some kind of an exit.

What should they be thinking about to not have that seller's remorse?

John Martinka: that comes into the planning and the discussion, and this case it was not money, but usually one of the first questions we will ask is, have you talked to a financial advisor about if you get X dollars for your business and then you pay taxes and costs, what will that mean for you as you pursue what I call your next great adventure in life,

If that.

And then what are you going to do? What is that next great adventure? And if it's retirement, does your spouse want you around 24 7?

Jeffrey Feldberg: Yeah, a big surprise for any a business owner who in the next chapter, the post exit life, finds that out after the fact, not beforehand.

John Martinka: Yeah. And in this case, the case I'm talking about, it was really a family thing. this was in end of 2023. We brought them a 2022 valuation offer. And in, you would probably remember 2023 [00:17:00] valuation started coming down. But the private equity firm was adamant that they're gonna flip it in five years or so, and there were a couple.

Donors each had a kid and other family members in the business and it spooked them. It was like what are these young men and women gonna do if they flipped the company? And it's it's really, it's not your worry. It shouldn't be your worry because if they do a good job, they're gonna be in high demand for the next buyer.

Jeffrey Feldberg: e. Exactly. And it's such a key point, John, that you're bringing up that as business owners. Again, in our minds it's well, the world revolves around us, the business revolves around us, and even though this new owner comes in and they've written a big check, hopefully they've written a big check and is now their baby, I've gotta expect absolutely nothing, and maybe even expect the worst, that, hey, maybe day after sale they're gonna ask me to leave.

Or maybe in a few years time, to your point, they're gonna find another buyer. They're gonna get their profits out. And so I have to begin that detachment from the company knowing that, Hey, I had my [00:18:00] run. Now I'm putting it hopefully into better hands.

John Martinka: And then also realized by size of deal, as you get into larger deals and you get more what I call professional buyers, which could be a private equity of various sizes, private equity is not just one size fits all. You have the human and you have those who say, we won't buy anything with less than 5 million of EBITDA and others that will go.

Down a lot to one or two. You have family offices, you have strategic buyers, and you get into a larger deal that where they're attracted to it, they want management, which could include the owner to stay on. They're buying people more than anything and they're often, very often not operators.

Jeffrey Feldberg: Yeah. More times than I, we've had many a buyers. And they've shared with us, Jeffrey, I'd rather pay more for a company knowing that I'm investing in a company and that I'm not buying a second full-time job. I wanna know that there's gonna be a management team or a leadership team, whether that's with the owner or without the owner.

Particularly if the owner rides off into the sunset the day after [00:19:00] that, I still have a company left that is gonna get me my return on investment. It's gonna hit the target levels that we spoke about pre-closing.

John Martinka: If you're selling a company that's going to be eight figures, you should expect that you are gonna stay on for a while, and there's a really high probability you are gonna be asked to take what is called rollover equity. In other words, if you, yeah, gonna sell 80% and you're gonna roll 20% into the new venture, and You are expected to stay on for a while, and the goal is, the second bite from the apple is as larger than the first. Your 20 becomes 80 or more.

Jeffrey Feldberg: John, to your earlier point, which is so spot on when you're taking equity and maybe it's 20%, maybe it's less than that, but maybe it's double that. Maybe it's more all depending again on to your point, who the buyer is. We be. Editor know who that buyer is. And for many business owners, it's a foreign concept for them that they should be doing as much due diligence on that future buyer or investor as is being [00:20:00] done on them because that could be their financial future that's being tied up into it.

Their legacy, the company's future if they make the wrong choice. Thoughts about that?

John Martinka: I think You hit the o' nail on the head, it very seldom do sellers or the seller team do as much due diligence on the buyer as they should.

most of the time you go back to your 80 20 rule, that 80% everything is fine. They're good, they've got the background, et cetera.

The money, they treat people well, and it doesn't matter if it's an individual Buying a company or if it's a professional buyer. But there are occasions where it, it isn't what you, the seller thought it might be.

that's where relationship comes in. when speaking, I've asked a lot of audiences, what do you think that the top three things are to make, getting a deal done?

And you know the answers are typical well, the the price, the cash, et cetera. And it really isn't. The top three things are motivation. If you don't [00:21:00] have a motivated seller and a motivated buyer, you're not gonna have a deal. But especially on the seller side, then it's almost as important as relationship. when you talk about you're selling, I don't know what it was like when you're selling your nine figure exit, but if you're talking about a seven or eight figure exit, the seller has to like and trust the buyer and feel comfortable. They're taking over their baby, their legacy. I hear all the time, I want someone who will take care of my people and.

