October 20, 2025 • 44 mins
Change hits like a wave, and most teams feel it first as fear. We sat down with M&A veteran John Martinka to unpack how to turn that fear into focus when ownership or leadership shifts. Our conversation gets practical fast: reframing uncertainty, rewarding continuity, and communicating with a steady cadence even when legal guardrails limit what you can say.
We walk through the three‑legged stool of trust across employees, seller, and buyer, and why retention bonuses tied to time and performance protect both people and the deal. John explains why buyers invest in teams, not just contracts, and how smart leaders involve key talent early without spooking the organization. We also explore how shop‑floor ideas often hold the best growth levers, and how a new owner’s curiosity plus targeted capital can unlock stalled improvements. From culture risk and turnover to customer stickiness and margin discipline, we connect the dots between people decisions and enterprise value.
If you’ve been asked to present to a prospective buyer, you’ll hear how to share the positive truth: clear wins, real risks, and where capital accelerates value, including measured adoption of AI that augments your team. Founders weighing an exit get a grounded checklist on valuation basics—profitability, growth, customer concentration, tenure, and owner dependency—and how to build a bench so the business thrives without a single linchpin.
Ready to lead through change with confidence and calm consistency? Hit play, subscribe for more leadership deep dives, and share this episode with a colleague who’s navigating a merger or transition. Your review helps more leaders find the show.
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Episode Transcript
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Mick Spiers (00:01):
How do you lead when the future feels uncertain,
when your people start asking,What does this mean for us? We
don't yet have all the answersyourself. Today, I'm joined by
John Martinka, who has spentdecades guiding leaders through
the human side of mergers andacquisitions. This conversation
(00:22):
isn't about deal terms orvaluations, it's about people.
We unpack how to keep teamsfocused when everything around
them is shifting, how tocommunicate honestly when you're
caught between legal silence andemployee anxiety, and how to
preserve trust, culture andmotivation when two worlds are
(00:44):
coming together. If you've everled through change, whether it's
a merger, restructure orleadership transition, this
episode will give you practicaltools and grounded wisdom to
steady the ship while the wavesare high.
Hey everyone, and welcome backto The Leadership Project. I'm
greatly honored today to bejoined by John Martinka. John is
(01:07):
better known as the escapeartist, and he helps small
business owners to create largeexits. So someone that's a
founder, they've built up abusiness over their entire life,
and they're looking to exit thebusiness and hand it over and
ensure that their business iswell looked after and they they
are well rewarded for all oftheir life's work. That's not
(01:30):
specifically what we're going tofocus on today. We're going to
focus on what it means to leadthrough those moments of change,
whether you're going through anacquisition, where your company
is being bought, or you areacquiring another entity. All of
this is change, and that changeis very unsettling for our
people and can be disruptive tothe business. So that's what
(01:52):
we're going to focus on today.
What does it mean to lead whenyou're going through a merger,
an acquisition, a divestment,etc. So without any further ado.
John, I'd love to hear from you.
Please say hello to theaudience, tell them a little bit
of your backstory and whatinspires you to do the work that
you do today, to help smallbusiness owners to exit with
(02:16):
grace?
John Martinka (02:17):
Well, it's a pleasure to be here, Mick, I'm
looking forward to a discussion.
It's, it's, it's a littledifferent than what I usually
talk about, but it's just asimportant to talk about
leadership within a a business,and what happens when a there's
a change in the business asanything else. My story is, if
we approach it from a businessperspective, I got into doing
(02:44):
what I'm doing, which is helpingpeople plan their exit of a
business, buy companies, sellcompanies through serendipity. I
was many years ago in the 90s. Iwas in a small Rotary Club, and
where I live in Kirkland,Washington. And the I got in, I
was young guy. I did really goodstuff. And they, you know, all
(03:07):
the older people said, Yeah,this guy's really something. And
we had to get him to bepresident. And I was president
the year after anothergentleman. And we were, it was a
brand new club. We were a littlecloser in age than with some of
the other more senior memberswho started it, and we hit it
off, and our wives hit it off,and one day, a little couple
(03:28):
years after that, he saidsomething along the lines of,
I've always thought you'd begood in this business. And one
thing that led to another, heknew I liked but didn't love
what I was doing, and I foundthat I love the variety. For one
what I do every It's not everyday. Every hour is different.
Every segment of an hour can bedifferent, from marketing to
(03:50):
holding a client's hand toresearching something, you name
it. I like educating. I thinkit's came from my mother. My
mother was a lady who could havegot a PhD in math and done a lot
of different things, but shewanted to teach, so she taught
math at the college level andloved educating people, and she
(04:12):
wrote a textbook that did verywell. And I've written five
books on my subjects of buyingand selling businesses, and just
tell prospective clients, Idon't care if you work with us
or not. I want you educated. AndI think third is just helping
people. I've come to realizethat what I do changes people's
(04:33):
lives. It truly does. If someonehas built that business and
they're going to sell it andmove on to what we call their
next great adventure in life,and do it the right way. It
means a lot. Or somebody who'sgoing to buy that company and
wants to, you know, have a gooddeal and take over a business
that that's going to changetheir lives. But also, what I
(04:56):
found is it changes a lot. Lotof times it changes the lives of
the employees. And a little bitof backstory on that is, you
take someone who founded abusiness and they've been at it
for it doesn't matter, 20, 3040,years, and they're set in their
ways, and you get a goodemployees who want to do more,
(05:16):
and the owner is saying, Well,why would I want to take that
risk? I'm making pretty goodmoney right now. I'm not working
that hard. And a buyer comes inand they want to grow it, and
those employees get energized,because that's the leadership
you talk about, is that buyercomes in and says, I'm not happy
with where it is. I love thebusiness, which is why I bought
(05:39):
it, or why we bought it, but wewant to, we want to energize it.
We want to grow. And mostemployees want to be part of
something like that.
Mick Spiers (05:52):
You're really good, John, so the first thing I'm
hearing is, I love that youfound purpose in your life, and
that you get great joy from whatyou're doing. And there's
something in there that you loveto educate. You love to help
people, to make it easier forthem, and to make it worthwhile.
The interesting thing there is,I'm going to say to you that if
(06:12):
I said to most people on thestreet, your business is about
to go through a an M and Aactivity, it's about to be sold
to a new owner, their firstreaction is fear. But it doesn't
have to be a bad story. Thiscould be a new injection of
capital, energy, vision,direction. This could be good
(06:33):
for everyone. It's good for theexiting founder. I hope that the
exiting founder, you know, landswhere they want it to land. Good
for the the incoming buyer whowants who's seen something in
the asset. And we might comeback to the word asset in in a
moment, they've seen somethingin the asset that they like, but
I'm sure that they're trying toaccrete value and and they can
(06:54):
see some ability to unlock valuein the in the future, and then
for the employees, that thiscould be a new adventure that
gives them what they've alwayswanted. So how do we get past
that fear factor? Though? FirstJohn, their first reaction is
definitely going to be all, notso sure about this.
John Martinka (07:11):
The Fear Factor is most prevalent with the
employees. And I use in my booksa three legged stool, and on the
top it says, employees stay, andeach leg is represented by the
employees, the owner and thebuyer, and they're all worried
that someone else is going tokick out that leg and the stool
(07:33):
is going to collapse. So thebuyer is worried the employees
aren't going to stay, and that'swhat they're buying. They're
buying people, you know, I don'tcare if it's in a huge
corporation or a small business,the people are what make it go.
The seller is worried his peoplethat have helped him build the
business for the last 510, 20years. However, whatever their
tenure is, are going to leaveand wreck his or her deal, and
(07:58):
the employees are worried thebuyer's gonna get rid of them,
which, you know, we're nottalking big corporate mergers in
my world, but that's rare.
People are buyers. Are buyingthe people, and it's bringing
them in at the right time,bringing, you know, not too
early, but not too late. I haveseen it backfire, where business
seller refused to tell anybody.
(08:21):
And a couple of his key peoplewere so mad when he announced
he'd sold the company, theysaid, you couldn't trust us. You
couldn't bring us in to help welike working here.
Mick Spiers (08:32):
Yeah, interesting dynamic there around the trust.
And the thing that I want topick up on here is when I said
they're buying an asset, theasset is the people. Yes, it is
the people. And if the peoplearen't part of that journey, I
think it would make it verydifficult for the incoming buyer
to to even value the company asto what, what am I buying here?
(08:54):
If, if the people aren't part ofthe process? John, so how can we
do that differently to makepeople, make everyone feel like
they're part of the process.
John Martinka (09:04):
Well, it goes from company to company and the
type of worker. Lot of times, ifit's a, say, a blue collar, a
factory or service people,they're not as concerned about
it. If it's more of a officewhite collar, I've seen them get
more more concerned, moreworried about what's going to
(09:27):
happen. And a lot of it has todo with the headlines. We read
headlines about big companiesand they're going to slash jobs
and all that. And it just isn'tlike that in the, you know, the
lower middle market, the middlemarket, because the people are
valued, like you just said, andthe machinery, the vehicles, the
(09:48):
working capital, the inventory,none of that is worth much
without people. Someone has torun the machine, drive the
truck, you know, handle thefinances, all of that.
