Episode Transcript
Adam O'Leary (00:01.422)
If you're a business owner struggling to prepare your business for a successful, profitable sale, then our guest, Marty Fanky, is going to give you a simple win you can implement today. Marty has a passion for helping business owners profitably grow their business, then exit the business at the perfect time, at the right price to the best buyer. He believes that you should always have your business in sale-ready condition, even if you never plan to sell it.
And today, he's going to tell us why. Marty, a big welcome to the show. Excited to have you here.
Marty M. Fahncke (00:37.226)
Thanks Adam, I'm really excited to be here. I appreciate you taking some time to have me on your show and hopefully share some good stuff with your listeners.
Adam O'Leary (00:44.896)
I love it. Well, Marty, you shared a powerful story about a plumber's window who is left with almost nothing. For our listeners who are running their own business today, what's the one most critical mistake they're probably making right now that devalues their business without them even realizing it?
Marty M. Fahncke (01:02.826)
Well, mentioned it in the intro there. It's not having their business in sale-ready condition. What does that mean? Having your business in sale-ready condition means everything should be in place at all times that if somebody wanted to buy it, it's already completely optimized. For example, I always relate business acquisitions to home buying and selling because most people have not purchased or sold a business, but most people have purchased or sold a home. If your home is a...
ready to sell, it's staged, it's clean and everything else and somebody just came along randomly and said, I'll give you twice what it's worth. You'd be really happy, right? Well, fine, I'll move if you're give me twice what it's worth. I actually see that with businesses. I see business owners who have businesses and somebody comes out of the blue and says, I'm interested in your business, I have a strategic reason for wanting to own it, I'd like to make an offer and acquire your business and their business is not ready, it is not ready for sale. And then the.
the prospective purchaser gets deep into the financials or the systems or other, and they find so much wrong with it, they walk away. I've seen it time and time again. So on a FOMO standpoint, fear of missing out, if your business is not in sell ready condition, you miss out on opportunities to potentially profit from it in a big way. On the downside, meaning why it should be ready even if you don't have an interest in selling it or nobody shows up to sell it is what I call the five Ds and a B. And I get calls,
almost every single day from victims of the five Ds and a B. People who don't plan on selling their business sometimes are forced to. The five Ds are divorce, disease, death, debt, disagreements, and the B is burnout. About 80 % of businesses wind up being sold because of one of those five Ds and a B. And if your business is not in sell-ready condition, when all of a sudden you get sick or you have
a financial issue or your spouse says, I'm done, I'm out of here and I want half the business, you are in trouble. Your business is not gonna be worth very much money. It's gonna be a massive nightmare. It's gonna be a mess. And I see it time and time again. And so that's another reason to always have your business in cell ready condition. And the final reason to do it and the most positive reason is if your business is in cell ready condition, meaning it has an operating system, it has financials that are clean, it has a team that's trained.
Marty M. Fahncke (03:24.016)
and passionate about the business. All of the things you need to do to have your business in sell-ready condition, even if you never sell it, wouldn't you as an owner really love to own that business versus the business that's sucking your time and energy and passion every single day, which is something I hear about from business owners all the time? So those are the three main reasons to always have your business in sell-ready condition at all times.
Adam O'Leary (03:51.062)
love this. This is fantastic. And one thing I've heard you mention is this concept of blood, sweat and tears that an owner puts into their business. Since buyers don't pay for that, how can a business owner translate that hard work into tangible value that a buyer will actually pay for? What metrics or systems should they be tracking to show that value?
Marty M. Fahncke (04:13.639)
Yeah, think, so I think you're referencing, you might have heard me talk about business owners, they have a business that, let's say it's worth two million dollars. And they say, but I've had it for 20 years and I've done all this and it's got this potential and I've put all this time and energy and blood, sweat and tears into it. Certainly it's worth three million dollars because of all that. The reality is a buyer doesn't pay for the emotional blood, sweat and tears that an owner has put into it. But what a buyer does pay for is,
the fundamentals, right? Good operations, good financials, low-turn customer base, recurring revenue, all those types of things. So when I hear a business owner saying, it's gotta be worth more because I've put so much into it, the reality is whatever you've put into it must translate to something with tangible value for a prospective buyer. And I sometimes have to kind of flip the tables on this and look, if you are looking at a business to buy,
And you knew in beyond a shadow of a doubt that business was worth $2 million. But the buyer, the seller was asking $3 million because how much work they've put into it. You would think the same thing. I don't care how much work you put into it. What are the results of that work? And so when, when you're trying to convert blood, sweat and tear value into real tangible value, the best way to do that is to make sure that you are doing all the steps to make your business as strong as possible.
