American Dream Achieved
IBA, as an approximately fifty-year old business brokerage firm serving the entrepreneurial community of the Pacific Northwest, has been uniquely positioned since before the American Bicentennial celebration of 1976 to witness and hear the stories of thousands of people who have lived the American dream through entrepreneurship creating beloved businesses by employees, customers, and communities while finding personal fulfillment and financial prosperity through execution of their ideas, hard work, perseverance, and ability. In an effort to share these stories heard throughout the years by our team of business brokers, who are commonly regarded as the “best listeners” in the M&A industry, IBA has retained highly regarded writer, Nesha Ruther, to tell their stories. It is our goal to share one story a month. It is our hope that you will find the stories as inspirational and motivational as they are to us and the buyers who bought the businesses in IBA facilitated transactions in Washington, Oregon, and Alaska.
The Story of Mike Nekahi & Khasha Mekanik (Black Pine Spas)
By Nesha Ruther
Mike Nekahi and Khasha Mekanik met as 17-year-old business students at the University of Washington. It was the summer before their freshman year, and they were rushing the same fraternity. “We had both signed on to be in the same house, we just became fast friends and have been really close ever since,” Mike says. “I think early on we had a connection because I’m Persian and he happens to be Persian, we had so many similar interests. [Khasha] is a very smart, motivated, business-minded guy. We had those things in common.”
The pair’s friendship went on to impact their families too. “My mother and his mother then became very, very good friends. There were just a lot of roots there almost immediately,” Mike says fondly.
“Mike is my first wife,” Khasha says with a laugh. “Our lives biggest projects we have done hand-in-hand.”
At the time, the University of Washington Business School had just launched a unique opportunity for students called PEI, Programs in Entrepreneurship and Innovation. It encouraged students to start their own businesses with the support and resources of the university. Mike, Khasha, and a few of their friends jumped at the chance.
As college students, one of the major focal points of the year was traveling, particularly during off periods such as spring break. The young men recognized the opportunity in creating a company that coordinated travel specifically for high school graduates and college students. In 1997 the group launched International Student Tours. A year later in 1998, they took their first group of students to Hawaii and Mexico.
Because many students would travel in large groups, IS tours were able to get deals on an entire plane or hotel, allowing them to keep their prices low while still making a profit. “Basically, it was a student tour package,” Khasha explains. “We had packages for college spring break and high school graduation. If you were a college student, we would offer $399 for a five-star hotel, round-trip airfare, and parties at a different nightclub every night. We would charter entire planes, and book entire hotels out just for our students, so we got to book them at a fraction of the cost. $399 is a good deal for us.”
“It was a really motivated, entrepreneurial group of guys,” Mike says of working with Khasha and the other founders. “Everybody fed off each other. We all wanted to grow, we all saw the opportunity, and we had a common goal.” Mike makes the experience sound easy, however, the boys were often working 40-50 hours a week on their business in addition to being full-time students.
The business was an instant success and quickly began to grow outside of Washington. After graduating, Mike moved to Arizona to expand the market there, and Khasha did the same in San Francisco. “We went from just doing the Northwest to four or five Western states in a matter of a year,” Mike says. “It grew like a weed.”
IS Tours increased their offerings to include study abroad programs and winter ski trips, but their most popular initiative remained the original trip to Mexico, sending students to Puerto Vallarta and Mazatlan. However, increased popularity led to greater logistical challenges and the responsibility of managing hundreds of college students and high school grads in a foreign country
“Logistically it got pretty intense,” Mike says. “In the Mexico program, for example, every Friday from mid-June to mid-July, we would have two chartered planes of students arriving. When they got off the planes, we would bus them to the hotel. We also had tour packages so that seven nights of their stay were all figured out. It wasn’t just hotel and airfare, but graffiti nights, or comedian nights, the packages included meals at restaurants. We really had to communicate with the locals.”
To top it off, much of the appeal of Mexico was not the fascinating history and sandy beaches, but the drinking age being 18. “We would have what we called the 24-hour staff room. In the hotel, we always had somebody awake, we would contract a local physician who we had on-call in case anyone needed medical attention. We were in communication with the security at all the clubs, restaurants, and bars. For some kids, the heat would hit them, they hadn’t really drunk before, and they would get dehydrated. We would always have staff members who could leave the party and get them back to their rooms safely and make sure they were okay,” Mike says. “It was a lot of babysitting, but we built our infrastructure to help and support [the students] and make sure they were always safe.”
Another challenge was competition. IS Tours was not the only program of its kind and student travelers were a hot commodity. Often, Mike and Khasha would be going head-to-head with representatives from other companies trying to win over potential travelers. Particularly in the early days, the success of the company meant securing the attendance of large groups. Representatives would often compete to woo popular students who could bring their friends.
As young people primed to take advantage of technological innovation, they moved the company online. It was a perfect time, as sites like Travelocity and Expedia were specifically targeting college students. “We wanted to move from being a brick-and-mortar travel agency and tour operator to a niched out [online service] specifically for student travel,” Mike says. IS Tours rebranded to become TripHub.com. Before long, they had gained the attention of angel investors, and in 1999, they received $1 million in venture capital.
Everything was going great, until, of course, the dot-com bubble burst in 2000. “The baby just went out with the bathwater,” Mike says of the economic crash. “We had a really good business model, but when we needed more funding, it just wasn’t there.”
While the financial payoff for the company was small, the knowledge the boys gained, particularly at such a young age, was invaluable. “Knowing what it took to start a business, face the competition, figure out how to run it profitably and grow, these were huge mental assets that we walked away with,” Mike says.
The majority of the group went their separate ways, but Khasha and Mike stayed close, both as friends and business partners.