Mick Spiers (10:00):
So the reframing here, I think, that I'm looking
for is, if you're on thereceiving end of this, if you're
you're a team member or a teamleader in a business that is
being sold, your first thoughtis probably going to be the fear
of loss. And what I'm hearingJohn is to is to reframe this
(10:21):
and go, Well, what are we goingto gain from this, and the fact
that I am the valuable assetthat's being bought here some,
some buyer has seen something inour team. We should almost take
this as a badge of honor to go,oh, this, this person is willing
to put their own money on thetable because they've seen our
work. They've seen our value. Soinstead of feeling the fear of
(10:44):
loss here, almost take it as acompliment that someone is
coming in and has seen somethingin you and wants to invest in
you and the team to grow intothe future. How does that sit
with you, John?
John Martinka (10:57):
Well, that's that's really good, and it's,
when do you bring people in?
I'm, I will say, I've been,I've, thinking back over the
last year, we've probably hadfive or six transactions we've
worked on, and every one ofthem, the seller brought in
people during the process, butalso at different levels, had
(11:20):
retention bonuses for thosepeople. I mean, one owner of a
small company, very profitablewith a small number of
employees, it was in the digitalspace. He brought them in right
away, and he said 15% of thesales price is going to you.
It's going to be a formula basedon seniority, job title, and
(11:43):
will be paid out at the end of123, and three years, so that
you will stay to help the buyerdid that right up front. Others
have had bonuses or retentionbonuses, again with a lag. You
don't want to give it to them atclosing, say, Hey, here's
$50,000 and they say, I see ya.
(12:06):
So it's you need to stay for ayear. And after a year there
are, they're usually prettyhappy with the new ownership and
and it works out. So it, it'show it's approached. It's like
anything else in life. Mick,it's, how do you approach it?
Well, you know, as a leader of acompany, the owner, you know,
(12:26):
this is one place where youwhere they have to take charge,
and they want to, they want toassure that things go well. They
may have a note from the buyerthat gets paid over time. They
don't want repercussions thatthe buyer, especially if it's a
larger entity or private equity,gets upset and comes back at
(12:49):
them and says, You didn't dowhat you could do to retain,
help us retain the employees, orthere's an earn out, meaning
they get paid based on betterperformance. So that leadership
comes into play there is notjust thinking about yourself,
but thinking about thecomponents that got you where
you are.
Mick Spiers (13:08):
So this feels like a win win for me, for sure,
John, the any of those formulasand techniques and incentives
that you're talking about, firstof all, if, if I'm getting a
retention bonus that says thatI'm going to get payouts in year
one, year two, year three,whatever it looks like. Now I do
feel like the valued assetthat's being purchased. I feel I
(13:31):
feel good about myself, first ofall, that I the fear of loss can
go away because this person isputting hard money on the table
to keep me around here. Then forthe purchaser, they're not
buying an empty asset wherethey're going to put money on
the table. And within threeweeks, everyone left. The person
was buying those people, and nowall of a sudden, they're not
(13:53):
around. So I can see a huge winwin there, in terms of that. The
other thing you said, thereabout then? Well, what about an
incentive for performanceimprovements? One thing I've
always thought here, John, I'mgoing to test this thought with
you, is that nearly always thebest ideas in a business as to,
(14:14):
what can we do differently? Whatcan we do differently to grow to
be more profitable, to be moreefficient, all this kind of
stuff. Most of those ideas comefrom the shop floor. I'm going
to say to you that there's goingto be many circumstances where
the founder was a very strongleader that had their own vision
and were almost blinkered inthat vision and may not have
(14:37):
been listening to the people onthe shop floor. Now the new
owner is going to come in withcuriosity and go, Hey, team,
tell me what you think. What doyou think we should do
differently? So you also throughthis process might you might get
a financial benefit of thebonuses that you're talking
about, but you might also get anew license to rethink the way
you do things, and get a chanceto do things that you've always
(14:59):
wanted. To do in the business,but the previous founder was a
little bit more very rigid intheir thinking. How does that
sit with you?
John Martinka (15:08):
Oh, that's absolutely right there. You
know, good employees want to do,do well, do more. Have career
advancement. You know, they're,they're, you know, you want to
have those a people for theirlevel of what they're doing, and
you want them to be challengingand wanting to grow. And I'll
give you a quick example of adeal from a number of years ago,
(15:31):
and the buyer came in. It was anindividual, and he convened a
four person management team,that, and they didn't know what
was going on. And they knew whatwas going on because, as a side
story, they were offered to buythe company, which they thought
was just great, until they foundout they'd have to sign on a
(15:56):
bank loan and personallyguarantee it, and everything
that goes with that. And thenthey said, No, maybe business
ownership isn't for us. So thatcomes back to ownership is
leadership, and not everyonewants that kind of leadership.
But he did a very short surveywith them, and this is one of
(16:16):
the things I won't forget,because one of the questions
was, what's the company'sbiggest weakness? And all four
had a similar answer. And Iremember he told me, one of them
said the biggest weakness justwalked out the door.
Mick Spiers (16:33):
Interesting.
John Martinka (16:34):
They were thrilled.
Mick Spiers (16:36):
So there's the opportunity there, and that's
not going to be universal, likefounders, you know, put their
heart and soul into businesses,but sometimes they trip over
their own shoelaces and and theymay not have the self awareness
that they are the bottleneckthat is throttling the capacity
of the business to grow. Theymight be the choke point in the
(16:59):
business, but they don't see ityeah.
John Martinka (17:02):
Yeah. If we move that into today's world, we're
going to have to wonder aboutleaders grabbing onto or not
grabbing onto AI to help theirbusiness. Some are going to go
right into it at a too fast, andit won't work. Some are not
going to go into it and get leftbehind, but others are going to
go into it or they measured pay.
Measured pace and know what theyneed it for, if you know if it's
(17:24):
suitable for their business. Andthey're going to move forward on
it, and they're going to,they're going to lead the
movement within their company touse tools like that.
Mick Spiers (17:38):
Yeah, and we shouldn't kind of what's the
word I'm saying here. Weshouldn't pigeonhole all all
founders to think that they'reall like that, but you could be
in that situation where thefounder had the right ideas for
yesterday but maybe does nothave the right ideas for
tomorrow, and may be stuck inold ways of thinking. And here's
(17:59):
an opportunity, here's a licenseto lean into a new world, an AI
powered world. How can we use AIto augment the business, not
replace the business, notreplace the people, but augment
the business and augment the waythat people work, to unlock more
value for everyone, to makeeveryone's life easier, to take
processes that used to becumbersome and stressful and
(18:22):
make them, make them a value,adding part of the business. So,
yeah, very good. So the firsttakeaway I'm taking away here,
John, is the reframing that ifyou're in this situation and
you're a senior leader in abusiness where the founder is
exiting and a new buyer iscoming in, instead of fearing
what you're losing, ask yourselfthe question, what might you be
(18:44):
gaining? And the gain might befinancial, it might be identity.
You might get a new position inthe organization, but it also
might be a license to try newthings under new leadership with
a new vision. The other mistakeI see a lot John, in all of
these situations, iscommunication in any kind of
(19:05):
change, whether it's a mergerand acquisition or a major
change to an organization,communication is something that
often falls down, usually ablack hole, usually a lack of
information, and in a vacuum ofinformation, people start
drawing their own conclusions,they fill in the blanks. What
advice could you give to leadersout there, when everyone knows
(19:26):
something's going on but noone's talking about it, how do
we get this communication right?
John Martinka (19:32):
Well, it, I think it starts with the owner or
leader, whether it's the youknow, it's the owner or a CEO
that the founder owner hashired, you come to realize that
they need to know what's goingon in the company. And you you
know, they use an analogy is,you know, there's, you know,
(19:55):
there shouldn't be anythingclose to an ivory tower. They
have to be communicated. Withthe employees. And you read
stories about some verysuccessful people in major
companies who are always talkingto the employees. They know who
they are. They know about theirfamilies. You know, there's a
there's a technique that youknow is known as management by
(20:17):
walking around, which means getout of the office and go see
what's going on and ask people,How are they doing? What would
they like to see different? Andit doesn't matter if it's
someone on the shop floor, youmentioned before, the shop floor
is where a lot of goodproduction improvements come
from. They don't always comefrom the outside advisor or
(20:39):
someone in the C suite. Theycome from the people who are
doing it every day.
Mick Spiers (20:45):
Yeah, really good.
So the first thing I'm hearingis to get out of that ivory
tower and walk around. What Iwant to kind of extrapolate
here, John, is that if you thinkthat you're keeping things well
kept secret, the chances arepeople already have an inkling
that something's going on. Andwhat I want to ask people is, do
you want them to draw their ownconclusions, or do you want to
(21:08):
control the narrative and getout there and have a dialog with
them? So I'm hearing, get offyour butt and go around, walk
the shop floor and have aconversation with people, and
then you can, I'm going to say,immediately, nip in the bud any
misinformation where people havedrawn the wrong conclusion, and
you can hear from them theirideas about about what could be
done throughout the process. Howdoes that sit with you, John?
