Scaling With People
Tired of spinning your startup wheels but never gaining traction? Buckle up, founders and CEOs, because this podcast is your rocket fuel to profitability! Every week, we ignite explosive conversations with bold-faced founders, brainy experts, and even a few out-of-this-world vendors. Get ready to crack the code on growth, master employee engagement, and blast through your scaling goals. We’re talking real-world strategies, actionable tips, and perspectives that’ll make your business do a cosmic dance. So, strap in and prepare for lift-off!
Scaling With People
People Power To Enterprise Value with John Martinka
Buyers don’t pay top dollar for a founder’s heroics; they pay for a business that runs without the founder. We sit down with M&A advisor John Martinka to map the moves that turn people power into enterprise value, from reducing owner dependency to proving that your management team and systems deliver results without you. If you’ve ever wondered when to start planning an exit, how to treat addbacks, or what actually spooks a lender, this conversation is your field guide.
John explains why clean, believable financials are worth far more than the taxes you think you’re saving, and how sloppy addbacks quietly shave six figures off your outcome. We go deep on the HR and compliance traps—especially contractor misclassification and state-specific rules—that can crater a deal late in diligence. Then we dig into the real engine of valuation: people. Learn how to build redundancy, design retention bonuses that keep key talent through integration, and communicate culture so employees trust the transition instead of fearing it.
We also lay out the biggest value drags—coasting on past wins, customer or supplier concentration, and penny-wise decisions that starve growth—and offer practical fixes you can deploy this quarter. Whether you’ll sell to an outside buyer, a team, or family, the same principle holds: good businesses let sellers control the deal. Get the playbook to turn an exit into a legacy, not just a liquidity event.
Subscribe for more unfiltered strategies, share with someone building something big, and leave a quick review with your top takeaway. Mention this podcast at Nokomasadvisory.com for a free e-copy of Exit Risk Style, Grace and More Money.
Welcome to Skilling with People, your weekly playbook for turning chaos into compounding growth. Each week we go under the hood with battle test experts in all areas of business, from marketing to sales, operating and finance and people, plus product and leadership to unpack the plays, numbers, and systems that turn chaos into compounding growth. Learn straight from founders and experts who've done it and continue to do it successfully. There's zero plus, just news that you can still immediately. This podcast is brought to you by Guide to HR. Human expertise, AI-powered impact. Welcome everyone to today's Skilling with People podcast. I'm Gwynnivre Cruiry, your host and founder to Guide to HR. Today we're going to be talking about turning people power into enterprise value. We have John Martinka here today. He's a go-to advisor for owners readying the big finish. And today we're going to be talking about how to increase your company's value before you ever see a term sheet. Choose the smartest exit, smell succession or something spicier, and prove why your people are the asset buyers actually pay for. So buckle up. This is how you turn an exit into a legacy. Super excited to have you, John. Welcome to the podcast. Tell the audience a little bit about yourself.
SPEAKER_02:Yeah, well, great to be here. I love your energy. So yeah, let me tell you a little bit of a background. Um, so I am in, or I see my company is in the what's called the lower middle market MA space, buying and selling of businesses, helping companies get ready for that exit. Uh my background is is pretty varied. Uh, I'll just share my first real job out of college. I grew up in the Midwest, was with the local concert promoter for five or six years.
SPEAKER_01:Oh, fun.
SPEAKER_02:And one here's what I learned that helps me with what I'm doing now. Every concert, whether it's for 500 people or 50,000 people, is a project. And every project has a checklist. And you learn to live by checklists. And that really helps me with our clients at this at this time. Uh, so we work with companies that you know are at some point they're gonna sell, either voluntarily or involuntarily, and you want to do it on your terms, and it's the and the title of my latest book, which my daughter who works with me co-authored is Exit with Style, Grace, and More Money.
SPEAKER_00:I love it. That's a great title. Yeah, so I have listeners that are in every level or uh section of building their care their business, right? From just starting their the only person to someone who may be 200 plus employees deep and maybe serious C or D or something similar to that. When should a founder start thinking about what that exit looks like?
