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  • Entrepreneurial Opportunity is Often The Box Not What is Inside

    Sep 24, 2019

    Entrepreneurial Opportunity is Often The Box Not What is Inside

    Lunches are currently being packed by parents across the United States for children who recently returned to school.  One frequently packed element in the lunches are juice boxes. Who among us can say they haven’t enjoyed a beverage from a box? Did you know that the man, Hans Rausing, who invented this simple square carton to store and distribute milk, juice, soup, and other consumable liquids famously surpassed the Queen of England according to a Sunday Times list in 1994 of the wealthiest people in Great Britain. Today over 500 million of his creation, Tetra Pak containers, are consumed around the world daily.  Unfortunately, this visionary entrepreneur passed away on August 30, but his simple invention will impact our lives into the foreseeable future.  

    Mr. Rausing provides an excellent case example that often the road to success as an entrepreneur is not found inside the box, but in the box itself.  IBA, as the oldest business brokerage firm in the Pacific Northwest, has facilitated 100’s of sales of privately held companies, where a business model was built successfully on supporting another industry.

    The following are a few examples of companies represented by IBA that generated revenues & profits through supplying or servicing products created by others.

    Wine in a Box – IBA has its own box to riches transaction story.  20 years ago, quality box wines did not exist on store shelves. The only wines sold in boxes were cheap, mass produced wines of limited quality.  IBA client, Joel Tefft, changed that in the state of Washington around the start of this century. Recognizing the strength of the emerging retail powerhouse, Costco, winemaker Joel Tefft went to the company with an idea, 5 bottle boxes of blended Washington wine produced by Tefft Cellars from the Rattlesnake Hills AVA. Designing a bladder system for the box and filling it with masterly blended red and white wines purchased from name wineries with extra barrel and tank production to supplement his own wine production, Mr. Tefft soon introduced the first quality box wines to Costco shoppers. The product was an instant success and pallet orders for stores in multiple states quickly followed. For a period of time, Tefft Cellars iconic box featuring a heron could be found in kitchens, on boats & RV’s, and at tailgate parties throughout the Pacific Northwest.  Recognizing that success generates imitation, Joel Tefft contacted IBA and employing our winery transaction division sold his company and the associated real estate for a premium value before his coveted shelf space was compromised by wineries producing box wines with more production capacity and capital.

    Fishing Industry Drayage – A decade ago many savvy investors recognized that an ancillary investment to Amazon (Valued at under $120 in October 2009), if you believed in their business model, was to invest in the company that would be transporting their products to consumers, United Parcel Service (UPS).  In October of 2009, the stock of this logistics and transportation company could be bought for less than $55 per share. Today, UPS stock has a market value of over $120. A 118% increase in value over the past decade, which when combined with the company’s 3.24% dividend results in an approximately 15% total return on the investment on an annual basis.  An investment that would look good in anyone’s retirement account. Similar transportation industry opportunities exist in the private sector to provide timely delivery services for a spectrum of industries wishing to subcontract out logistics and transportation to a third party. Earlier this year, I provided business valuation and negotiating support for a company that transported fresh fish from the docks to mainland fish processors.  In this situation, vertical integration negotiations were occurring where the drayage company was sought for acquisition by one of its largest customers in an effort to bring the service “in-house”, gain dedicated, skilled drivers, and experienced logistic support management. The negotiations were put on hold during the summer to allow both companies to focus on their business models during the busy season. It is anticipated that negotiations will be initiated again and concluded by the end of the year. 

    Medical Equipment Repair & Maintenance – In June of 2015, I was coaching little league baseball with a friend, Doug Kreysar, who was a significant shareholder in Radiant Vision Systems.  Doug shared with me one day during practice that his company was being acquired by Konica Minolta (https://www.konicaminolta.com/newsroom/2015/0624_01_01.html).  The transaction rewarded my friend financially for his hard work and provided Radiant Vision Systems with an opportunity to compete internationally with much larger companies in the public sector.  What was the service that Radiant Vision Systems provided that was deemed of high value by Konica Minolta? Radiant Vision Systems is the company that created the tool to evaluate light, color, manufacturing integrity, and surface quality on IPhones & Samsung Galaxies. It is this tool that insures that the cell phones inspected by this process are received favorably in the quickly evolving personal communication device marketplace.  This transaction illustrates the opportunity that exists for entrepreneurs to provide quality control, maintenance, and repair services for original equipment manufacturers (OEM’s). One transaction facilitated by IBA in this space where a pair of entrepreneurs identified an opportunity to service and repair equipment, involved the sale of Northwest Biomedical Equipment. Northwest Biomedical Associates founders, Curt Given and Tim Justice, identified that hospitals needed regular repair and service for their foundational machines such as autoclaves and anesthesia machines.  However, the beauty of their business model was that the machines rarely broke down and hospitals lacked the staff, knowledge, and experience to service their own machines. An outsourced marketplace was created with hospitals for bi-annual service on the machines by Northwest Biomedical on a reoccurring basis allowing for cost effective scheduling and allocation of staff. Service & repair can be very efficient and profitable for entrepreneurs if it can be prescheduled on a reoccurring basis. I anticipate many readers participate in such service agreements for their furnaces, sprinkler systems, and window cleaning.  All service niches where IBA has sold businesses for clients.  

    Every year despite having successfully completed over 4000 transactions involving the sale of businesses since 1975, IBA has an entrepreneur walk through our door seeking to sell a business providing a good or service that we have not represented previously.  If the business model is sound and the company profitable a buyer likely exists interested in acquiring the entity. A value simply needs to be established for the business and a deal negotiated. If you are a business owner wishing to sell a company that supports other companies or an industry, we would welcome the opportunity to learn about your business and provide an overview of our client services. 

    IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”. 

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