John Martinka (21:35):
Well, I think it is. It's the old success, you
know, like the old suggestionbox in companies and people
would write things down, butit's a lot more effective if the
if you, as the owner or a anyleader, are hearing it
firsthand, directly from thatperson, because you're showing
interest, we all want to be paidattention to. And you, you do a
(21:56):
lot with leadership. You know alot about it, but it's you, you
lead. You know you need lead byshowing interest and empathy and
other things that make peoplefeel comfortable. I will give
you an example on the other endof it, and this is, you know,
(22:17):
you see companies like this, andI don't care if they have 10
employees, 50 employees, 100employees, whatever the number
is. And if you have a more of adictator, and this one client we
had, he would, here's what hewas known by, his drive bys. And
what he would do is he wouldhover over someone's desk, and
(22:39):
he'd watch him for a while, andhe what I had heard in work, you
know, talking to the employeeson a consulting project was and
he would all of a sudden juststomp away and go, don't worry
about that. It's just my money.
Well, how does that make peoplefeel? And you wonder why you
have turnover in companies likethat. When the economy is bad,
they stay when the economy turnsaround, they go get another job.
Mick Spiers (23:05):
Yeah, yeah, very good job. So what everyone
universally wants in the in theworkplace is to feel seen, to
feel heard and to feel valued.
And if you're sitting in thativory tower working on the exit
strategy without going aroundand talking to people, you're
going to alienate them, andyou're going to make them feel
unseen, unheard, not valued. Andthat's going to impact your
(23:27):
company at the time where youwant, you want things thriving
at the time that the new owneror the person that's putting
money on the table is looking tovalue the company, you want it
thriving on all cylinders. Thisis not the time to go into a box
and not talk to people. What areyour thoughts there?
John Martinka (23:48):
Oh, you're absolutely right. And when it
comes time to transition acompany, and it could be a
transaction, but could also bean owner, saying, I want to
bring someone in to run thiscompany so I can step back be
chairman of the board. A CEO isgoing to look at how are things
going. You know, two big thingsin analyzing a company and its
(24:09):
value, are customers andemployees? Are you treating the
customers well? Are they sticky?
Are they staying year after yearafter year? Are they paying you
enough for your product orservice to that the margins are
where they should be, and thenon the employees, it's, what's
the tenure? What's the turnover?
(24:31):
You know, there's always goingto be some turnover. I mean,
it's, it's inevitable, becausethings happen, people move, they
have a family situation, or theyjust, they see advancement
somewhere else. But when youstart seeing turnover at, you
know, instead of losing 10% ofpeople a year, it's a 25% and
we're not talking fast foodrestaurants or teenager
(24:54):
employees, but we're, you know,we're starting to see that high
turnover that gets reallyexpensive. Massive. And that
comes, that comes a lot fromculture. And I was on the board
of a company for many years, andunfortunately for the CEO, we
had to replace her, because theculture just wasn't there that,
(25:17):
you know, there, there wasturnover. People weren't as
productive as they could havebeen, and what the management
team just to summarize, theywould say, when there's a tough
decision to be made, she'll saysomething like, Oh, I'm gonna go
work on the strategic plan.
Well, that doesn't instillconfidence, and while her top
management team, only one wasone had left, but ended up
(25:42):
coming back. There was a lot ofturnover, involuntary turnover,
in the ranks of 100 some people.
Mick Spiers (25:55):
It's very expensive. It's expensive to the
operations, but it's also goingto be, yeah, what an A new
potential buyer might be lookingat and going, well, what am I
buying here?
John Martinka (26:04):
Yeah, and it's, it's a reputation out there too,
because word spreads. If youknow, if you've got, you're in
an industry, and you know you'repeople are seeing that they're
going to go somewhere and say,yeah, it just wasn't happening.
There would, no one would make adecision. No one. People aren't
happy, and then people won'twant to go work there good
(26:25):
people.
Mick Spiers (26:26):
You also put up that the customers see it too,
right? So if the if there is,because all of the customers,
they're people too, and theywant to do business with people
that they know, like and trust,and if they're trying to do
business with your company, andall they see is a revolving
door, and they see differentfaces every every few months.
Then they get frustrated, andthey go and start taking their
(26:48):
money elsewhere as well, andbefore you know it, you've
devalued what might have beensomething quite magical.
John Martinka (26:55):
Yeah, a new sales rep every 6 to 12 months doesn't
build a lot of loyalty.
Mick Spiers (27:01):
Yeah, yeah, exactly. All right. So one more
thing I want to explore here,John, let's put a hypothetical
to you, because this happens ifyou're one of those senior
leaders in an organization thatis up for sale, you might be
called upon to meet theprospective new owners, either
(27:23):
do a management presentation,might even just be an interview
situation. What recommendationsor advice could give to people
that get put in that situationwhere you're a senior leader in
a business and you're gettingasked to do a management
presentation to a prospectivebuyer? How do I prepare for
something like that, and what,what should be in my mind?
John Martinka (27:44):
Well, I'll give you an example that happened
earlier this year, because thefounder of the company we we did
a transaction. The founder hadhired a CEO a few years prior.
The CEO knew he was this.
Founder was going to be exiting,and so he was had intimate
knowledge of everything goingon, and to the point that when
(28:05):
in a purchase and saleagreement, and I don't care if
it's a, you know, nine figuredeal or a seven figure deal, or
there is going to be a sectionin the contract called
representations and warranties,and the owner, the seller is
representing, warranting thateverything they have told the
(28:28):
buyer and which is listed at theend of the contract in writing
is true and correct. So they'resaying it is true and correct. I
warranty it with repercussionsif I'm not telling the truth.
They asked the CEO to also signthe representations warranties.
Because every time they went tothe owner and said, What about
this? Or what about that? Hesaid, I don't know. Talk to the
(28:49):
CEO. So how does the CEO presentHimself to those buyers? Well,
first of all, by being himselfor herself and just saying,
here's how we do things. Whatcould have an answer to the
question, what do you think wecould do better? Why haven't you
done it? Sometimes it's just theowner is stubborn. Sometimes
(29:11):
it's capital. And if you have amore of a professional buyer for
a company, they are going tobring capital in to do those
things, you're going to improvethe processes to make that CEO's
job easier.
Mick Spiers (29:26):
So what I'm hearing here, John, I'm going to throw a
term at you that resonated in myhead as I was listening to you.
I'm going to say, well, beyourself. Was interesting. And
I'm going to say, tell them thepositive truth now. Now, what do
I mean by that? Bear with me fora second, John, and see if this
makes sense. Just be open andtransparent about what's
(29:47):
working, because you do want toshow that the company is
worthwhile buying, but be openand transparent about the things
that aren't working as well asyou'd like them to work, because
they're going to find outanyway. So they're going.
Presentations and warrantiesthat you're talking about. If
you I'm trying to paint a fewdifferent scenarios here, if you
present the company and go,everything's perfect here, and
(30:09):
then they buy it. First of all,they probably won't believe it,
but then they buy it, and thenthree months later, they find
out that everything that you putin that presentation was not
exactly true, then that's arepresentation and warranty
issue, and that's not going togo well. The other part that I'm
going to say is the the newbuyer is wanting to buy what's
great about the company, butthey're also wanting to buy what
(30:32):
they can fix, because anythingthat they can fix unlocks new
value in the in the company, andmakes it more profitable and
more meaningful generates newgrowth. So be honest about the
things that are not working.
Because every time the new ownerthat's going to put a check on
the table is going to value thecompany, they're looking for the
(30:52):
areas where they can unlockvalue by fixing those things. So
don't hide the things that arenot working well. Be honest
about what is working well, andthen be honest about the things
that are not working well, thepositive truth. How does that
sit with you, John?
John Martinka (31:08):
You said it probably a little more
articulate than I was saying it,but you have to tell the good
and the bad. Hopefully there'sno ugly. And it also comes down
to culture. And leadershipdetermines the culture, just
like the company I told you Iwas on the board of directors.
But other companies, you'regoing to have a management team,
(31:29):
and the management team needs totell the same story, the CEO,
the CEO, the CFO, etc. It'soperations person, and it's
different from company tocompany. To company. A
manufacturing business clientwas asked about the culture, and
one of the owners said, we'remanufacturing business. 90% of
(31:51):
our employees come in at sevenin the morning and do their job
and leave at 330 that's theculture. We give them lunch
every we provide lunch. EveryThursday, it's, you know, that's
good. Our operation, you know,our management people up there,
they do their job. They relate.