Same thing on the buyer side. They gotta feel that this is a trustworthy person because you know, does a seller, there are certain things, no matter how much due diligence you do, there are some things a seller can hide. Doesn't happen very often, but there are certain things and a lot of it isn't. I say things that are hidden are not always on purpose.

Sometimes it's just they're the unconscious competent. And I'll also say that a lot of times when things get uncovered post-sale, it's positive news more than negative news.

Jeffrey Feldberg: So interesting. And yeah, to your [00:22:00] point, trust. Trust is the currency in m and a. It's not money, it's trust. As a buyer, do I trust the seller? And obviously as a seller, do I trust the buyer? And if that's not there either no deal or perhaps lower enterprise values or. If mistakes are made along the way.

Jeffrey's been really straightforward. He's called it out before and yeah, this happened. You know what, though? I trust him. I believe him. We're gonna keep on proceeding and just move forward and we'll just chalk this one up to hey, it happens to everyone. And so trust is absolutely key. Now, speaking of this, I wanna go to your book for just a moment.

What I really appreciated about your book, because you don't hear this advice there often, and it's actually right in chapter one, so this is default Nation exit with So Grace More Money. What I loved is you talk about it being all personal and most people out there, and they're wrong when they say this.

No, Jeffrey, business is not personal. Business is business. Don't worry about it, is just focus on that. Tell Deep Nation what you really want them to know of why it's all personal and why this is so important.

John Martinka: Because if you don't handle it a personal what's [00:23:00] going on in the business isn't gonna matter. And that's where I started out with, you know, a financial advisor, what are you gonna do? Is your life in order? And then it, first of all, it has to be the analogy of owner gets up one day and says, I wanna sell in three years, I'm gonna raise the dimmer switch on my business. So it's bright and shiny, and the financials are in order, and I'm delegating. So when it comes time to sell it's ready and buyers are gonna love it.

What happens is, again, Pareto's principle, 80% will flip when they get up. Flip the switch. I've had it. I want out. I.

Jeffrey Feldberg: Yeah. All too often unfortunately, and as you're talking about that actually from mindset wise, what we should be expecting, how we should be viewing this, and really, it's not a zero sum game. It's not that, John, you win and I lose, or I win and you lose. I. Hey, we're all people and we all have our goals, our motivations.

Let's figure out a way where it's not just a win, but it's a win-win, win for all stakeholders.

John Martinka: Yeah, and you talked about the importance of the [00:24:00] buyer in a relationship. I have seen many deals where there were multiple offers and the highest offer did not get the deal. In fact I've heard it twice in the last week. Someone, a buyer told me someone else got it. They said it was a better fit.

And I talked to a past client yesterday. He just did a bolt on acquisition for his main business, and he said I was the lowest of multiple offers and I got it.

He was the right person.

Jeffrey Feldberg: but from the outside looking in, I'm sure people are saying, what? That's crazy. I'm just gonna go for the highest number. Until you get into it. And at Deep Wealth, we call them the no fly zone. So what absolutely must not be in the deal. Otherwise, I'm walking away from the table or deal points, what absolutely has to be in the deal.

Because if it's not there, I'm also gonna be walking away. And to your point, and to preparation, which is why we say preparation is the gift that keeps on giving. Before I ever speak to someone like yourself, John, who's gonna take me to market? Coming to you and saying, okay, here are my deal points. [00:25:00] Here are my no fly zones.

It just brings a level of clarity that we can begin to weed out potential kinds of investors or buyers. It is just not gonna be a fit. And yeah, sometimes it means we're signing on the dotted line where it's the best fit, but not necessarily top dollar.

John Martinka: That's right. And have to know that we have a client right now and two owners, and they say, very pointedly ask them, by the way what if the buyer says to you, We're gonna need you for three months and we'll be fine. Oh that's okay. We're good. What if they ask you to save for a year or a little more?

We'll do it for 'em. We want the business to be successful, but we're not staying much more than a year and it's not gonna be full time. So there's your line in the sand.