SPEAKER_02:You know, I hear people say, well, they should start thinking of it when they start their business. And that that sounds good, but it's not it's not real at all. When you're starting a business or when you've got five employees and you want to grow, you are doing more uh in the business than the old on the business. And and in small business, it is rare, very rare, for an owner to only work on the business. They're always getting involved in something. And uh, and and it as it should be. But when an owner gets to the point that they've got enough people to handle the majority of the day-to-day tasks without the owners being looking over their shoulder, uh, that's when it's time to think about it. And and you say, Well, I'm 45 years old. I don't want to think about exiting. I love my business. You know, I got many years to go. Uh, you could be like a friend of mine who sold his uh he was third generation family business. He got the offer he couldn't refuse.
SPEAKER_00:Yeah. And then did he go off and do something else because he wasn't quite ready to go into retirement land, or did he invent earnings?
SPEAKER_02:It he wasn't ready for retirement, so he does some consulting, he does a lot of nonprofit work, that kind of thing. And that offer is different for everybody. So if you know if you're getting, you know, you're 45 years old and you're getting an offer of five million, it's not gonna carry you, you're gonna have to go do something else.
SPEAKER_01:Yeah, yeah, absolutely.
SPEAKER_02:But if it's if it's significantly higher, yeah, it may be time to say, you know, I can just uh step back for a while. So yeah, when you're at that point where you're not involved in the day-to-day too much, which is what buyers want.
SPEAKER_00:Yeah, right. Because if you're trying to sell your business and your business is successful on you, then no one's gonna want to buy that because if you want to exit out of the business, the business isn't gonna continue to succeed if you're not there.
SPEAKER_02:Yes, you're right. And it's I I will tell you of all the podcasts I've been on, the guests I've had, you know, we always comes up near the top of the list is owner dependency is a big red flag.
SPEAKER_00:Yeah, absolutely. Yeah, because you want to be able to buy something that you can go and scale and grow. And if you can't do that without the owner, then what's the point?
SPEAKER_02:That's right.
SPEAKER_00:Yeah. So as maybe some of the listeners are thinking, yeah, I'm kind of getting close to there. I've been able to kind of, you know, shift some work over here and over there, and I'm doing more of like working on the business and in the business. Maybe it should be time I start thinking about what this looks like, or at least have a good, maybe, roadmap or framework to think about as maybe potential offers start coming in. What's like one of the first or two things that they should be thinking about and preparing for such an exit?
SPEAKER_02:Well, we just talked about one, and that it ties to uh build a management team and increase their uh important duties. So it the the lar and the larger the business gets, the more the buyer is going to really want a management team. Uh and you you mentioned it. If if it's if it's the owner, and you know, we call it personal goodwill, they want company goodwill. They want the they want the company to be running without them as much as possible. So that's that's one of the top ones. Another one is have really good financial systems so you have accurate financial statements and don't play games with them. I have a I have a sheet on my computer, and I you know, I hear all these owners all the time, well, I, you know, I I it says I made X dollars, but I really made$100,000 more because I wrote off personal expenses through the business. And it, you know, it if you think of this business is going to sell for four, five, six times their profit, that$100,000 is four to six hundred thousand, they may not get. And if even if the bank says we'll allow half of those, that's two to what two to three hundred thousand uh dollars to save thirty-some thousand dollars in federal tax.
SPEAKER_00:Yeah, that can really hurt. So how if if they're doing that right now, how far back or how far in the future, stop right now, and then don't look to try to sell until what a year, two years, five years later?
unknown:Yeah.
SPEAKER_00:I know many business owners do exactly what you just said, including myself.
SPEAKER_02:Yeah. If you have to sell, it's different. If you there's a catastrophic of the catastrophic event, you're you're stuck, which is why you should do these things to make it as attractive as possible to a buyer at all times. Okay, because you don't know what's going to happen. I mentioned before an offer that you can't refuse. But what, yeah, there are catastrophic events also, you know, divorce, death, disability, you know, uh serious health issues, maybe not disabling, but uh that will affect the owner or the owner's family. And you gotta be, you have to be ready. So, you know, have those accurate statements, reduce the owner's role. Uh, and you know, you're in the people business, you know, and one of the things you know, I say is hire and retain great people, not just employees, advisors also have good advisors in you.
SPEAKER_00:Absolutely, and advisors can come in all different shapes and sizes, right? And so it depends on the need of the business, but definitely advisors can be your best tool in your tool belt.
SPEAKER_02:Yeah. I mean, we the obvious ones are the accountant and the attorney, but someone like your firm, uh, there are so many HR traps.