Well, everyone's on the samepage. Now, if you flip it or to
a company that has a lot of morewhite collar and sales people,
(32:14):
you know, you want everyone atthat level to be saying the same
thing about the culture. Theywant to they the leader needs to
set the goals of the company,the objectives so that everyone
knows what they are. Because ofa if a buyer comes in, and I
don't care if it's a buyer orjust an investor that want is
(32:35):
going to put capital in, theywant to know that everyone in
the company is working towardsthat same goal. You can't have
one manager saying, well, wewant to maximize sales, and
another say, no, we want tomaximize margin, and another one
saying, you know, we don't careabout that. I want to put out
the best product possible.
Mick Spiers (32:54):
Yeah, good. All right, very good. All right,
excellent, John. All right.
You've given us a lot ofinteresting thoughts. I'm going
to summarize those a littlelater. I'm going to ask one more
question here. Now, the majorityof people listen to the show are
senior managers in companieslike this, and that's why we
focused on this. But I do knowfor sure that we do have some
founders that listen to the Seanshow John, and they might have
(33:18):
built their company, and, youknow, put their heart and soul
into it over many years, andthey are thinking, it's about
time to exit. What they oftenstruggle with is just to value
what they've built. If a founderhas put, you know, 1020, 30
years of their life in thiscompany, and they're at the
(33:38):
point where, okay, I am going toexit now it's time for me to go
to my next adventure, which mayor may not include retirement.
How does someone make arealistic valuation of what
their company is worth ifthey're getting to that stage of
their life?
John Martinka (33:56):
Well, the number one factor is almost always the
profitability of the company.
More profits, the higher thevalue. And then you look at
other things, like, is therecustomer concentration you have?
I just saw someone talking, orread about them talking about a
company that had top customerwas 70% and the second customer
(34:19):
is 20% that's a risk that lowersvaluation. Employee turnover. We
talked about is the companygrowing. A growing company is
going to get more with the sameprofit level than one that's
flat or been going down the lastfew years. And we talk about
leadership, leadership for afounder, even for a CEO, is
(34:42):
getting themselves out of asmuch of the day to day as
possible, even if it's not a,you know, not a privately owned
company, but one that could facea an acquisition from private
equity or bigger firm. You. Youdon't want the CEO to be too
dominant. And I recently met agentleman who has referred to
(35:04):
me, and he sold his company for$90 million 90 million US
dollars. His transition with thebuyer has been a lot more
involved than he ever thought itwould be. And he said, It's my
fault. I was too important tothe company. There are too many
(35:25):
things. I was the one who coulddo them and did them. So
leadership or owner dependencyis a big deal, but it really
comes down to profits and thenall those other factors, you
know, determine are you going toget x or you're going to get
why?
Mick Spiers (35:45):
Yeah, really good, John. So I'll tell you what I'm
hearing. And first of all, I'mreally pleased to hear that the
normal factors are still inplay. Why do I say that we've
seen some valuations of techcompanies. I'm talking big tech
companies here where thevaluation they've never even
turned a profit, and yet theirvaluation is based on future
(36:08):
potential that you some of thenumbers are just mind boggling,
and everyone scratches theirhead, and I don't want small
business owners to think thatcould possibly apply to them. So
the basics are what stillapplies. Are you profitable? Are
you growing? Are you do you havea sustainable customer base that
that is not just a singlecustomer? Do you have low staff
(36:32):
turnover, and is the businessresilient and stable enough that
you've done the right successionplanning, that you aren't the
linchpin to the success of thebusiness that your leadership
team and your your group aregoing to continue to do what
they do, maybe even better thanwhat they were doing. It when
when you leave, are the thingsthat I'm hearing here. John, all
(36:55):
right, very good. I'm going tosummarize a few things here. I'm
going to say that anyone in theaudience that's going through
this process, and you hear thatfirst murmuring of, oh, the
company's for sale. The firstthing to do is to reframe the
fear of, what am I losing, tothink about what might I be
gaining from this. The secondbig learning for me here was
(37:19):
about the communication. Fillthe communication gap. People
know they're clever. They knowthat something's probably going
on. Go and have a dialog withthem, even if there's some
things that you can't share withthem, go and have a dialog with
them about what's going tohappen if someone is called upon
to do a management presentationto prospective owners, the best
(37:41):
thing you can do is be open andtransparent about what's
working, what's not working. Anyideas that you might have as to,
you know, if only we had alittle bit more investment on in
this area, we could grow here.
Have a bit of vision of what thefuture could look like, but just
be open and transparent. Don'ttry to oversell it. Don't try to
undersell it just be yourselfand be authentic about what it
(38:01):
is. And if you are an owner outthere, the same principles still
apply. Is the businessprofitable? Is it growing? Is it
sustainable? Is it going tocontinue to grow after your
departure, these are the thingsthat are most important for you
to look after. All right, John,thank you so much for your time.
Today, I'm going to take us now.
(38:24):
Take us now to our Rapid Round.
These are the same fourquestions we ask all of our
guests. So what's the one thingyou know now, John Martinka,
that you wish you knew when youwere 20?
John Martinka (38:33):
Life is about sales for most people, it
doesn't mean direct sales, likeselling cars or carpeting, and
it ties into one of my favoritebusiness books that I am now
started rereading. It's byDaniel Pink and called to Sell
Is Human. We're always selling.
Kids sell to their parents.
Parents sell to their kids.
Teachers are same thing, andselling to a boss, what a good
(38:57):
job you could do, or when you'rebeing hired, what a good person
you are. Sales is not a dirtyword. It's what we all do. Sell
each other, to our spouses, toif they became our spouses,
things like that.
Mick Spiers (39:13):
That's interesting.
We're selling and we'renegotiating every day. When you
stop back and look at it, wereally do, John, right. What's
your favorite book?
John Martinka (39:22):
Well, I just mentioned the cell is human by
Daniel Pink. But I would say, Ithink, you know, I've read a lot
of novels, and I'm not going tobring up things like that, but I
would say the book that reallyopened my eyes was a million
dollar consulting by EllenWeiss. I think it's now in about
its seventh or 10th or whatever.
Edition.
Mick Spiers (39:43):
Excellent. Okay, all right, thank you. What's
your favorite quote?
John Martinka (39:46):
I don't know about a favorite quote, Mick,
but I do have something on mydesk that I see every time I
look at my below my computerscreen, and it's four words and
it to be and it's about beingaggressive. Of shameless, faster
and edgy, so always be leadingwith those things.
Mick Spiers (40:06):
Yeah, like those words, and it's good reminder
that you got it sitting there onyour desk. I think going to
share a personal observationhere. I think far too often we
fall into the trap of walkingaround on autopilot instead of
being intentional. And what I'mhearing when I hear those words,
John is you're leaning into thatas your intention. This is how
(40:28):
I'm going to show up today withthe with those words. That's
really powerful.
John Martinka (40:32):
Yeah, get things done.
Mick Spiers (40:34):
Yeah, exactly.
Yeah. Very good. All right. Andfinally, there are going to be
people listening to the showthat are going through things
like this. They might be anowner themselves or or they
might be struggling withprocesses where their companies
are being sold or bought,whatever the case may be. How do
people find you? Find yourbooks, how to take advantage of
your services, if they'd like toknow more?
John Martinka (40:58):
Okay, so company website is nokomisadvisory.com.
the books are available onAmazon. And I tell you from the
I get small royalties everymonth from different places,
like where you are, in Australiaand Europe and mostly in the US
(41:22):
just put my name in. JohnMartinka, my latest book that my
daughter helped me write. She'sbeen working with me for seven
or eight years now, is exit,risk, style, grace and more
money. It's available on Kindle,paperback, and within the next
week or two, audio version.
Mick Spiers (41:40):
Oh, wow. Excellent job. That's great news. All
right. Well, thank you so muchfor your time today. Thank you
for sharing your wisdom with us.
There are it is a stressful timewhen when people go through
these things, but I think you'vegiven them a lot of things that
were some powerful reframingthat they can look at here in
terms of what they're gainingrather than what they're losing.
So thank you so much for sharingthat with us today, John.
John Martinka (42:03):
It was a pleasure to be here, and I will let me
just final thought that thetransaction of a company that
stress can be the same ifthere's a leadership change up
above, even with no ownershipchange, and you have to approach
it exactly the same as we'vetalked about.
Mick Spiers (42:20):
Very good, John, that's a great lesson to leave
us with. Thank you so much.
Another powerful conversationthere with John Martinka, thank
you for reminding us thatleadership through change starts
with empathy, transparency andcalm, consistency. Your
takeaways for this week,communicate early and
communicate often, even when youdon't have all the details, let
(42:42):
your people know what you doknow and when they'll hear more.
Silence breeds fear and in avacuum of information, people
draw their own conclusions. Bevisible and be available. Walk
the floor, hold space forquestions and acknowledge
emotions without over promisingoutcomes and reinforce the why
(43:04):
in times of uncertainty, peopleneed to hear the purpose behind
the change as much as theprocess of it. If this episode
resonated with you, pleasefollow or subscribe. Share it
with a colleague facing changeand leave us a quick review. It
really helps more leaders findthe show and stay tuned for our
(43:25):
next guest, Jeff Hancher, authorof firm feedback in a fragile
world, Jeff shares powerfulframeworks for having tough
conversations with clarity andcompassion, exactly the kind of
leadership skill you need whenguiding teams through uncertain
times. You won't want to missthis.
