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  • Opportunistic Entrepreneurship – Excellent Timing & Superior Execution Can Produce Big Profits

    May 18, 2021

    Numerous fortunes have been made by entrepreneurs who had the right product or service at the right time to satisfy growing or changing buyer demand.  A recent Wall Street Journal article (https://www.wsj.com/articles/squishmallows-carry-on-where-furbies-left-off-it-just-kind-of-exploded-11619794249) highlighted the presently robust marketplace for Squishmallow plush animals.  As a business broker in my 28th year of facilitating transactions involving the sale of privately held companies and family businesses, the Squishmallow phenomenon currently taking place in the retail sector is very reminiscent of the Beanie Babies retail opportunity that America experienced in the 1990’s which peaked in 1998 with $1.4 billion in sales.  Many smart retailers in the Pacific Northwest including Corbet & Joanne Richter, former owners of the Alpine Blossom, a combination Hallmark shop and florist in North Bend, and a past IBA client intelligently assessed the opportunity placing significant orders for the product line becoming for a period of time a destination store for collectors and resellers of Beany Babies while simultaneously generating valuable customer foot traffic that was converted into alternative sales, new customers, and an enhanced level of revenues and profits for the company.

    An entrepreneurial tide in a specific market sector has the possibility to lift economic boats for weeks, months, or years before it stabilizes or diminishes.  The Apple iPhone sold just under 1.5 million units worldwide in 2007.  Today, it consistently sells 210 – 230 million units annually (• iPhone sales by year | Statista).  Unlike Beanie Babies which were popular at a specific time & place, iPhones are anticipated to hold major market share in their retail segment into the foreseeable future, but like all products they will eventually be replaced.

    It is important as an entrepreneur to assess opportunities and execute appropriately for the situation.   Execution can involve investment in inventory, expansion to additional locations or online advertising programs, acquisition of additional equipment or infrastructure, or hiring additional staff.  It can involve purchasing a company or franchise in an emerging market segment, industry, or geographic area.  It can also impact the timing of an exit strategy related to the sale of a company, as businesses command the highest values when they are on an upward trajectory for sales and profits.

    A good case example of a mature industry that regularly undergoes evolution is the fast serve haircare industry.   The first major brand in the industry was Supercuts which was introduced to the marketplace in 1975 by Frank Emmett and Geoffrey Rapport in Albany, California as a quick, inexpensive hair cut option available without an appointment.  The business model revolutionized the industry spreading nationwide through franchising.   Today, approximately 2500 units of the business model remain worldwide.  Supercuts Franchise Information (entrepreneur.com) Innovating and enhancing on the Supercuts business model, Great Clips was born in 1982 by David Rubenzer and Steve Lemmons in Minneapolis, Minnesota. The brand today has approximately 4500 locations worldwide eclipsing its predecessor in the industry in locations.  https://www.greatclips.com/about-us/history  However, innovation is far from complete in quick, convenient haircare.  In 1993 in Austin, Texas entrepreneur Gordon Logan decided to essentially combine haircuts with a sports bar in the creation of Sport Clips.  Today, despite operating in a very mature industry Sport Clips is recognized as one of the fastest growing franchises in the nation (Sport Clips Haircuts ranked as a “fastest-growing” franchise eighth year in a row by Entrepreneur magazine) with approximately 1500 locations presently serving customers.  Taxes and death are historical givens in life, so is the need for a haircut creating an approximately $1.15 billion United States industry and the opportunity for many entrepreneurs and employees to earn good incomes in this personal care niche.

    Strong entrepreneurs are aware of local, regional, and national trends and position themselves to take advantage of consumer demand for products and services.  A good example of one of these entrepreneurs was Michel Brotman, the founder of Simply Seattle, https://www.simplyseattle.com/.  Michel created the “go to” retailer in Seattle for Seattle centric merchandise whether it was team branded merchandise supporting Mariners, Seahawks, or Sonics teams or pop culture passions like Grey’s Anatomy or Sleepless in Seattle.  It is anticipated that with the rise of Seattle’s new hockey team, The Kraken, high demand will exist into the foreseeable future for branded merchandise affiliated with the team.  It will be interesting in Seattle to see which retailers capture market share for team affiliated merchandise.

    An industry with great volatility in trends is hospitality and food service.  Trends can be product centric, like occur in alcohol where a spirit or specific drink will rise and fall based on consumer popularity, as occurred with the Moscow Mule which caught fire in the last decade as a “call drink” after largely being unknown this century despite having a recipe in the public domain since 1941 when it was created by John G. Martin and Jack Morgan at the Cock ‘n’ Bull in Los Angeles.  They can be in food categories like were spurred by Chick-fil-A and with the Popeye’s Chicken Sandwich (https://www.usatoday.com/story/money/food/2019/12/31/popeyes-chicken-sandwich-food-fight-2019-2020/2785127001/) in the fast food segment.  They can also be tidal changes like occurred during the pandemic when drive-thru, pick-up, and delivery food concepts surged while dine-in options declined, a trend that is anticipated to reverse as people hungry for social engagement and new experiences return in force to eating out with increased vaccinations and herd immunity in the population.  Someone is going to make these food & beverage sales, the question is which establishments are going to have the products and environments that people want to frequent.

    I often say, “Business is the ultimate competitive sport”.  Opportunities exist in business for entrepreneurs everyday everywhere.  The best business owners have the ability to identify short and long term trends, they also have the ability to identify when to hold and sell their companies to maximize market value.  IBA has successfully sold businesses in Washington, Oregon, and Alaska for 46 years in every economic environment. If you are interested in getting into or out of the the entrepreneurial game in 2021 in the Pacific Northwest we would welcome the opportunity to talk with you about our 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, accounting, legal, wealth advisory, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family 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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