E280: From Yoga Studio to EBITDA Truths: The Hidden Financial Traps in Small Business Exits

Most Small Business Owners Don’t Understand Their Financials – Many don’t know what “good books” look like, and believe that filing a tax return is sufficient for running or selling a business.

You’re Not Fooling Anyone with Your Add-Backs – There’s a line between aggressive adjustments and devious manipulation. Sophisticated buyers will catch it.

Clean Financials Win Deals – Having a finance-savvy team member who can explain your numbers is more valuable than having the best broker in the world.

Sloppy Books Kill Value – Underreporting income to avoid taxes might save you 30 cents today but cost you $3 per dollar at exit.

Inventory Stuffing and Payroll Gimmicks Are Red Flags – Buyers should watch for sudden revenue spikes without corresponding operational changes.

Buying Existing Businesses Beats Starting from Scratch – Graves advocates for acquiring operational businesses over new franchise launches due to lower risk and immediate cash flow.

You Can’t Outsource Sales if You Don’t Understand It – Founders must embrace being generalists early on and learn the core levers of their business.

Sellers Often Sabotage Trust – If you’ve lied to the IRS, why would a buyer trust you? Reputation, transparency, and consistency are deal-makers.