(43:47):
Thank you for listening to TheLeadership Project,
mickspiers.com a huge call outto Faris Sedek for his video
editing of all of our videocontent and to all of the team
at TLP. Joan Gozon, GeraldCalibo and my amazing wife Sei
Spiers, I could not do this showwithout you. Don't forget to
(44:08):
subscribe to The LeadershipProject YouTube channel where we
bring you interesting videoseach and every week, and you can
follow us on social,particularly on LinkedIn,
Facebook and Instagram. Now, inthe meantime, please do take
care, look out for each otherand join us on this journey as
we learn together and leadtogether.
How do you lead when the future feels uncertain,
when your people start asking,What does this mean for us? We
don't yet have all the answersyourself. Today, I'm joined by
John Martinka, who has spentdecades guiding leaders through
the human side of mergers andacquisitions. This conversation
(00:22):
isn't about deal terms orvaluations, it's about people.
We unpack how to keep teamsfocused when everything around
them is shifting, how tocommunicate honestly when you're
caught between legal silence andemployee anxiety, and how to
preserve trust, culture andmotivation when two worlds are
(00:44):
coming together. If you've everled through change, whether it's
a merger, restructure orleadership transition, this
episode will give you practicaltools and grounded wisdom to
steady the ship while the wavesare high.
Hey everyone, and welcome backto The Leadership Project. I'm
greatly honored today to bejoined by John Martinka. John is
(01:07):
better known as the escapeartist, and he helps small
business owners to create largeexits. So someone that's a
founder, they've built up abusiness over their entire life,
and they're looking to exit thebusiness and hand it over and
ensure that their business iswell looked after and they they
are well rewarded for all oftheir life's work. That's not
(01:30):
specifically what we're going tofocus on today. We're going to
focus on what it means to leadthrough those moments of change,
whether you're going through anacquisition, where your company
is being bought, or you areacquiring another entity. All of
this is change, and that changeis very unsettling for our
people and can be disruptive tothe business. So that's what
(01:52):
we're going to focus on today.
What does it mean to lead whenyou're going through a merger,
an acquisition, a divestment,etc. So without any further ado.
John, I'd love to hear from you.
Please say hello to theaudience, tell them a little bit
of your backstory and whatinspires you to do the work that
you do today, to help smallbusiness owners to exit with
(02:16):
grace?
John Martinka (02:17):
Well, it's a pleasure to be here, Mick, I'm
looking forward to a discussion.
It's, it's, it's a littledifferent than what I usually
talk about, but it's just asimportant to talk about
leadership within a a business,and what happens when a there's
a change in the business asanything else. My story is, if
we approach it from a businessperspective, I got into doing
(02:44):
what I'm doing, which is helpingpeople plan their exit of a
business, buy companies, sellcompanies through serendipity. I
was many years ago in the 90s. Iwas in a small Rotary Club, and
where I live in Kirkland,Washington. And the I got in, I
was young guy. I did really goodstuff. And they, you know, all
(03:07):
the older people said, Yeah,this guy's really something. And
we had to get him to bepresident. And I was president
the year after anothergentleman. And we were, it was a
brand new club. We were a littlecloser in age than with some of
the other more senior memberswho started it, and we hit it
off, and our wives hit it off,and one day, a little couple
(03:28):
years after that, he saidsomething along the lines of,
I've always thought you'd begood in this business. And one
thing that led to another, heknew I liked but didn't love
what I was doing, and I foundthat I love the variety. For one
what I do every It's not everyday. Every hour is different.
Every segment of an hour can bedifferent, from marketing to
(03:50):
holding a client's hand toresearching something, you name
it. I like educating. I thinkit's came from my mother. My
mother was a lady who could havegot a PhD in math and done a lot
of different things, but shewanted to teach, so she taught
math at the college level andloved educating people, and she
(04:12):
wrote a textbook that did verywell. And I've written five
books on my subjects of buyingand selling businesses, and just
tell prospective clients, Idon't care if you work with us
or not. I want you educated. AndI think third is just helping
people. I've come to realizethat what I do changes people's
(04:33):
lives. It truly does. If someonehas built that business and
they're going to sell it andmove on to what we call their
next great adventure in life,and do it the right way. It
means a lot. Or somebody who'sgoing to buy that company and
wants to, you know, have a gooddeal and take over a business
that that's going to changetheir lives. But also, what I
(04:56):
found is it changes a lot. Lotof times it changes the lives of
the employees. And a little bitof backstory on that is, you
take someone who founded abusiness and they've been at it
for it doesn't matter, 20, 3040,years, and they're set in their
ways, and you get a goodemployees who want to do more,
(05:16):
and the owner is saying, Well,why would I want to take that
risk? I'm making pretty goodmoney right now. I'm not working
that hard. And a buyer comes inand they want to grow it, and
those employees get energized,because that's the leadership
you talk about, is that buyercomes in and says, I'm not happy
with where it is. I love thebusiness, which is why I bought
(05:39):
it, or why we bought it, but wewant to, we want to energize it.
We want to grow. And mostemployees want to be part of
something like that.
Mick Spiers (05:52):
You're really good, John, so the first thing I'm
hearing is, I love that youfound purpose in your life, and
that you get great joy from whatyou're doing. And there's
something in there that you loveto educate. You love to help
people, to make it easier forthem, and to make it worthwhile.
The interesting thing there is,I'm going to say to you that if
(06:12):
I said to most people on thestreet, your business is about
to go through a an M and Aactivity, it's about to be sold
to a new owner, their firstreaction is fear. But it doesn't
have to be a bad story. Thiscould be a new injection of
capital, energy, vision,direction. This could be good
(06:33):
for everyone. It's good for theexiting founder. I hope that the
exiting founder, you know, landswhere they want it to land. Good
for the the incoming buyer whowants who's seen something in
the asset. And we might comeback to the word asset in in a
moment, they've seen somethingin the asset that they like, but
I'm sure that they're trying toaccrete value and and they can
(06:54):
see some ability to unlock valuein the in the future, and then
for the employees, that thiscould be a new adventure that
gives them what they've alwayswanted. So how do we get past
that fear factor? Though? FirstJohn, their first reaction is
definitely going to be all, notso sure about this.
John Martinka (07:11):
The Fear Factor is most prevalent with the
employees. And I use in my booksa three legged stool, and on the
top it says, employees stay, andeach leg is represented by the
employees, the owner and thebuyer, and they're all worried
that someone else is going tokick out that leg and the stool
(07:33):
is going to collapse. So thebuyer is worried the employees
aren't going to stay, and that'swhat they're buying. They're
buying people, you know, I don'tcare if it's in a huge
corporation or a small business,the people are what make it go.
The seller is worried his peoplethat have helped him build the
business for the last 510, 20years. However, whatever their
tenure is, are going to leaveand wreck his or her deal, and
(07:58):
the employees are worried thebuyer's gonna get rid of them,
which, you know, we're nottalking big corporate mergers in
my world, but that's rare.
People are buyers. Are buyingthe people, and it's bringing
them in at the right time,bringing, you know, not too
early, but not too late. I haveseen it backfire, where business
seller refused to tell anybody.
(08:21):
And a couple of his key peoplewere so mad when he announced
he'd sold the company, theysaid, you couldn't trust us. You
couldn't bring us in to help welike working here.
Mick Spiers (08:32):
Yeah, interesting dynamic there around the trust.
And the thing that I want topick up on here is when I said
they're buying an asset, theasset is the people. Yes, it is
the people. And if the peoplearen't part of that journey, I
think it would make it verydifficult for the incoming buyer
to to even value the company asto what, what am I buying here?
(08:54):
If, if the people aren't part ofthe process? John, so how can we
do that differently to makepeople, make everyone feel like
they're part of the process.
John Martinka (09:04):
Well, it goes from company to company and the
type of worker. Lot of times, ifit's a, say, a blue collar, a
factory or service people,they're not as concerned about
it. If it's more of a officewhite collar, I've seen them get
more more concerned, moreworried about what's going to
(09:27):
happen. And a lot of it has todo with the headlines. We read
headlines about big companiesand they're going to slash jobs
and all that. And it just isn'tlike that in the, you know, the
lower middle market, the middlemarket, because the people are
valued, like you just said, andthe machinery, the vehicles, the
(09:48):
working capital, the inventory,none of that is worth much
without people. Someone has torun the machine, drive the
truck, you know, handle thefinances, all of that.
Mick Spiers (10:00):
So the reframing here, I think, that I'm looking
for is, if you're on thereceiving end of this, if you're
you're a team member or a teamleader in a business that is
being sold, your first thoughtis probably going to be the fear
of loss. And what I'm hearingJohn is to is to reframe this
(10:21):
and go, Well, what are we goingto gain from this, and the fact
that I am the valuable assetthat's being bought here some,
some buyer has seen something inour team. We should almost take
this as a badge of honor to go,oh, this, this person is willing
to put their own money on thetable because they've seen our
work. They've seen our value. Soinstead of feeling the fear of
(10:44):
loss here, almost take it as acompliment that someone is
coming in and has seen somethingin you and wants to invest in
you and the team to grow intothe future. How does that sit
with you, John?
