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

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.

Article:

From Fortune 500 to Yoga Mats to Financial Fixer: Rosco Graves Tells All

You don’t often hear about someone leaving Deloitte to open a yoga studio, but Rosco Graves did just that. And the story isn’t just quirky—it’s instructive. On this episode of How2Exit, Graves walks us through his unlikely journey from Big Four auditor to the founder of Polaxis, a firm that helps small businesses get their financial act together before sale or scale.

The core message? Numbers don’t lie—but if you don’t know how to read them, they’ll kill your deal faster than you can say “add-back.”

Most small business owners, Graves argues, don’t understand their books, let alone how to make them tell a compelling story to a buyer. They run personal expenses through the business, underreport income to dodge taxes, or slap together amateur financials that fall apart under scrutiny. And when it comes time to sell? “They’re trying to save a quarter on taxes,” Graves says, “and losing five dollars on valuation.”

Buyers beware: Graves pulls back the curtain on shady tricks like deferred payroll taxes, inventory stuffing, and artificially juiced revenue—all of which look great in a quick P&L review but hide ugly surprises under the hood. “I’ve seen people stop paying taxes to boost EBITDA,” he says, “hoping to sell before the consequences hit.”

He’s not just pointing fingers, though. Graves is equally critical of well-meaning but financially illiterate owners who show up to meetings with "two sets of books" or can't explain why their balance sheet hasn’t changed in three years. “You’re not helping yourself,” he says. “Buyers want credibility. If you lie to the IRS, why would they trust you?”

The solution? A finance team that understands M&A—not just tax prep. A strong CFO, even on a fractional basis, can translate raw numbers into a narrative buyers trust. And if you're a seller? Start cleaning up your books at least 12 months before listing. “The story your numbers tell,” Graves says, “has to match the one you're telling with your mouth.”

Graves also dives into the psychological side of acquisitions. Culture clashes, employee churn, and clumsy leadership transitions can wreck post-acquisition integration. “If you're the new owner,” he warns, “you're automatically the bad guy.” His advice: don’t change anything in the first 90 days. Build trust first. Then fix things with buy-in from your team.

This episode is a masterclass in what buyers need, what sellers miss, and how financial storytelling is the real driver of business value. Whether you're prepping for an exit or hunting for your next acquisition, Rosco Graves' insights are a flashlight in the fog.

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