SPEAKER_00:Oh, yeah. Especially if you're talking about payroll, which may or may not fall under finance, but yeah, taxes and payroll compliances.
SPEAKER_02:Yeah, I recommend payroll services. Uh it there's just so many uh little things. And you know, you mentioned before we we were recording about having clients in California. California is the biggest trap, has the most traps of all.
SPEAKER_00:Yes, absolutely. I mean, I was just talking to a franchise owner and uh they wanted to 1099, they're California people, and I was like, no, no, you can't. You can't do that in California anymore. And there's so many laws now where, oh, well, I only have like 10 people, I don't need to worry until I'm at 50. No, no, you have to worry at five or even one, depending on what the situation is.
SPEAKER_02:Oh, you do, and you know, but they they look at it and they say, well, well, I won't have to pay their FICA in Medicare Unemployment, L and I, et cetera, et cetera, et cetera. I mean, I go back a number of years and was talking to an owner, and he he he had a cleaning business, but it was not you know cleaning offices or houses. It was clean, it was cleaning, it was clean rooms, mainly hospitals. Yeah, very high-end. Yeah, all his people were contractors. The state had come in and told him, no, they're employees. And he's are you know, he's saying, no, I think they're contractors, even though he had a judgment for six figures against him, he didn't want to change. Because I'm I'm guessing he had to raise his rates to cover all those tax burdens and that maybe make him not as competitive.
SPEAKER_00:Yeah, yeah, for sure. Yeah, you really have to think about that and have that be part of your strategy as you grow your business and uh beyond, right?
SPEAKER_01:Yeah.
SPEAKER_00:Yeah. So what are some of the options? Like, I mean, when I think about exit, it's like, okay, I sell, I get some money, I go off and either you know enjoy the rest of my life, or maybe I I do something else, maybe I do nonprofit work, whatever it might be. But um, what are what are some options when exiting a business?
SPEAKER_02:Well, you listed some of them. You can if someone could uh take a sabbatical, start or buy another business, retire, uh do advisory work, uh you know, it just depends on their financial situation. Yeah, you take someone who's you know at what we consider retirement age, which seems to be ever increasing. Yes, and they say this is enough money that I don't have to work anymore. And my financial and by the way, in the first chapter of our book, we say, before you're gonna sell, think of selling your business, contact your financial advisor. You know, is this gonna be enough for what you want to do? We call it the next great adventure in life, which could be retirement and playing golf or going to the beach, or it could be go get being an employee or whatever.
SPEAKER_00:Yeah, and it all depends. Like you, we you and I could get the same offer, but it depends on what our debt, current debt is. Like maybe I have a higher mortgage, more amount in my house, maybe I've had my house sold off. And so I think it also depends on where you are financially and your commitments that you have, too.
SPEAKER_02:Yeah, it's personal tied to business, and yeah, you got to deal with the personal stuff, like financial advice, deal with a financial advisor, know why you're selling, be able to articulate it. If you look at there's a lot of businesses for sale, usually smaller ones, and what's the answer? Oh, they want to pursue other interests, and buyers go, that's baloney. What's going on behind the scenes that we don't know about?
SPEAKER_00:Yeah, yeah. What are they what is the fire that they've been damping that is gonna be a blow up in my face when I buy it? Yeah. Are there other are there opportunities where a founder could sell their business but stay in it? And if so, what does that look like from your perspective?
SPEAKER_02:Uh it's a tricky one because it can it can it can be the worst thing that could ever happen at a business or the absolute best thing. And I'll give you a couple of examples. I can think of two I know of where the uh seller stayed on to do sales, and in both cases, the seller just couldn't handle not being the one in charge. Oh yeah, they can they can sour the culture very quickly and re and and it's all it takes is little comments like, well, I never did it that way. Does he know what he's doing? No, on the flip side, my good friend Rick bought a company about a dozen years ago, and the seller, you know, sleepy little companies, making money, not much, doing about five million in sales. And the seller did not like running a business. He loves selling. Yeah, Rick kept him on. He, I think he stayed three or four years, became the top salesperson, and then then did his retirement, and it was win-win. So you have to be really careful with with that when it's long term.
SPEAKER_00:Yeah, for sure. Yeah, yeah. So why um why are people a business's number one asset? I mean, obviously, as an uh people operations representative, I know, but like just curious from your perspective, when you're looking to exit and sell your business, why are the people your number one asset?
