IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities. The following blog has been provided by Bill Southwell, IBA’s lead business broker for the Spokane metropolitan area:
The Challenges in Selling a Business in a Remote Location
During my formative years in the business brokerage practice, I was happy to engage potential listings of almost all sizes, types, and in most cases without regard to the geographical location. As the career of most business brokers mature, they often tend to become more selective about the size of business that they will engage, and in many instances how far away they are prepared to venture outside their marketing comfort zone to service and support a listing.
I once had a seasoned business broker tell me that he would never consider taking on any new listing that was more than one hour away from his Seattle office in any direction. I remember thinking at the time that this broker will list very few businesses in Western Washington with our traffic congestion and his rigid geographical constraints? Heck, for me on many days it’s impossible to travel across the city of Seattle in less than one hour. I know that this broker’s self-imposed marketing limitation was somewhat exaggerated, but it does reflect a common mindset for many in the business brokerage industry. My early indoctrination into the business has taught me many lessons, among which was the need to occasionally paint a broader stroke on my geographical areas of marketing concentration to maximize my market potential; even if some of those new opportunities might be considered remote.
So, what constitutes a remote location? The dictionary defines remote as, “A place situated far from the main centers of population; distant.” In the business brokerage arena, remote locations are always relative to where your principal place of business is located, however, the concentration of the population almost always centers around the larger metropolitan markets. Over the past year I have been directly engaged with new business listings that have taken me into numerous outlying markets to evaluate remote companies in Washington in areas such as Port Angeles, Pateros, Davenport, Long Beach, and Twisp. From our corporate headquarters in Bellevue, these referenced remote business locations that I serviced all had one thing in common: They all took over 2 hours to service & support in each direction. In today’s fertile market environment many business brokers don’t sense a need to venture too far beyond their own backyard to stay busy.
So, why would a business broker consider making this type of travel commitment to potentially source a listing in these remote locations if they didn’t necessarily have a need for additional inventory? The answer to this rhetorical question is complex. For me personally, I just came to the realization that there were lots of remote business opportunities flying under the radar that presented excellent listing opportunities if I would be willing to make the effort. Thank goodness for internet communication capabilities and virtual methods of doing business or most of these remote listing opportunities would probably be almost impossible to support while also juggling other representation responsibilities. I can’t begin to cover in this blog the importance of electronic communications between the broker and seller, buyers, and third part consultants in servicing a transaction, especially those situated in remote areas.
As a rule, my firm tends to only engage new listings where the business is profitable, meets our main street and middle market revenue requirements, has a long term operating history, has all books and records up to date, and most importantly is ready to go to market. For IBA, the geographical location of a good business opportunity rarely removes it from listing consideration, however, it can be one of many material factors for us to weigh when determining whether to engage with a new client or pass. Out of necessity, many business brokers must become very selective about the total number of projects that they can take on at any given time and balance their time management considerations necessary to properly support those listings throughout the sale process. IBA, the firm I elected to affiliate with from a menu of choices in 2015, is blessed to have one of the deepest and most talented teams of professional intermediaries in the Pacific Northwest. I do not recall a time when we did not have the bandwidth to properly serve a business owner in need of our services in the region.
Selling a business isn’t easy in the best of times. As one of my esteemed IBA colleagues once wrote, “The sale of a business is a sophisticated, nuanced transaction requiring knowledge on many levels.” Marketing a remote location can present even more challenges for a business broker due to logistics and requires a unique collaboration between the broker and Seller to be successful. The goal is always to generate as much buyer activity as possible, while at the same time maintaining an environment of confidentiality for the sale. There is rarely a quick solution to sell a remote location and it will typically require a broker to exhaust all available marketing resources. At IBA we methodically work through a progression of marketing approaches for all listings that includes:
- Accessing our unique IBA pre-qualified buyer database;
- Cultivating, leveraging and networking personal and professional affiliations;
- Proactively marketing in proven venues to engage business buyers;
- Researching and identifying synergistic acquisition candidates on both a vertical and horizontal basis; and,
- Positioning the business in the most favorable light possible and attempting to enter the market at the optimum time to best attract the highest level of buyer interest.
Internet marketing is one method of generating new buyer activity for most IBA business listings. Internet marketing literally opens-up the business listing to the world. In the past couple of years, I have personally generated buyer interest in the companies I have represented for sale through internet marketing sources from New York to California, Canada, Mexico, Europe and even the Middle East. With most listings, the bulk of the buyer interest gravitates towards the more mainstream markets with larger population bases. Conversely, many buyers can be attracted to remote business opportunities for other reasons that include improving their quality of life, simply slowing down, a better price/value relationship, and limited competition. I am convinced that there is a saddle for every seat, but in the case of a remote business opportunities the number of those seats will generally be more limited.
Can business brokers work miracles with the marketing of remote business listings? In many cases, probably not. That said, my firm would never take on a new listing project in a remote area, or elsewhere, unless we expected to sell. The sale of a remote business opportunity often requires a balancing act, whereby the seller will be asked to sometimes make more concessions throughout the process in order to make the business more attractive to a larger segment of the buying public. These concessions could include things such as providing some form of Seller financing, agreeing to more flexible terms, and attempting to insure that the business is positioned for sale before a peak business cycle to offer new ownership the chance to take possession during the most fiscally productive periods of the year. Optimism is always at the core of starting any new representation project, but with a remote listing this often needs be tempered with realistic timeline expectations. In many instances, a remote business listing could take a year or more to sell.
At the end of the day, a good business is always a good business, whether situated in a remote area or in an urban center. For those business brokers who embrace the challenges of representing a remote business opportunity, I have found that the results will often reward their commitment.
Bill Southwell, a successful entrepreneur himself who took a company public and lawyer with multiple degrees from Gonzaga, is IBA’s lead business broker for the Spokane metropolitan area, but willing and able to represent companies from the Pacific Ocean to Snake River. Bill Southwell is a generalist by choice preferring to represent entrepreneurs in a spectrum of industries rather than focus on a specific type of businesses. His successfully, completed transactions have included companies in the manufacturing, construction, industrial, distribution, retail, service, education, and hospitality industries. If you have questions about the content of this article or would like to learn more about Mr. Southwell’s customer centric representation of business owners with knowledge, experience, and a high professional skill set please contact him at (425) 454-3052 or firstname.lastname@example.org.
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”.