John Martinka (10:57):
Well, that's that's really good, and it's,
when do you bring people in?
I'm, I will say, I've been,I've, thinking back over the
last year, we've probably hadfive or six transactions we've
worked on, and every one ofthem, the seller brought in
people during the process, butalso at different levels, had
(11:20):
retention bonuses for thosepeople. I mean, one owner of a
small company, very profitablewith a small number of
employees, it was in the digitalspace. He brought them in right
away, and he said 15% of thesales price is going to you.
It's going to be a formula basedon seniority, job title, and
(11:43):
will be paid out at the end of123, and three years, so that
you will stay to help the buyerdid that right up front. Others
have had bonuses or retentionbonuses, again with a lag. You
don't want to give it to them atclosing, say, Hey, here's
$50,000 and they say, I see ya.
(12:06):
So it's you need to stay for ayear. And after a year there
are, they're usually prettyhappy with the new ownership and
and it works out. So it, it'show it's approached. It's like
anything else in life. Mick,it's, how do you approach it?
Well, you know, as a leader of acompany, the owner, you know,
(12:26):
this is one place where youwhere they have to take charge,
and they want to, they want toassure that things go well. They
may have a note from the buyerthat gets paid over time. They
don't want repercussions thatthe buyer, especially if it's a
larger entity or private equity,gets upset and comes back at
(12:49):
them and says, You didn't dowhat you could do to retain,
help us retain the employees, orthere's an earn out, meaning
they get paid based on betterperformance. So that leadership
comes into play there is notjust thinking about yourself,
but thinking about thecomponents that got you where
you are.
Mick Spiers (13:08):
So this feels like a win win for me, for sure,
John, the any of those formulasand techniques and incentives
that you're talking about, firstof all, if, if I'm getting a
retention bonus that says thatI'm going to get payouts in year
one, year two, year three,whatever it looks like. Now I do
feel like the valued assetthat's being purchased. I feel I
(13:31):
feel good about myself, first ofall, that I the fear of loss can
go away because this person isputting hard money on the table
to keep me around here. Then forthe purchaser, they're not
buying an empty asset wherethey're going to put money on
the table. And within threeweeks, everyone left. The person
was buying those people, and nowall of a sudden, they're not
(13:53):
around. So I can see a huge winwin there, in terms of that. The
other thing you said, thereabout then? Well, what about an
incentive for performanceimprovements? One thing I've
always thought here, John, I'mgoing to test this thought with
you, is that nearly always thebest ideas in a business as to,
(14:14):
what can we do differently? Whatcan we do differently to grow to
be more profitable, to be moreefficient, all this kind of
stuff. Most of those ideas comefrom the shop floor. I'm going
to say to you that there's goingto be many circumstances where
the founder was a very strongleader that had their own vision
and were almost blinkered inthat vision and may not have
(14:37):
been listening to the people onthe shop floor. Now the new
owner is going to come in withcuriosity and go, Hey, team,
tell me what you think. What doyou think we should do
differently? So you also throughthis process might you might get
a financial benefit of thebonuses that you're talking
about, but you might also get anew license to rethink the way
you do things, and get a chanceto do things that you've always
(14:59):
wanted. To do in the business,but the previous founder was a
little bit more very rigid intheir thinking. How does that
sit with you?
John Martinka (15:08):
Oh, that's absolutely right there. You
know, good employees want to do,do well, do more. Have career
advancement. You know, they're,they're, you know, you want to
have those a people for theirlevel of what they're doing, and
you want them to be challengingand wanting to grow. And I'll
give you a quick example of adeal from a number of years ago,
(15:31):
and the buyer came in. It was anindividual, and he convened a
four person management team,that, and they didn't know what
was going on. And they knew whatwas going on because, as a side
story, they were offered to buythe company, which they thought
was just great, until they foundout they'd have to sign on a
(15:56):
bank loan and personallyguarantee it, and everything
that goes with that. And thenthey said, No, maybe business
ownership isn't for us. So thatcomes back to ownership is
leadership, and not everyonewants that kind of leadership.
But he did a very short surveywith them, and this is one of
(16:16):
the things I won't forget,because one of the questions
was, what's the company'sbiggest weakness? And all four
had a similar answer. And Iremember he told me, one of them
said the biggest weakness justwalked out the door.
Mick Spiers (16:33):
Interesting.
John Martinka (16:34):
They were thrilled.
Mick Spiers (16:36):
So there's the opportunity there, and that's
not going to be universal, likefounders, you know, put their
heart and soul into businesses,but sometimes they trip over
their own shoelaces and and theymay not have the self awareness
that they are the bottleneckthat is throttling the capacity
of the business to grow. Theymight be the choke point in the
(16:59):
business, but they don't see ityeah.
John Martinka (17:02):
Yeah. If we move that into today's world, we're
going to have to wonder aboutleaders grabbing onto or not
grabbing onto AI to help theirbusiness. Some are going to go
right into it at a too fast, andit won't work. Some are not
going to go into it and get leftbehind, but others are going to
go into it or they measured pay.
Measured pace and know what theyneed it for, if you know if it's
(17:24):
suitable for their business. Andthey're going to move forward on
it, and they're going to,they're going to lead the
movement within their company touse tools like that.
Mick Spiers (17:38):
Yeah, and we shouldn't kind of what's the
word I'm saying here. Weshouldn't pigeonhole all all
founders to think that they'reall like that, but you could be
in that situation where thefounder had the right ideas for
yesterday but maybe does nothave the right ideas for
tomorrow, and may be stuck inold ways of thinking. And here's
(17:59):
an opportunity, here's a licenseto lean into a new world, an AI
powered world. How can we use AIto augment the business, not
replace the business, notreplace the people, but augment
the business and augment the waythat people work, to unlock more
value for everyone, to makeeveryone's life easier, to take
processes that used to becumbersome and stressful and
(18:22):
make them, make them a value,adding part of the business. So,
yeah, very good. So the firsttakeaway I'm taking away here,
John, is the reframing that ifyou're in this situation and
you're a senior leader in abusiness where the founder is
exiting and a new buyer iscoming in, instead of fearing
what you're losing, ask yourselfthe question, what might you be
(18:44):
gaining? And the gain might befinancial, it might be identity.
You might get a new position inthe organization, but it also
might be a license to try newthings under new leadership with
a new vision. The other mistakeI see a lot John, in all of
these situations, iscommunication in any kind of
(19:05):
change, whether it's a mergerand acquisition or a major
change to an organization,communication is something that
often falls down, usually ablack hole, usually a lack of
information, and in a vacuum ofinformation, people start
drawing their own conclusions,they fill in the blanks. What
advice could you give to leadersout there, when everyone knows
(19:26):
something's going on but noone's talking about it, how do
we get this communication right?
John Martinka (19:32):
Well, it, I think it starts with the owner or
leader, whether it's the youknow, it's the owner or a CEO
that the founder owner hashired, you come to realize that
they need to know what's goingon in the company. And you you
know, they use an analogy is,you know, there's, you know,
(19:55):
there shouldn't be anythingclose to an ivory tower. They
have to be communicated. Withthe employees. And you read
stories about some verysuccessful people in major
companies who are always talkingto the employees. They know who
they are. They know about theirfamilies. You know, there's a
there's a technique that youknow is known as management by
(20:17):
walking around, which means getout of the office and go see
what's going on and ask people,How are they doing? What would
they like to see different? Andit doesn't matter if it's
someone on the shop floor, youmentioned before, the shop floor
is where a lot of goodproduction improvements come
from. They don't always comefrom the outside advisor or
(20:39):
someone in the C suite. Theycome from the people who are
doing it every day.
Mick Spiers (20:45):
Yeah, really good.
So the first thing I'm hearingis to get out of that ivory
tower and walk around. What Iwant to kind of extrapolate
here, John, is that if you thinkthat you're keeping things well
kept secret, the chances arepeople already have an inkling
that something's going on. Andwhat I want to ask people is, do
you want them to draw their ownconclusions, or do you want to
(21:08):
control the narrative and getout there and have a dialog with
them? So I'm hearing, get offyour butt and go around, walk
the shop floor and have aconversation with people, and
then you can, I'm going to say,immediately, nip in the bud any
misinformation where people havedrawn the wrong conclusion, and
you can hear from them theirideas about about what could be
done throughout the process. Howdoes that sit with you, John?
