The famous quote, “The three most important things when buying real estate are location, location, location” is attributed to Lord Harold Samuel. Although businesses can be successful anywhere, location can be a significant influence on the value of a privately held company or family business.
The following are seven factors that can contribute to a business having a higher market value based on its location and why the Pacific Northwest is an attractive place to own, sell, and buy a privately held company or family business:
- Traffic Infrastructure – People travel by foot, bicycle, car, boat, and plane in the Pacific Northwest. Each of these modes of transportation creates locational opportunities for entrepreneurs. Whether walking or biking around Green Lake, on Alki Beach, or the Burke-Gilman Trail in the Seattle metropolitan area, the businesses adjacent to these high traffic locations financially benefit from consumer demand for their products & services. The same is true for gas stations and hotels on major thoroughfares and companies shipping products to and from Asia out of the region’s ports. Increased revenue and profit almost always equate to a higher price in the sale of a business.
- Demographics – One of the fundamental components for success in business is being in the right place at the right time with the right product or service. It is also said that a rising tide lifts all boats. Entrepreneurs benefit financially when owning and selling companies by being placed in growing marketplaces with products or services which resonate with the population. Many counties in Washington (https://a-z-animals.com/blog/discover-the-fastest-growing-counties-in-washington-state/) and Oregon (https://ktvz.com/news/central-oregon/2023/11/21/la-pines-population-jumps-9-5-in-a-year-fastest-in-oregon-c-o-counties-cities-grow-while-some-other-places-see-losses/) have been growing in recent years making small businesses medium in size and medium companies large entities organically. In addition, a robust local economy offering quality employment and education opportunities produces a revenue stream to support the family-owned businesses in communities from the plumber and HVAC service provider to the auto repair shop and kitchen & bath remodeler. Entrepreneurs in IBA’s primary service areas of Washington & Oregon are blessed to operate in states in the top 25% nationally in terms of median household income (https://www.statista.com/statistics/233170/median-household-income-in-the-united-states-by-state/).
- Labor – It is difficult for a company to grow without an abundance of people with the skill sets needed to fill key positions. Washington & Oregon consistently rank in the top ten states to live and work in out of the 50 in the United States (https://www.cnbc.com/2023/07/14/these-are-americas-10-best-states-to-live-and-work-in.html).
- Taxes – States without a state income tax are popular for entrepreneurship. Washington is one of seven states where that is true: https://www.investopedia.com/financial-edge/0210/7-states-with-no-income-tax.aspx Washington & Oregon both now have capital gains taxes in place that potentially impact business owners when they sell their family businesses to facilitate retirement with comfort & dignity, legacy, and philanthropy: https://smartasset.com/taxes/state-capital-gains-tax Given these facts, Washington is still ranked as one of the most business friendly states in the nation by many (https://www.shopify.com/blog/most-business-friendly-states).
- Energy – The availability of affordable, abundant energy can have a significant impact on company creation, growth, and value. Washington & Oregon are blessed to have access to clean, green hydropower (https://www.nwcouncil.org/energy/energy-topics/hydropower/) for approximately fifty percent of their electrical energy needs. This energy benefits residences with lower utility costs, manufacturing companies from Boeing to Intel, and the technology sector which has brought server farms to previously agricultural areas to take advantage of the region’s energy resources (https://www.datacenterfrontier.com/site-selection/article/11430108/cyrusone-h5-bring-more-data-centers-to-quincy).
- New Construction – The benefits of new construction in an area are multifold. New residential construction creates modern, quality housing opportunities for the local population. It also creates entrepreneurial opportunities for construction companies and affiliated service providers. New commercial construction offers businesses occupancy opportunities with state of the art technology infrastructure for data & communication transmission and the ability to integrate robotics and Industry 4.0 concepts into operations (https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-are-industry-4-0-the-fourth-industrial-revolution-and-4ir). It also creates new transportation, construction, and business development opportunities like are emerging in the Seattle metropolitan area with the buildout of the city’s new light rail system (https://www.masstransitmag.com/rail/infrastructure/article/53070405/sound-transit-to-open-starter-2-line-in-spring-2024).
- Professional Advisors/Resources – The sale of a business is a sophisticated, nuanced process requiring knowledge, experience, and a high level of skill. It is not a recommended DIY (Do-It-Yourself) activity when involving one of the most significant assets in a portfolio. The advisors/resources on your team can have a five, six, or seven figure impact on transactional value, so proximity to top tier professionals can be critical for achieving desired results. The proper valuation of a privately held company or family business (The starting place for any business sale transaction) requires accounting, investment, finance, business, and local knowledge. If the comprehensive sale of a business and associated property is desired in one package, real estate licensing, knowledge, and experience are also a prerequisite. IBA as the largest & oldest business brokerage & commercial real estate firm in the Pacific Northwest possesses those attributes. We also offer a complimentary professional opinion of the market value of businesses and associated real estate, if applicable, to potential clients.
A hallmark of a professionally facilitated business sale transaction is the creation and maintenance of an environment of confidentiality, so knowledge that a company is for sale does not enter the public domain and become known to employees, customers, competitors, and vendors prior to desired disclosure by the parties. Meetings between parties require confidential settings. Meetings at restaurants, coffee shops, and the business may be possible at times, but in many situations the ability to meet in a location out of the public eye is desired. Nothing is worse than holding a confidential meeting at a Starbucks and having an employee or a nosy member of the community observe the meeting and arrive at the table with questions. Quality, established M&A and commercial real estate firms have facility infrastructure with conference rooms. Part-time players in the industry and the parties without a track record of transactional success, IBA has sold over 4300 companies, do not. IBA is proud to offer its clients confidential conference room options in Bellevue, Federal Way, Spokane, Olympia, and Bellingham in Washington and Portland and Bend in Oregon.
The sale of a business is often an emotional, life altering event for an entrepreneur. In many cases, the road to success and sale involved the expenditure of blood, sweat, and tears along the way. The ability to meet in person with a business broker to learn the sale process, strategize, and share their thoughts and concerns is often highly valued by entrepreneurs. As a Pacific Northwest based company with eighteen intermediaries our team is happy to meet in person with potential clients and facilitate transactions personally whether a business is located in Forks, Ashland, Walla Walla, or Baker City. Have Podcast will travel is a common mantra at IBA. Have you tried Founders (https://www.founderspodcast.com/), a firm favorite.
Most have heard the expression, “It is not what you know, but who you know that matters”. At IBA, our VP of Business Development, Curt Maier, has his own take, Your Net Worth = Network (https://ibainc.com/blog/curt-maier/net-worth-network-the-foundation-of-a-successful-professional-personal-life/). Employing either verbiage, the lesson is the same having local knowledge and resources can be a difference maker in life. In business sale transactions the primary professionals in demand are attorneys, CPA’s, bankers, appraisers, environmental inspection experts, and escrow & title companies. The size and quality of a business broker’s Rolodex can be the difference between a timely, successful transaction and one that is delayed or does not close.
Civilization through the ages has been built on solid land with access to resources. Entrepreneurial success is frequently constructed in similar locations. If you have built a business castle in the Pacific Northwest and are ready to exit to pursue new horizons, IBA is available to help. If you desire the opportunity to own a business in one of the two robust economic environments in America served by IBA, we would welcome the ability to share the acquisition opportunities we have on the market in Washington & Oregon.
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 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”.