The number one metric that buyers are looking to value a business on is profit. So can your blood, sweat, and tears be converted into actual profit? If it can, then you're going to realize value against it. But many times, business owners are not focusing on profit. They might be focusing on revenue at the sacrifice of profit. Or one thing that we see a big problem with is owners, especially if they have no intention of selling anytime soon,
is they're focusing on tax mitigation and not profit maximization. Well, what does that mean? It means they're doing everything they can. I've had business owners come to me like, here's my revenue and it's in the millions and I've done all this. And guess what? I show on paper, no profit. So I'm not paying any taxes. Well, guess what? A buyer is going to value your business on profit. So when your profit is zero, you've devalued your business. That's a huge mistake many business owners make. So these are just some of the things that we work with with our clients to make sure that they're gonna get.
Marty M. Fahncke (06:40.265)
the maximum value for their business when they're ready to sell.
Adam O'Leary (06:43.981)
I love that. And for a business owner who is considering a sale in the next few years, what's one easy way they can get an accurate, realistic valuation without paying for a high-priced advisor?
Marty M. Fahncke (06:53.897)
So I've been a consultant for many, many years and there's a phrase in consulting called good, fast or cheap, pick two. You cannot have good work, fast work and cheap work. And that phrase works for contractors, pretty much any business, good, fast or cheap. You just ask, how do we get an accurate, realistic valuation without paying for it? You're gonna have to pick two, Adam. You're not gonna get all three. You can go online and do a,
Find some of those like business valuation things and you plug in a couple numbers and it's free. Guess what? That's cheap. It is not accurate and it is not realistic. You can get an accurate valuation, but you're going to pay for it. So unfortunately, I don't have an answer for you on that because what you're asking for doesn't exist. If you want to get a good valuation on your business, you're probably going to have to pay somebody, whether that be a CPA for book value.
or a broker or advisor for market value. By the way, there is a big difference in the two and don't be fooled. Book value that an accountant can provide you is sort of the value of the business as an asset class. That's different than the value of the business that a buyer would actually pay for it. That's market value. And what does that mean? give you a quick example. Let's say that you win the lottery and you buy your wife a very expensive diamond ring.
and you take it in to have it appraised for insurance purposes. So they come in, say, yep, that ring's worth $100,000. So if it's lost or stolen, it's insured for that amount. But you take that same diamond ring and maybe you on hard times and you have to sell it. Well, how much are you gonna be able to sell it for? It's not $100,000. A pawn shop's gonna give you $5,000. A high-end jeweler might give you $35,000.
but you're probably not gonna get 100,000. And you say, the value is 100,000, I have this appraisal. That's not market value, that's book value. The same thing happens with businesses, by the way. So when you are asking about evaluation, you wanna get market value, not just book value.
Adam O'Leary (09:01.901)
I love that. No, thank you for sharing that difference because that's very important and I learned something new today. So there's something I know about business owners and I've seen quite a few sales and exits in my life. And one thing is about the emotional side. So I think one of the challenges that business owners face is when they're going ahead and even...
Marty M. Fahncke (09:05.085)
Yes. Good.
Marty M. Fahncke (09:19.091)
Mm-hmm.
Adam O'Leary (09:26.295)
thinking about the idea of a sale, there's almost this instant emotional feelings that will start popping up for them because they've poured their entire life into this company. I mean, it's literally a child or like a second wife at this point. that idea of letting go is completely terrifying. So what is one simple way that they can prepare themselves emotionally for an exit so that they can enjoy the reaps of their labor, I guess you could say.
Marty M. Fahncke (09:40.545)
yeah.
Marty M. Fahncke (09:54.182)
Yeah, absolutely. We work with primarily two types of sellers. our first type of seller that we work with tends to be younger, more entrepreneurial, and they're interested in selling their current business because they wanna go and do the next thing. They're already excited about something else. They probably even started something else as a side project and it's taken off and now they need to sell their existing business. Those ones are easy, right? They already have a vision for what's next. The next class of sellers that we work with, we work with a lot of people who have maybe built a business for,
15, 20, 25 years and they're looking at potentially retiring or something else and they've had it for a really long time. And yeah, they spend a lot of time in that business, maybe more than they've spent with their kids, more than they've spent with their spouse. They're with their business more than anything. Those are the ones that kind of need to think about this because if you don't have a clear plan for what's next, and that's the question you ask, what's next, then you need to be thinking about that and getting that put into place.