John Martinka (21:35):
Well, I think it is. It's the old success, you
know, like the old suggestionbox in companies and people
would write things down, butit's a lot more effective if the
if you, as the owner or a anyleader, are hearing it
firsthand, directly from thatperson, because you're showing
interest, we all want to be paidattention to. And you, you do a
(21:56):
lot with leadership. You know alot about it, but it's you, you
lead. You know you need lead byshowing interest and empathy and
other things that make peoplefeel comfortable. I will give
you an example on the other endof it, and this is, you know,
(22:17):
you see companies like this, andI don't care if they have 10
employees, 50 employees, 100employees, whatever the number
is. And if you have a more of adictator, and this one client we
had, he would, here's what hewas known by, his drive bys. And
what he would do is he wouldhover over someone's desk, and
(22:39):
he'd watch him for a while, andhe what I had heard in work, you
know, talking to the employeeson a consulting project was and
he would all of a sudden juststomp away and go, don't worry
about that. It's just my money.
Well, how does that make peoplefeel? And you wonder why you
have turnover in companies likethat. When the economy is bad,
they stay when the economy turnsaround, they go get another job.
Mick Spiers (23:05):
Yeah, yeah, very good job. So what everyone
universally wants in the in theworkplace is to feel seen, to
feel heard and to feel valued.
And if you're sitting in thativory tower working on the exit
strategy without going aroundand talking to people, you're
going to alienate them, andyou're going to make them feel
unseen, unheard, not valued. Andthat's going to impact your
(23:27):
company at the time where youwant, you want things thriving
at the time that the new owneror the person that's putting
money on the table is looking tovalue the company, you want it
thriving on all cylinders. Thisis not the time to go into a box
and not talk to people. What areyour thoughts there?
John Martinka (23:48):
Oh, you're absolutely right. And when it
comes time to transition acompany, and it could be a
transaction, but could also bean owner, saying, I want to
bring someone in to run thiscompany so I can step back be
chairman of the board. A CEO isgoing to look at how are things
going. You know, two big thingsin analyzing a company and its
(24:09):
value, are customers andemployees? Are you treating the
customers well? Are they sticky?
Are they staying year after yearafter year? Are they paying you
enough for your product orservice to that the margins are
where they should be, and thenon the employees, it's, what's
the tenure? What's the turnover?
(24:31):
You know, there's always goingto be some turnover. I mean,
it's, it's inevitable, becausethings happen, people move, they
have a family situation, or theyjust, they see advancement
somewhere else. But when youstart seeing turnover at, you
know, instead of losing 10% ofpeople a year, it's a 25% and
we're not talking fast foodrestaurants or teenager
(24:54):
employees, but we're, you know,we're starting to see that high
turnover that gets reallyexpensive. Massive. And that
comes, that comes a lot fromculture. And I was on the board
of a company for many years, andunfortunately for the CEO, we
had to replace her, because theculture just wasn't there that,
(25:17):
you know, there, there wasturnover. People weren't as
productive as they could havebeen, and what the management
team just to summarize, theywould say, when there's a tough
decision to be made, she'll saysomething like, Oh, I'm gonna go
work on the strategic plan.
Well, that doesn't instillconfidence, and while her top
management team, only one wasone had left, but ended up
(25:42):
coming back. There was a lot ofturnover, involuntary turnover,
in the ranks of 100 some people.
Mick Spiers (25:55):
It's very expensive. It's expensive to the
operations, but it's also goingto be, yeah, what an A new
potential buyer might be lookingat and going, well, what am I
buying here?
John Martinka (26:04):
Yeah, and it's, it's a reputation out there too,
because word spreads. If youknow, if you've got, you're in
an industry, and you know you'repeople are seeing that they're
going to go somewhere and say,yeah, it just wasn't happening.
There would, no one would make adecision. No one. People aren't
happy, and then people won'twant to go work there good
(26:25):
people.
Mick Spiers (26:26):
You also put up that the customers see it too,
right? So if the if there is,because all of the customers,
they're people too, and theywant to do business with people
that they know, like and trust,and if they're trying to do
business with your company, andall they see is a revolving
door, and they see differentfaces every every few months.
Then they get frustrated, andthey go and start taking their
(26:48):
money elsewhere as well, andbefore you know it, you've
devalued what might have beensomething quite magical.
John Martinka (26:55):
Yeah, a new sales rep every 6 to 12 months doesn't
build a lot of loyalty.
Mick Spiers (27:01):
Yeah, yeah, exactly. All right. So one more
thing I want to explore here,John, let's put a hypothetical
to you, because this happens ifyou're one of those senior
leaders in an organization thatis up for sale, you might be
called upon to meet theprospective new owners, either
(27:23):
do a management presentation,might even just be an interview
situation. What recommendationsor advice could give to people
that get put in that situationwhere you're a senior leader in
a business and you're gettingasked to do a management
presentation to a prospectivebuyer? How do I prepare for
something like that, and what,what should be in my mind?
John Martinka (27:44):
Well, I'll give you an example that happened
earlier this year, because thefounder of the company we we did
a transaction. The founder hadhired a CEO a few years prior.
The CEO knew he was this.
Founder was going to be exiting,and so he was had intimate
knowledge of everything goingon, and to the point that when
(28:05):
in a purchase and saleagreement, and I don't care if
it's a, you know, nine figuredeal or a seven figure deal, or
there is going to be a sectionin the contract called
representations and warranties,and the owner, the seller is
representing, warranting thateverything they have told the
(28:28):
buyer and which is listed at theend of the contract in writing
is true and correct. So they'resaying it is true and correct. I
warranty it with repercussionsif I'm not telling the truth.
They asked the CEO to also signthe representations warranties.
Because every time they went tothe owner and said, What about
this? Or what about that? Hesaid, I don't know. Talk to the
(28:49):
CEO. So how does the CEO presentHimself to those buyers? Well,
first of all, by being himselfor herself and just saying,
here's how we do things. Whatcould have an answer to the
question, what do you think wecould do better? Why haven't you
done it? Sometimes it's just theowner is stubborn. Sometimes
(29:11):
it's capital. And if you have amore of a professional buyer for
a company, they are going tobring capital in to do those
things, you're going to improvethe processes to make that CEO's
job easier.
Mick Spiers (29:26):
So what I'm hearing here, John, I'm going to throw a
term at you that resonated in myhead as I was listening to you.
I'm going to say, well, beyourself. Was interesting. And
I'm going to say, tell them thepositive truth now. Now, what do
I mean by that? Bear with me fora second, John, and see if this
makes sense. Just be open andtransparent about what's
(29:47):
working, because you do want toshow that the company is
worthwhile buying, but be openand transparent about the things
that aren't working as well asyou'd like them to work, because
they're going to find outanyway. So they're going.
Presentations and warrantiesthat you're talking about. If
you I'm trying to paint a fewdifferent scenarios here, if you
present the company and go,everything's perfect here, and
(30:09):
then they buy it. First of all,they probably won't believe it,
but then they buy it, and thenthree months later, they find
out that everything that you putin that presentation was not
exactly true, then that's arepresentation and warranty
issue, and that's not going togo well. The other part that I'm
going to say is the the newbuyer is wanting to buy what's
great about the company, butthey're also wanting to buy what
(30:32):
they can fix, because anythingthat they can fix unlocks new
value in the in the company, andmakes it more profitable and
more meaningful generates newgrowth. So be honest about the
things that are not working.
Because every time the new ownerthat's going to put a check on
the table is going to value thecompany, they're looking for the
(30:52):
areas where they can unlockvalue by fixing those things. So
don't hide the things that arenot working well. Be honest
about what is working well, andthen be honest about the things
that are not working well, thepositive truth. How does that
sit with you, John?
John Martinka (31:08):
You said it probably a little more
articulate than I was saying it,but you have to tell the good
and the bad. Hopefully there'sno ugly. And it also comes down
to culture. And leadershipdetermines the culture, just
like the company I told you Iwas on the board of directors.
But other companies, you'regoing to have a management team,
(31:29):
and the management team needs totell the same story, the CEO,
the CEO, the CFO, etc. It'soperations person, and it's
different from company tocompany. To company. A
manufacturing business clientwas asked about the culture, and
one of the owners said, we'remanufacturing business. 90% of
(31:51):
our employees come in at sevenin the morning and do their job
and leave at 330 that's theculture. We give them lunch
every we provide lunch. EveryThursday, it's, you know, that's
good. Our operation, you know,our management people up there,
they do their job. They relate.
Well, everyone's on the samepage. Now, if you flip it or to
a company that has a lot of morewhite collar and sales people,
(32:14):
you know, you want everyone atthat level to be saying the same
thing about the culture. Theywant to they the leader needs to
set the goals of the company,the objectives so that everyone
knows what they are. Because ofa if a buyer comes in, and I
don't care if it's a buyer orjust an investor that want is
(32:35):
going to put capital in, theywant to know that everyone in
the company is working towardsthat same goal. You can't have
one manager saying, well, wewant to maximize sales, and
another say, no, we want tomaximize margin, and another one
saying, you know, we don't careabout that. I want to put out
the best product possible.
Mick Spiers (32:54):
Yeah, good. All right, very good. All right,
excellent, John. All right.
