A foundational element to being able to provide sage advice is relevant knowledge and experience. IBA, as a nearly fifty-year-old business brokerage and commercial real estate firm that has facilitated almost 4300 transactions, is blessed to have accumulated significant knowledge and experience related to valuing, negotiating, and closing sales of privately held companies and family businesses among its double-digit team of professional intermediaries working out of its four offices in Washington & Oregon to share with our clients. However, to quote Malcolm Forbes, “The dumbest people I know are those who know it all.”
The reality is that accumulated knowledge and experience are a wonderful foundation for providing professional counsel, but they are not the end. For that reason, IBA, on an ongoing basis, invests significant time, effort, and resources in corporate education activities, so as M&A intermediaries we are current on changes occurring related to business sales, and real estate transactions in the law, tax policy, financing, and other venues. Examples of what has occurred internally recently include hosting a roundtable discussion featuring numerous top CPA and Law firms to discuss strategies associated with mitigating the new Washington state capital gains tax for clients, having two separate banks with market leading SBA loan departments provide overviews of the changes in policies & procedures associated with the program going into place over the next couple of months (The most significant changes to the program in years), and attending seminars on the new real estate law changes being implemented in Washington at the start of 2024.
IBA obtains this knowledge with intent to share following the guidance of the Dalai Lama who advised, “Share your knowledge. It is a way to achieve immortality”.
IBA does not seek immortality, although we aspire to reach a century of service as trusted advisors to the entrepreneurial community. We do seek to help people achieve the best possible outcomes and make intelligent decisions from positions of knowledge.
One decision business buyers need to make is, where to buy a business?
Our research has led us to believe that although great opportunities continue to exist in the urban centers of the Pacific Northwest, significant upside opportunity presently is being created in the robust economic gardens growing in the suburbs and exurbs.
The following is some of the research that has led us to that conclusion:
Mahatma Gandhi, one of the greatest leaders in world history, famously said, “The future depends on what you do today”.
What is the most important ingredient for entrepreneurial success?
This is true whether the business model is an auto repair shop, HVAC company, restaurant, or gym.
Business valuation is frequently a backward-looking exercise. That means that if organic growth is occurring for businesses as a result of an increasing population in the area that value propositions likely exist for the acquisition of established, successful businesses in the area. After all, as a business buyer do you really care what the company did in 2022 in terms of profitability, or is what it will do in 2024 with you as owner more important?
Here is a simple numeric example:
A company in 2022 had gross revenues of $5,000,000 ($13,700 per day). The discretionary owner cash flow was 15% or $750,000. If revenue increased just 3% per year (A little more than $400 a day) each of the next three years to $5,150,000 in 2023, $5,304,500 in 2024, and $5,463,635 in 2025, and if the same 15% owner cash flow figure existed the figure would have increased to $819,545 based on the fact a “rising tide raises all boats” by 2025. A company purchased in 2023 based on 2022 financials would by 2025 be viewed as a bargain acquisition. Insider Note: The reality in most companies is that increased revenue frequently arrives with incrementally larger associated profit because fixed expenses like rent, insurance, etc. frequently increase at a much slower rate than revenue growth. Businesses also frequently increase in revenue post-acquisition in retirement sales due to increased enthusiasm by leadership, additional labor contribution by ownership, and technology enhancement.
What factor limits the ability of a company to grow more than any other?
THE ABILITY TO FIND AND HIRE EMPLOYEES
If the suburbs and exurbs are growing in population, what is simultaneously increasing? The answer is the number of available people seeking employment.
There are many incentives to work closer to home ranging from children in school to wasted productive time commuting to and from work. Seattle & Portland traffic is getting worse (Commute times in Seattle rise as Amazon, others return to office | king5.com and Long Commute? In Portland, You’re Not Alone. (wweek.com)) and the drive distances to affordable housing are getting longer. It is not a hard sale for a business owner offering employment & equal pay closer to home, especially if it is with a growing company with upside opportunity, resulting in 5 hours a week (The cost of a 30-minute commute twice a day), 20 a month, and 240 additional hours a year of reduced time sitting in traffic. What could you do with an extra 240 hours a year? I suspect something better than sitting in your car reading bumper stickers. What could you do as an entrepreneur, if you had the ability to positively attract experienced, skilled staff without having to offer financial incentives above market?
Where are modern facilities available to rent, buy, or build at affordable prices?
THE SUBURBS AND EXURBS
Two of the most significant components that raise real estate and rent prices are scarcity and dirt values. New buildings constructed with modern technology and utility infrastructure provide favorable work environments. New buildings often offer incentives (Favorable rent and tenant improvement allowances) to early tenants. New construction allows for company specific customization. Housing is also commonly cheaper for employees to rent or purchase in the suburbs and exurbs. New is frequently preferred when it comes to real estate making areas outside of the metropolitan core attractive for entrepreneurship, employment, and living.
IBA as a professional service firm offers two ways for people to become entrepreneurs. The first is through the purchase of an existing company we are representing for sale. Unfortunately, we cannot order inventory, so annually it is unknown what industries and locations our projects will be sourced. The following page of our website provides a list of the industries commonly represented by the firm for sale: Industries Served – IBA Business Brokers (ibainc.com). IBA also has a franchise brokerage division that allows entrepreneurs to place businesses in specific locations to take advantage of growing populations of consumers and new real estate opportunities: https://ibainc.com/what-we-do/franchise-sales/. This division has the ability to sell franchises in all fifty states.
If you are interested in selling a business anywhere in the Seattle metropolitan area from Arlington to Spanaway or the Portland metropolitan area from St. Helens to Bethany, we would welcome the opportunity to provide an overview of our services. Buyer demand is presently high. If you want to buy a business or franchise, your inquiry is equally welcome. All conversations with IBA are held in strict confidence.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, real estate, legal, and accounting 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”.