SPEAKER_02:You know, a lot of people wouldn't think that because you don't see people on the balance sheet.
SPEAKER_00:Right. You might see that really big, large expense line item called payroll, though.
SPEAKER_02:Not the balance sheet, not where you have machines and equipment and furniture and computers and cash and receivables and all that. Uh I'll I'll give you a I'll give you an example that I think will prove the point. Uh seller of a small business did not want the buyer talking to the key people before the deal closed.
SPEAKER_00:Ooh, that's a red flag. Yeah.
SPEAKER_02:Well, they sat down, buyer looked him in the eye and said, You may think I'm buying your business. I'm really buying your people. He got to talk to him, he got the deal closed, he did very well. But you are buying at just about every level, you are buying people. And there's a I use a three-legged stool that the uh top is employees stay, and each leg is the employees, the seller, and the buyer. And this the employees are worried the buyer's gonna fire them. The seller's worried is key people is always people are gonna lose their jobs, and the buyer's worried they're gonna leave. They all want the same thing that employees stay. They're all fearful of the other.
SPEAKER_00:Yeah, yeah. So, how do you see successful buyers with that transition, the communication and and squashing that fear for the current employees to keep the employees whom you're really kind of buying um around to keep the business going?
SPEAKER_02:You know, that's a it's really it's a really good question. And it, you know, and in in the size deals we work on in the lower middle market, but even in even above, I mean, uh had lunch with uh a friend in my industry a couple weeks ago, and we were talking about relationships. And he said, yeah, even at a$50 million deal, it's do it's relationship driven. Do the buyer and seller like each other, trust each other? Can they get a handle on the culture? Uh and then when the buyer meets the key people or all the people, you know, it's just letting them know everything stays the same.
SPEAKER_00:Yeah.
SPEAKER_02:Yeah. Uh you know, do people really trust that?
SPEAKER_00:Do people really trust that?
SPEAKER_02:Yeah, I think they do because people work for small businesses for a reason. And the reason is, you know, they often could go to a large company and make more money and just be a uh you know, a number in the HR department.
SPEAKER_01:Yeah.
SPEAKER_02:But they don't might not have the flexibility, they might not have the uh opportunity for their ideas to be heard and acted upon.
SPEAKER_00:Yeah, yeah. Do you ever see um businesses or buyers, I should say, put in like a structure like a state bonus or retention plan? And so have you seen it work or oh yeah, not feel like not needed?
SPEAKER_02:I'm thinking over the last year and a half, one, two, three, three or four deals we worked on, the the seller set aside money and said, You you you stay for I and all of them were at least a year. One was payments after one, two, and three years.
SPEAKER_01:Oh nice.
SPEAKER_02:And the others were you know, something after stay a year, you know, and you'll get this retention bonus that came from the buyer, but with the seller's money.
SPEAKER_00:Yeah, yeah. That's really nice. Do you ever see like um like how you can mean like what is your playbook or what you've seen a playbook look like in regards to capturing that tribal knowledge before the diligence um starts?
SPEAKER_02:Well, that that really is what due diligence is.
SPEAKER_01:Yeah.
SPEAKER_02:Is finding those things.
SPEAKER_01:Yeah.
SPEAKER_02:Before before it closes, yeah, you want you want to get a a buyer wants to get a handle on everything. Are the numbers accurate? Are the comp are the customers happy? Are the employees happy? Are they productive? Uh you know, I you know, there's all I mean, there's many different examples of uh of this, and I'm I can think of a couple right off the top of my head that we're we had a long client we did a number of projects for, and one of them was to he was approached to buy someone in his industry, smaller business. And he's uh he subbed out a job to them. And it was, let's just say it was due at the end of business on Tuesday. And he went there, he says, Okay, uh I'm here to pick up my work. This is a uh machine shop. And and the owner of the other company says, Well, we didn't get to it today. And every, you know, everyone took off at uh 3 30 like they normally do. And he said, I'm not buying that company. Their culture is not one of meeting deadlines. He said, I have to, I have to, I said I would ship on Wednesday. I'm gonna have people work overtime tonight to get it out. Yeah, and it killed the guy, it killed the guy's opportunity to uh have a nice sale of his business.
SPEAKER_00:Yeah, wow, that's crazy. So um what do you see is regards to like sellers and and buyers taking action on regards to reducing key person risk and making sure that the business is viable without you the the the seller, the founder owner?