Jeffrey Feldberg: Yeah, having that clarity right into that, and I wanna go back to the book for a moment because you had me chuckling and I loved how you did this, so. I'm going to chapter two for just a moment, and it's not just the numbers you're saying. Well, Jeffrey, it's not just the numbers. You finish saying that then, okay, I've bought into that, and then bam, chapter three.

Maybe it is the numbers. So again, [00:26:00] for someone who hasn't been through this, you're speaking to Default Nation now. Let's talk about the numbers of why it is not just the numbers and why. Maybe it is just the numbers.

John Martinka: We've talked about some of the things, why it's not the numbers. Your customers do have diversity or concentration. How are you pricing those customers? I have a future client. I've known him almost 20 years. His latest venture has been taking off. He has said, when I'm ready to sell, I'm working with you.

But I'm having too much fun right

He has a top client that is pretty, like 20%, but to get that top client, he has very low margins. my goal is to get rid of that client, 'cause I won't lose that much in gross margin. so that comes into it, not just diversity. We talked about suppliers.

What about the landlord? That is a key issue if the landlord will not give an appropriate lease or an appropriate rate. Or, it could be the fair market rate, but the seller's [00:27:00] been on a long lease and is way under market

and it's expensive to move. You got your employees that comes into it.

And these days it's also what about the it. Is your it up the snuff or are you subject to, crashes and hacking and everything else? I missed one deal that fell apart. It was actually during covid and our client dealt with sensitive information, financial information on people.

Their managed service provider got hacked, which tells you they weren't worth a very good MSP.

The MSPs getting hacked, led to all of their clients' access. They got access to our client. It was a mess. There were lawsuits. It cost them $500,000 to fix it and as all the government fines.

Jeffrey Feldberg: Wow.

John Martinka: so all that comes into, it's maybe not the numbers, but all of that is reflected in the numbers. And that's where having good financial [00:28:00] systems so you therefore have accurate financial statements is really important. The tendency with too many owners is they blend a personal and business checkbook,

And then they say well, that's really not a business expense.

Okay, so you've been cheating the IRS and we're not talking about a lunch or a coffee or something like that. We're talking about. I ride off the car even though I just commute things like that. 

Jeffrey Feldberg: As you're talking about that, you're taking me to our step forward due diligence and specifically. EBITDA adjustments to your point where as an entrepreneur, I have lifestyle investments. Earlier John, you said maybe the landlord, you have a lease that's too low. Maybe I am a landlord.

Maybe there's not even a lease. And I'm doing that because I want to show increased profits. I know I'm gonna have an exit at one point, and perhaps I have some family members that I'm putting through the business and other kinds of things. But I don't do the work and I don't have that off the books for a good two, three years before the liquidity event.

So yes, I'm paying higher taxes, but when I do show [00:29:00] up to the liquidity event, it's not take me up my word. We don't really need all that inventory that we have on hand. That was just because I'm a worrier and I have two belts into suspenders. Believe me, we don't really need that. The business is just fine without that, and most buyers are gonna say.

Hey, I'm not buying that. I'm gonna take this number as is, and hey, you ran the business for all these years with it. So off we go. Or, Hey, Jeffrey, your lease is way undervalued. I'm gonna have to put a penalty on your enterprise value. I've gotta go to market. I've gotta now look to move and get a lease. Or, Hey, you don't have a President's payroll on here.

I'm gonna have to add that in. There goes enterprise value. Would love some of your thoughts on the EBITDA adjustments.

John Martinka: First one is you see a lot of specialty in the market, a little lower size than we like to work in, is they add back the owner's comp and they say well, that's a discretionary item. They don't have to take a salary. And say they're an investor and they hire someone, they are gonna have that salary, so why wouldn't they get it themselves?

And then I have never ever seen a bank or a [00:30:00] legitimate business appraiser and emphasize legitimate not put in a fair market salary for the job of running the company. They always do. So I've seen banks that will. Say to a buyer, especially an individual buyer, they wanna see their personal statements and say, look, E, you say you can take a salary of a hundred thousand, but your lifestyle says you need a 175.

We don't want you going into personal debt when you owe us money.

Jeffrey Feldberg: Yeah.

John Martinka: And those things come up in that, smaller deals, unfortunately, even as you get to larger deals, there is that blending of the business and personal checkbook. We like clients where we don't have to do any of those add-backs and maybe adjust to market.

