Entrepreneurship a Pastime, Competitive Sport, and Investment Activity

Jul 1, 2016

This 4th of July weekend many people will visit baseball parks around the United States and watch a game of “America’s Pastime”, baseball. I will be attending a game between the Seattle Mariners & Baltimore Orioles at Safeco Field with my father. I anticipate at one point of the game John Fogerty’s baseball anthem, Centerfield, will play with its famous lyrics, “Oh, put me in Coach, I’m ready to play, today. Put me in, Coach, I’m ready to play, today. Look at me, I can be Centerfield.”

The lyrics were written in reference to playing baseball, but they could just as easily be applied to entrepreneurship or buying a business. Each week numerous individuals, privately held companies, and private equity firms contact IBA desiring to evaluate the businesses IBA is representing for sale. The motivations of the parties who contact IBA interested in buying a business can be divided into three potential groups, with specific business buyers being able to be categorized in 2 or 3 of the groups simultaneously.

The first group of business buyers are the people who want to own a privately held company because business is their pastime of choice. Pastime being defined as something you enjoy doing. This is a common characteristic of both sellers and buyers in the business sale transactions facilitated by IBA. The desire to do something they enjoy motivates many entrepreneurs to buy a business. There is no replacement for the pleasure achieved successfully guiding the helm of your own company into the future. The joy of entrepreneurship also is frequently a deterrent to our clients selling their businesses, for they know when IBA successfully guides the business into the harbor where a sale will be completed that the ability of that owner to take the business on another voyage will have ended.

The second group of business buyers are people who want to own a privately held company because they want to participate in the ultimate competitive sport, business. Wins & losses in team sports occur based on the ability & performance of the players on the field. The same is true in business with wins & losses being tracked with revenues & profits. Revenues & profits are built on a foundation of offering quality products and/or services; effective marketing & management; assembling a staff of knowledgeable, experienced, skilled individuals; innovation; and forecasting & accounting acumen. Many desire to test their ability in this unforgiving environment. The talented ones will retire with a legacy of success on multiple levels including a sale price for their company reflective of the results documented in the historical record, the tax returns of the company.

The final group of business buyers are people who want to own a privately held company because they wish to generate a return on investment that cannot be achieved traditionally in the equity or real estate marketplaces. It is common for buyers of businesses from IBA to earn returns on investment on their acquisitions of between 20 – 50%. Buying or owning a business in the United States is one of the fastest ways to accumulate wealth. However, with reward always comes risk and competitive success is a requirement to maximize return on investment.

As a business owner, I have great respect and admiration for anyone who is willing to put on a glove and play centerfield as an entrepreneur. I tip my cap this weekend to everyone who took the risk and runs their own business. You are the foundation of America’s economy. We would not be where we are as a nation without you.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media and the mergers & acquisitions community on confidentiality and any other subjects relevant to the purchase & sale of a business.