SPEAKER_02:Well it's Redundancy. It's having multiple it's getting to the point where you have multiple people that can do things, input especially important things. And it's just, you know, it's the same as a machine. You know, if if you have a small business and you have uh five machines in your shop and one machine goes down, you're probably stuck for a while. If you had a big company that has 500 machines and one goes down, it's like a big deal.
SPEAKER_01:Yeah.
SPEAKER_02:So it's the same with people. I mean, you want to have enough people that they can cover for each other. If one person uh well, one person gets you know gets sick or gets in a car accident, that things don't fall apart. And that's the maturity level and the size of the business that allows them to have that redundancy.
SPEAKER_00:Yeah.
SPEAKER_02:As well as making sure people can do up multiple jobs.
SPEAKER_00:Yeah. So I got one last question to ask you, kind of going back to the away from the people side and back to the business and readiness. What have you seen as being like one of the value drags of the business that people could start thinking about getting rid of now or repurposing or restructuring to make their business more viable?
SPEAKER_02:Well, I would say I can give you three quick ones. Uh, one is being very happy with where you are and not growing.
SPEAKER_00:Oh, yes.
SPEAKER_02:And and that means you're coasting. And you know, you can only coast downhill.
SPEAKER_00:So yes, that's very true. I never heard it that way, but that's so true.
SPEAKER_02:Yeah. And so you see these businesses where the owner just says, I'm happy making whatever I'm making. It could be a little money, a lot of money, and they don't, and the employees are gonna get bored and say, I want career advancement, so I'm gonna go somewhere else. So grow is one. Uh, pay attention to all your dependencies. Don't have a key customer at 60% of your sales. Don't be tied to one supplier, uh, you know, even a key employee. We talked about redundancy. There's only one person and do certain important things. Uh you know, make sure that's a bad thing. That is not that is that is driving down uh value. And then the third quick one would be uh don't trip over dollars to save a dime. You know, if you have invest in your business, yeah. Invest in that growth, invest in the people, think long term, not how much am I going to make next month.
SPEAKER_00:Yeah. That makes sense. And on point number two, even if you're not thinking about exiting or you know, with your knowledge and experience telling us when to start thinking about it, maybe we're, you know, a five years from now. That number two, oh my gosh, that is important even if you're not, right? You don't want to have something be dependent on one vendor, one supplier, one key person, because unfortunately, life happens and other companies are not guaranteed to be around and or keep the rates and commitments that they have, right? To you. And you got to protect yourself and your business.
SPEAKER_02:You got it.
SPEAKER_00:So as we wrap up here, uh, is there any last final thoughts or tips or tricks or ideas that you'd like to share with the audience?
SPEAKER_02:Yeah, I'll say an important one. When it comes time to exiting your business, and again, it uh it doesn't matter if you're going to sell it, you sell it to an outside buyer, employees, family, anything. The seller controls the deal on a good business. The buyer controls the deal on a not so good, i.e., bad business. So if you want to be in control, have a good business that buyers are going to want that's doing all the things we have talked about today, and and then some.
SPEAKER_00:Well, thank you, John, for your wisdom and expertise. And I hope the listeners got some good takeaways. I know I have. Uh, to wrap up, is there any special way that you'd like people to reach out to you if they want to learn more?
SPEAKER_02:Yeah, if they do reach out, then they can reach out via a contact form on the website, which is Nokomasadvisory.com, N O K O M I S Advisory.com. If they mention this podcast, we'll send them a free e-copy of our book, Exit Risk Style, Grace and More Money.
SPEAKER_00:Awesome. Thanks, John, for the freebie. And that link will be also in the description of the podcast. So appreciate you joining us. And for those listeners, thanks so much. We hope you learned something, and we'll see you on the next podcast. Have a great one, everyone. That's a wrap for today's episode of Scaling with People. If you got value from this conversation, do me a favor, share it with someone building something big. And hey, I'd love to hear your take. Drop a comment, shoot me a message, or start a conversation. And don't forget to subscribe so you never miss the bold, unfiltered strategies we drop every week. I'm Winnipeg Cuery, founder and CEO of Guide2HR, where we help high growth companies feel smart with people for strategies and AI-powered systems that don't just keep up, they lead. If you're building fast and want your HR to move faster, head to guide2hr.com and let's talk. And remember, scale isn't just about speed, it's about people. Until next time, have a great one.