And it's not always retiring to go fishing every day or whatever else. Sometimes it's relaunching a new business in your retirement. I Colonel Sanders started KFC with his social security check at age 62. So it might be doing something new. It might be volunteering. It might be traveling. might be funding college educations for your kids or grandkids. There's lots of different things that are the what's next. I always tell prospective business sellers,
Most people have seen Happy Gilmore and Happy Gilmore 2 just came out recently and so it's created a little bit of a resurgence in Happy Gilmore. But in Happy Gilmore, when he's kind of freaking out and his mind's going, he goes to his happy place, right? it's Julie Bowen on a bed and lingerie and beer and everything. It's just this mental happy place. And that's Happy Gilmore's happy place. What is your happy place? As a person, not as a business owner, as a person, what is your happy place?
And do you have the ability to spend as much time and energy in that happy place now as you'd like? Most people say no, heck no. Whether that's like a traveling, whether that's being with family, whether that's a vacation home, whatever that looks like, most people will say, no, I don't have the amount of time I'd like to spend in my happy place. And so I start with that. After you sell your business, how much time can you spend in the happy place? Would your happy place look different if you had millions of dollars in the bank?
Marty M. Fahncke (12:20.373)
Would it be bigger? Would it be in a different location? And really creating that dream and vision so that instead of going away from something, their business, they're going to something, their happy place. So that's what we always counsel our clients to think about.
Adam O'Leary (12:37.195)
I love it. And Marty, our show is called Simple Wins because we want to give our listeners something that they can implement today. Based on your experience, what's one single action a business owner can take right now to begin building a business that's less reliant on them and will create more value for a future buyer?
Marty M. Fahncke (12:54.885)
Absolutely, simple thing. Navigate right now to Amazon and search two books. Book number one, Who Not How by Dan Sullivan and Benjamin Hardy. Brilliant, brilliant book that will change the way you think about anything that you need to get done. You should never think, how do I do this? You should think, who can do this for me? It will change your personal life, it will change your business life, I'll tell you, in a big way. Grab that book.
read it, whether you read the thing or audio book or whatever, grab Who Not How by Dan Sullivan and Benjamin Hardy. And then throw one more book into your cart. It's called Boomer Sells the Business, A Step-by-Step Guide to Cashing Out and Living Large. And don't let the name fool you, the book is a gold mine of information for business owners of any age or generation. You do not have to be a boomer. Selfishly, that's my book. I would love for people to check this out. I wrote it as a passion project.
Adam and I were talking a little bit before we were recording. My particular, my company and my business and my goal, I don't work with boomers types businesses. The types of people who sell boomer businesses, those aren't the ones I work with. I truly wrote this as a passion project to help people because I had so many business owners contacting me who didn't have their businesses in sell ready condition, who didn't understand the value of their business, who didn't have the things in place they needed to.
and they are in a very bad place, sometimes horrible financial situations because of problems they've got because they did the process wrong. I wrote the book to help them and not selfishly, but I'd love for everyone to check that out. If you're a business owner, read those books. If you aren't a business owner, buy them as Christmas gifts for people who are, they will appreciate you.
Adam O'Leary (14:43.917)
I love this. Marty, where should people go to learn more about you?
Marty M. Fahncke (14:47.529)
They can go to, well, I have a very unique name, Marty Fonky. I'm the only Marty Fonky in the entire world. So you Google me, you'll find me. I can't hide from anyone. But you can go to my website at westboundroad.com. That's westboundroad.com. Or look me up on LinkedIn. I'm very active there where I share tips and ideas for business owners of all sorts.
Adam O'Leary (15:09.005)
Marty, you're amazing. Thank you so much for coming on this podcast.
Marty M. Fahncke (15:12.371)
Thanks Adam, it was a blast. appreciate you having me here.
Adam O'Leary (15:15.894)
Absolutely. Signing off for now, have a wonderful rest of your day and looking forward to seeing you on the next episode of Simple Wins.