That one where the owners take, they take big bonuses. Let's see. So they're both making. 300 some thousand dollars a year working part-time. We adjusted to market for what a one company president slash CEO o would be [00:31:00] making. That's a fair adjustment. Now, it would flip the other side if they're an S corporation and they said, I'm taking a salary of 75, but it would cost me 200 to hire someone.

You gotta deduct 125 from profit.

Jeffrey Feldberg: Yeah. And from the EPI adjustments. I wanna go to something else that you said in the book that it's so easy to overlook and buyers know this, and not all buyers, I'm painting with a very broad brush or not all buyers are malevolent and they have these negative intentions, although some are, one tactic though that buyers will use is they'll put an offer in front of the business owners that has a lot of zeros, and we stop thinking logically.

We get excited, we get caught up. Our ego, our pride, all gets caught up in there, but I love how you put it together. It is not a deal until the lawyers are done and hopefully, John, we're taking a big assumption here because too often I'll hear entrepreneurs say you know what? I'll just use my regular business lawyer.

They've never done an m and a deal before, but they know the business. They're a lawyer. How different can it be? It's worlds apart. What do you want the Deep Health [00:32:00] Nation to know of why? And hoffer's not done until the lawyers say it's actually done. And I'm gonna preface that by saying it's an m and a lawyer, the right kind of m and a lawyer who's got the experience and who's been in the trenches that knows what he or she's doing.

John Martinka: That's a really key point. It has to be a lawyer that is good at m and a deals, but for that, for your business' size. So the lawyer who is used to doing deals in the six figure range is not the right lawyer if you're selling for 15, $20 million and the lawyer who at one of the big firms who's doing.

Mid nine figure deals and some of them will work on one, maybe two deals a year. 'cause they're so complicated is not for your 15, $20 million deal. I think back many years and a buyer's attorney was with a big firm. It wasn't that big a deal sent over 50 some page purchase and sale agreement.

And. The seller attorney said, we're not even gonna read it. [00:33:00] We'll draft one.

Jeffrey Feldberg: it's all contextual. You don't wanna be the small fish in the big pond. You don't wanna be that big fish in the small pond. You want that goldilock scenario where you're just right in the middle of that firm's sweet spot. So it's something that they're doing all the time. They're very familiar with it.

To your point. A nine figure deal, a high nine figure deal is gonna be a very different purchase and sale agreement than a seven figure deal.

John Martinka: That's right, and that's part of my job. Is to guide the client to make sure they have the right attorney. we've had clients in 15, 20 states, so I don't know attorneys in all markets, but I know how to screen 'em. We know how to screen them. But if it's something where like in here in the Pacific Northwest, Seattle, Portland, et cetera, we know the, a lot of attorneys that are appropriate for different size deals.

Jeffrey Feldberg: In speaking of the advisory team, actually step six in our nine step roadmap. Step six is the advisory team. John, what are your thoughts of how do I know I have the right advisor? It may be someone like yourself on the investment [00:34:00] banking side. It might be an m and a lawyer. I. It could be perhaps a CFO, an M and a CFO.

How do I know it's the right advisor? What would be some telltale signs?

John Martinka: One thing, we go back to a buyer and seller and a relationship and the trust and talking. Someone who talks competence and. And isn't pushy if someone's pushing to do something, is that they're desperate for work. if you or I were to pick up the phone and start calling business owners and say, Hey, we can help you grow, they're gonna say, if they have to make cold calls, how good can they be? So a lot of it comes from the, you know, the platinum standard of a referral, or in my case, maybe a book that adds to it. It's rarely one thing, it's, I get a referral, I give them a copy of my book. They read it or even skim it. They say, okay, this guy knows what he's doing.

I get along with him, we hit it off.

He talks sense. I was meeting with someone yesterday and, you know, it's I would say things and say, I don't know enough about your [00:35:00] company, but I would guess that it, this might be the right answer, but we can confirm that. So I'm not just going out and saying, oh, look at this.

This is the way it's gonna be.

Jeffrey Feldberg: Sure. It's so true actually in that kind of situation. John, one of the litmus tests that we suggest, it's a quick thought experiment, and so imagine with this particular advisor, you're on a plane ride, you're taking some kind of a business trip together, and you're on the tarmac, you're about to take off.

Plane stops. Pilot comes on over the PA system. Ladies and gentlemen, we have a mechanical issue. We're not able to get back to the gate and it's just busy in the airport. We have to stay out here. They're flying apart in, but it's gonna be seven, eight hours that you're gonna be on this plane and you're looking at the person next to you at the end of the seven, eight hours.