You've given us a lot ofinteresting thoughts. I'm going
to summarize those a littlelater. I'm going to ask one more
question here. Now, the majorityof people listen to the show are
senior managers in companieslike this, and that's why we
focused on this. But I do knowfor sure that we do have some
founders that listen to the Seanshow John, and they might have
(33:18):
built their company, and, youknow, put their heart and soul
into it over many years, andthey are thinking, it's about
time to exit. What they oftenstruggle with is just to value
what they've built. If a founderhas put, you know, 1020, 30
years of their life in thiscompany, and they're at the
(33:38):
point where, okay, I am going toexit now it's time for me to go
to my next adventure, which mayor may not include retirement.
How does someone make arealistic valuation of what
their company is worth ifthey're getting to that stage of
their life?
John Martinka (33:56):
Well, the number one factor is almost always the
profitability of the company.
More profits, the higher thevalue. And then you look at
other things, like, is therecustomer concentration you have?
I just saw someone talking, orread about them talking about a
company that had top customerwas 70% and the second customer
(34:19):
is 20% that's a risk that lowersvaluation. Employee turnover. We
talked about is the companygrowing. A growing company is
going to get more with the sameprofit level than one that's
flat or been going down the lastfew years. And we talk about
leadership, leadership for afounder, even for a CEO, is
(34:42):
getting themselves out of asmuch of the day to day as
possible, even if it's not a,you know, not a privately owned
company, but one that could facea an acquisition from private
equity or bigger firm. You. Youdon't want the CEO to be too
dominant. And I recently met agentleman who has referred to
(35:04):
me, and he sold his company for$90 million 90 million US
dollars. His transition with thebuyer has been a lot more
involved than he ever thought itwould be. And he said, It's my
fault. I was too important tothe company. There are too many
(35:25):
things. I was the one who coulddo them and did them. So
leadership or owner dependencyis a big deal, but it really
comes down to profits and thenall those other factors, you
know, determine are you going toget x or you're going to get
why?
Mick Spiers (35:45):
Yeah, really good, John. So I'll tell you what I'm
hearing. And first of all, I'mreally pleased to hear that the
normal factors are still inplay. Why do I say that we've
seen some valuations of techcompanies. I'm talking big tech
companies here where thevaluation they've never even
turned a profit, and yet theirvaluation is based on future
(36:08):
potential that you some of thenumbers are just mind boggling,
and everyone scratches theirhead, and I don't want small
business owners to think thatcould possibly apply to them. So
the basics are what stillapplies. Are you profitable? Are
you growing? Are you do you havea sustainable customer base that
that is not just a singlecustomer? Do you have low staff
(36:32):
turnover, and is the businessresilient and stable enough that
you've done the right successionplanning, that you aren't the
linchpin to the success of thebusiness that your leadership
team and your your group aregoing to continue to do what
they do, maybe even better thanwhat they were doing. It when
when you leave, are the thingsthat I'm hearing here. John, all
(36:55):
right, very good. I'm going tosummarize a few things here. I'm
going to say that anyone in theaudience that's going through
this process, and you hear thatfirst murmuring of, oh, the
company's for sale. The firstthing to do is to reframe the
fear of, what am I losing, tothink about what might I be
gaining from this. The secondbig learning for me here was
(37:19):
about the communication. Fillthe communication gap. People
know they're clever. They knowthat something's probably going
on. Go and have a dialog withthem, even if there's some
things that you can't share withthem, go and have a dialog with
them about what's going tohappen if someone is called upon
to do a management presentationto prospective owners, the best
(37:41):
thing you can do is be open andtransparent about what's
working, what's not working. Anyideas that you might have as to,
you know, if only we had alittle bit more investment on in
this area, we could grow here.
Have a bit of vision of what thefuture could look like, but just
be open and transparent. Don'ttry to oversell it. Don't try to
undersell it just be yourselfand be authentic about what it
(38:01):
is. And if you are an owner outthere, the same principles still
apply. Is the businessprofitable? Is it growing? Is it
sustainable? Is it going tocontinue to grow after your
departure, these are the thingsthat are most important for you
to look after. All right, John,thank you so much for your time.
Today, I'm going to take us now.
(38:24):
Take us now to our Rapid Round.
These are the same fourquestions we ask all of our
guests. So what's the one thingyou know now, John Martinka,
that you wish you knew when youwere 20?
John Martinka (38:33):
Life is about sales for most people, it
doesn't mean direct sales, likeselling cars or carpeting, and
it ties into one of my favoritebusiness books that I am now
started rereading. It's byDaniel Pink and called to Sell
Is Human. We're always selling.
Kids sell to their parents.
Parents sell to their kids.
Teachers are same thing, andselling to a boss, what a good
(38:57):
job you could do, or when you'rebeing hired, what a good person
you are. Sales is not a dirtyword. It's what we all do. Sell
each other, to our spouses, toif they became our spouses,
things like that.
Mick Spiers (39:13):
That's interesting.
We're selling and we'renegotiating every day. When you
stop back and look at it, wereally do, John, right. What's
your favorite book?
John Martinka (39:22):
Well, I just mentioned the cell is human by
Daniel Pink. But I would say, Ithink, you know, I've read a lot
of novels, and I'm not going tobring up things like that, but I
would say the book that reallyopened my eyes was a million
dollar consulting by EllenWeiss. I think it's now in about
its seventh or 10th or whatever.
Edition.
Mick Spiers (39:43):
Excellent. Okay, all right, thank you. What's
your favorite quote?
John Martinka (39:46):
I don't know about a favorite quote, Mick,
but I do have something on mydesk that I see every time I
look at my below my computerscreen, and it's four words and
it to be and it's about beingaggressive. Of shameless, faster
and edgy, so always be leadingwith those things.
Mick Spiers (40:06):
Yeah, like those words, and it's good reminder
that you got it sitting there onyour desk. I think going to
share a personal observationhere. I think far too often we
fall into the trap of walkingaround on autopilot instead of
being intentional. And what I'mhearing when I hear those words,
John is you're leaning into thatas your intention. This is how
(40:28):
I'm going to show up today withthe with those words. That's
really powerful.
John Martinka (40:32):
Yeah, get things done.
Mick Spiers (40:34):
Yeah, exactly.
Yeah. Very good. All right. Andfinally, there are going to be
people listening to the showthat are going through things
like this. They might be anowner themselves or or they
might be struggling withprocesses where their companies
are being sold or bought,whatever the case may be. How do
people find you? Find yourbooks, how to take advantage of
your services, if they'd like toknow more?
John Martinka (40:58):
Okay, so company website is nokomisadvisory.com.
the books are available onAmazon. And I tell you from the
I get small royalties everymonth from different places,
like where you are, in Australiaand Europe and mostly in the US
(41:22):
just put my name in. JohnMartinka, my latest book that my
daughter helped me write. She'sbeen working with me for seven
or eight years now, is exit,risk, style, grace and more
money. It's available on Kindle,paperback, and within the next
week or two, audio version.
Mick Spiers (41:40):
Oh, wow. Excellent job. That's great news. All
right. Well, thank you so muchfor your time today. Thank you
for sharing your wisdom with us.
There are it is a stressful timewhen when people go through
these things, but I think you'vegiven them a lot of things that
were some powerful reframingthat they can look at here in
terms of what they're gainingrather than what they're losing.
So thank you so much for sharingthat with us today, John.
John Martinka (42:03):
It was a pleasure to be here, and I will let me
just final thought that thetransaction of a company that
stress can be the same ifthere's a leadership change up
above, even with no ownershipchange, and you have to approach
it exactly the same as we'vetalked about.
Mick Spiers (42:20):
Very good, John, that's a great lesson to leave
us with. Thank you so much.
Another powerful conversationthere with John Martinka, thank
you for reminding us thatleadership through change starts
with empathy, transparency andcalm, consistency. Your
takeaways for this week,communicate early and
communicate often, even when youdon't have all the details, let
(42:42):
your people know what you doknow and when they'll hear more.
Silence breeds fear and in avacuum of information, people
draw their own conclusions. Bevisible and be available. Walk
the floor, hold space forquestions and acknowledge
emotions without over promisingoutcomes and reinforce the why
(43:04):
in times of uncertainty, peopleneed to hear the purpose behind
the change as much as theprocess of it. If this episode
resonated with you, pleasefollow or subscribe. Share it
with a colleague facing changeand leave us a quick review. It
really helps more leaders findthe show and stay tuned for our
(43:25):
next guest, Jeff Hancher, authorof firm feedback in a fragile
world, Jeff shares powerfulframeworks for having tough
conversations with clarity andcompassion, exactly the kind of
leadership skill you need whenguiding teams through uncertain
times. You won't want to missthis.
(43:47):
Thank you for listening to TheLeadership Project,
mickspiers.com a huge call outto Faris Sedek for his video
editing of all of our videocontent and to all of the team
at TLP. Joan Gozon, GeraldCalibo and my amazing wife Sei
Spiers, I could not do this showwithout you. Don't forget to
(44:08):
subscribe to The LeadershipProject YouTube channel where we
bring you interesting videoseach and every week, and you can
follow us on social,particularly on LinkedIn,
Facebook and Instagram. Now, inthe meantime, please do take
care, look out for each otherand join us on this journey as
we learn together and leadtogether.
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