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

How2Exit: Buy, Don't Build - M&A of Small Businesses

Watch Here: https://youtu.be/PnKoDPkgKFI
About the Guest:
Rosco Graves is the founder of Polaxis Professional Services and a former Deloitte advisor. He’s navigated both the boardrooms of Fortune 500 companies and the trenches of small business ownership—including launching a yoga franchise. Today, he helps small business owners prepare financially for growth, funding, and exits, specializing in turning messy books into stories buyers want to hear.
Summary:
In this episode of How2Exit, Ron sits down with Rosco Graves—former Deloitte advisor turned entrepreneurial CFO—to unravel the financial blind spots that plague many small businesses. From owning a yoga franchise to running Polaxis Professional Services, Graves offers rare insight on what owners get wrong when starting, running, and especially exiting a business. The conversation is an eye-opening roadmap for founders, buyers, and anyone serious about unlocking business value through financial clarity.
Graves doesn’t just talk balance sheets—he breaks down the real-life implications of sloppy books, sketchy add-backs, and why sellers often sabotage their own exits to save a few tax dollars. This is one of the most tactical and truth-heavy episodes of the season.
Key Takeaways

1. 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.
2. You’re Not Fooling Anyone with Your Add-Backs – There’s a line between aggressive adjustments and devious manipulation. Sophisticated buyers will catch it.
3. 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.
4. Sloppy Books Kill Value – Underreporting income to avoid taxes might save you 30 cents today but cost you $3 per dollar at exit.
5. Inventory Stuffing and Payroll Gimmicks Are Red Flags – Buyers should watch for sudden revenue spikes without corresponding operational changes.
6. 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.
7. 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.
8. Sellers Often Sabotage Trust – If you’ve lied to the IRS, why would a buyer trust you? Reputation, transparency, and consistency are deal-makers.

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Contact Rosco on
Linkedin: https://www.linkedin.com/in/roscograves/
Website: http://www.polaxis.co/
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