Are you crawling outta your skin after the first five minutes? I can't take it. Get me outta here, or did the time go by? You know, It was a long time, but it wasn't so bad. I enjoyed speaking with that person because. Chemistry, it's absolutely everything. You've gotta trust me, I need to trust you, but we need to have that chemistry.

You [00:36:00] could be the best advisor in your area in the world, but it may not be the best advisor for me just because we have a different chemistry of what's going on. Nothing personal on other side. It just is what it is. That's about that.

John Martinka: Other than you're a hundred percent right. And it's not just in something like this. My CPA retired a few years ago, and the people who took over his practice, we just weren't clicking and I stopped using them.

It's not just in the buy sell world, it's in everything.

If you're looking to buy a car and you go to three dealerships and you say, I really like that car. But I'm not doing business with that sales person. You may go to another dealership for that brand you will go to, not maybe I.

Jeffrey Feldberg: Absolutely. So true. Chemistry is absolutely everything. And again, deep Old Nation. Go to the show notes, click on the link, pick up, not just the recent book, exit with Style Grace somewhere might even pick up all the books. There's so much wisdom, battle tested wisdom that's in there. John, let me ask you this before we go into [00:37:00] wrap up mode.

There are so many questions that I have not yet had a chance to ask. That said, is there one question you want to address that I haven't yet asked, or perhaps a topic or a theme that we haven't discussed that you want to get out to the Depa Nation?

John Martinka: Yeah, it is easy to question that, that I rarely get asked. it doesn't have to do with the business. It's other parts of life. So I'm a big believer in when you give back that you benefit as much as the people you are giving to and, on my normal Zoom background, I know we're doing audio only here.

I have a background of a picture in the Caribbean and from the country of Antigua. 'cause we go there every year working in the schools. In couple weeks, in February, we take local students in a tech program and through my rotary club and different grants that we get. we have over the years have donated over 10,000 Computers, mostly laptops lately, and we've set up wifi networks in five dozen schools. And not only do our students [00:38:00] get a trip of a lifetime and learn a different culture and stay with host families, but we benefit the students down there that's a big part of life. And if all you do is focus on your business yourself you're missing something.

Jeffrey Feldberg: I couldn't agree more. And it's so interesting, John, there is that saying that oftentimes the giver will get more back than the receiver. So if I'm helping somebody, what that does for my mindset, for my mental health, it gives me a new magic moment, a different experience, as opposed to just staying in my lane, doing nothing else, growing the business and focusing on other things as opposed to, hey.

How do I pay it forward? How do I help other people in a way that's meaningful to them and in a way that's very meaningful to me?

John Martinka: You're right on that. for many years taught a class about two or three times a year at the local SBA office on growing an advisory business. And I always would have my notebook open, and as I went through what I was teaching, I would write down, I better do this again. I better start on that again.

I'm telling them to do it.

Jeffrey Feldberg: Yeah it's so much. And obviously when you're doing it, in this case, when you're teaching it, you have to [00:39:00] know it and it just brings a whole fresh perspective. And what's interesting, John, one of the things in our nine step roadmap, it's actually step 10. We make it step zero, and that's the post exit life.

So you're no longer with the business. You have hopefully a lot more zeros in the bank and also a lot more time. What are you doing to give back? What are you doing for your legacy that's gonna make a positive difference that you now can in a way perhaps that you couldn't before? Because you have more resources, you have more time, you have more freedom to be able to make a difference.

Thoughts about that?

John Martinka: I think that for most of us, unless we're in the the Bill Gates or Jeff Bezos and built something absolutely incredible, people are gonna remember you more for what you did for others than, oh, this person had a nice business and they sold it.

Jeffrey Feldberg: Yeah. So true. People remember Maya Angelou, I believe, who said people remember how we made them feel, not what we said, and so much truth of that, both in business and on the personal side of life. I. John, let me ask you this. We're [00:40:00] gonna be going into wrap up mode here, and it's a tradition here on the Deep Wealth podcast where it's really my privilege, my honor, to ask the same question to every guest.

So from one fellow podcast host to another podcast, a host. Here's the question for you. It's a really fun one. Let me set this up for you. When you think of the movie Back to the Future, you have that magical DeLorean car that will take you to any point in time. So John, I want you to imagine now, it's tomorrow morning.

You look outside your window, not only do you see the DeLorean car curbside, the door is open, is waiting for you to hop on in which you do, and you're now gonna go to any point in your life, John, as a young child, a teenager, whatever point in time it would be. What are you telling your younger self in terms of life lessons or life wisdom or, Hey John, do this, but don't do that.

What would that sound like?

John Martinka: Guess there's a lot of focal points there, but I'll go back since I, I really like what I'm doing now and especially having brought my daughter in to work with me is be, go back when I started [00:41:00] into this business and my friend who got me into it has a much different style than I have. And I thought I had to emulate his style and I would've gone back and said, never do that.

That's not you. Just. Do things your way and it'll work better. That would be the one thing. You have to be yourself.

Jeffrey Feldberg: It is such timely advice. Be yourself, particularly today with social media. Don't get me on my social media soapbox here of being told what to do and how to do it and trying to emulate everyone else, and we're seeing one picture out of a hundred thousand pictures for that one day and is perfectly curated.

I love it. Be yourself. Take your gift to the world. On the side note, John, how is it working with your daughter? What's that like? So to the entrepreneurial community, otherwise known as default nation, that they're thinking about bringing a family member into the business. Thoughts on that? Anything that you can share?

John Martinka: Be ready. Be patient. when it, this came about, it was also sort of [00:42:00] serendipity. where she was working got sold and she said to me, I realized I would, the person that came in, I was training to do my job. She was doing a job search and I would subcontract out some basic work, not what we do with clients, some back office stuff.

And I said why don't you come and work for me? You can do this. You've done some of it for me before, but it's more than that. You're gonna have to get out in the community and do some biz dev.

I made her talk to eight or 10 people who in the advisory world. Who had to eat what they killed

And get a feeling, what's it like to go out there and network and meet people and build a relationship. And then the covid hit. And of course that set her back quite a bit on that part of it. But it's, again, it's being patient and not just 'cause it's a family member. Don't expect too much or too little. You gotta be able to hold a family member's feet to the fire just like you would anyone else.

And you have to be patient with them just like you would anyone [00:43:00] else

Jeffrey Feldberg: Some words to the whys. And speaking of words to the whys, John, before we wrap things up, someone in Depa Nation, they want to speak with you. They have a question. Perhaps they want you to take them to market. Where would be the best place online to find you?

John Martinka: go to. Our website, KOAs advisory.com, N-O-K-O-M-I-S advisory.com. There's a contact form fill it out. And if you put in that this came from the Deep Wealth Podcast I'll send you a complimentary copy of our book, exit Risk Style, grace, and More Money, or any of the other books that I have if you mentioned it.

Jeffrey Feldberg: Love it. Absolutely love that. John in Deep Wealth Nation, why not have that conversation? See what's there. Go through John's books. Be the better for that. And that said, John, it's official. Congratulations. This is a wrap. And as we love to say here at Deep Wealth, may you continue to thrive and prosper while you're being healthy and safe.

Thank you so much.

John Martinka: Yeah. Thank you. All the best. 

Jeffrey Feldberg: So there you have it, Deep Wealth Nation. What did you think? 

So with all that said and as we wrap it up, I have [00:44:00] another question for you.

Actually, it's more of a personal favor. 

Did you find this episode helpful? 

Have you found other episodes of the Deep Wealth Podcast empowering and a game changer for your journey? 

And if you said yes, and I really hope you did, I have a small but really meaningful way that you can actually help us out and keep these episodes coming to you.

Are you ready for it? 

The dramatic pause. I'll just wait a moment. Drumroll, please. Subscribe. Please subscribe to the Deep Wealth podcast on your favorite podcast channel. When you subscribe to the Deep Wealth Podcast, you're saving yourself time. Every episode automatically comes to you, and I want you to know that we meticulously craft Every one of our episodes to have impactful strategies, stories, expert insights that are designed to help you grow your profits, increase the value of your business, and yes, even optimize your post exit life and your life right now, whatever you want that to look like.

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So all that said. Thank you so much for listening. And remember your wealth isn't just about the money in the bank. It's about the depth of your journey and the impact that you're creating. So let's continue this journey together. And from the bottom of my heart, thank you so much for listening to this episode.

And as we love to say here at Deep Wealth, may you continue to thrive and prosper while you remain healthy and [00:46:00] safe. 

Thank you so much. 

God bless.