At the time, one of the professors of the entrepreneurship program at the University of Washington had just received $9 million in funding to launch his own company. He reached out to two of his star pupils, who had just sold TripHub/IS Tours. Mike and Khasha went to work for him for a number of years before deciding they wanted to go into small business.
Mike and Khasha had founded one start-up and worked for another, they decided to focus their energy on something different, buying a brick-and-mortar local business, something smaller in scope, but already established and reliable.
Looking for someone who might have a business they could purchase; the pair recalled a local broker who had come to speak at one of their entrepreneurship courses. “Gregory Kovsky’s father had come in and spoken [to us], not just about starting a business but acquiring a business. It gave these business school kids another avenue to being an entrepreneur, by taking over a business. That was how we started our relationship with the Kovskys,” Mike says.
At the time, Gregory had a listing for Black Pine Spas, a hot tub superstore. The business had been established for over two decades and had managed to survive the economic crash of 2002. “The company had been hurt, but what we liked about it was that it had gone through this storm and was injured, but it didn’t die. That was really reassuring,” Khasha says.
Khasha and Mike wanted to buy Black Pine, and while they had the business experience of someone much older, they were still in their early 20s and not in a financial position to do so on their own. In the end, it was their parents who helped finance the deal, listing their homes as collateral to give the pair the capital they needed.
First-generation immigrants from Iran, Mike’s mom was a schoolteacher with a master’s degree in Education. Khasha’s father was an engineer and his mother was a journalist. “Their experience in coming [to the United States] and raising their kids here meant that they wanted to support us as much as possible and take those steps to grow professionally,” Mike says. “[My mom] loved the idea of having your own business and doing your own thing. She said, ‘If we can’t gamble on our kids, who can we gamble on?’ They believed in us.”
While Mike’s mom passed away last year, the pair carry on the legacy of her belief. They were able to pay their back parents in the first 18 months of running Black Pine.
Another aspect of the purchase that was unique was the pair’s relationship with Tom, the previous owner. After exiting the business, Tom went to work for Dynasty Spas, one of Black Pine’s suppliers and became their official rep for the Northwest. “Tom ended up being between us and the manufacturer for five more years. So not only was our chemistry good, but he became a mentor [to us]. He was available 24/7. He would come to our events and support us from a manufacturer’s standpoint.” Mike says.
While Black Pine would change suppliers twice more throughout the duration of Khasha and Mike’s ownership, their relationship with Tom endured. “20 years later and we talk once a month,” Mike says fondly. “We’re friends, true, lifelong friends.”
While Khasha and Mike loved building a business from scratch, they realized their true passion lay in helping grow a preexisting model. Black Pine allowed them to hone these skills. Mike’s strengths lay in sales and marketing, and Khasha thrives in operations and finance. Together, their shared background and unique perspectives serve as a strong base to help a business scale.
“Your expenses might be lower if you start a company, but you’re starting from zero. The amount of energy it takes your car to go from 0 to 10 miles an hour is exponentially higher than the amount of energy needed to go from 10 to 20, because you have momentum, and momentum is a massive catalyst,” Khasha says.
In order for a business to successfully scale, there need to be existing opportunities for growth. A business with untapped opportunities allows new owners to come in with a fresh perspective and an eye for expansion. You want [the business] to be healthy, while still being flawed in some ways,” Khasha says laughing.
Mike and Khasha saw such an opportunity in Black Pine’s location. For many years, Black Pine had been based in Lynnwood in the suburbs of Seattle. The store was located on a busy thoroughfare and had become highly recognizable to customers. While the previous owner, Tom, had opened satellite businesses across Puget Sound, he always eventually closed them down and maintained Lynnwood as his base of operations, and for the first ten years of their ownership, Khasha and Mike did too.
In 2012, however, they made the bold decision to change locations.
“For ten years we had been in the legacy location which Black Pine had been in for 20 years prior,” Mike says. “It was a 1000 square foot building with frontage on the highway and a 5,000 square foot warehouse in the back. To get in the showroom you had to walk through the back warehouse. This building was probably from the 50s or 60s, and the whole thing was kind of beat up.”
The pair wanted to buy the property in order to fix it up, but the owner didn’t want to sell. Instead of renewing their lease, the pair decided to shop around for a new location. “We found an 8,000-square-foot building about three miles away. It was newer and bigger, so we acquired that building,” Mike says.
Having so much more space allowed Black Pine to diversify the kinds of products they were selling. While their merchandise had previously been dominated by hot tubs, they now sold billiards tables, grills, saunas, and more. “You walked in, and it had everything for your backyard and home,” Mike says.
Expanding their merchandise also changed the sales season. Perhaps surprisingly, most hot tub sales happen in the spring and summer. “Here in the Northwest, people are able to do work on their backyards in the spring and summer months, build decks and even homes, so there is a seasonal flow to development and construction,” Mike explains. “It’s easier to install a hot tub when the weather is better than in the dead of winter, so we always needed a winter product for those off-peak months.”
Now, rather than selling mostly hot tubs with an alternative product such as billiards tables or wood stoves for the off-months, Khasha and Mike were able to carry alternative products year-round, while still selling their bread-and-butter hot tubs. “We approached $4 million [in sales] because of those other products,” Mike says. “It really rounded us out and we needed that. So now, when somebody would walk in, they were buying a hot tub in the spring, but they would also get a grill.”
Mike and Khasha were also able to create packages they could sell at a discount price, such as a hot tub & pool table combo, increasing their per-unit transaction with additional products. In one instance, a fisherman from Deadliest Catch came in and purchased a sauna, game room furniture, a pool table, a hot tub, and a grill. Talk about a catch!
Another factor that allowed for growth was their willingness to go to the customer. “We would do home shows, state fairs, parking lot events, and three-day expos at convention centers,” Mike says. When the pair bought Black Pine in 2002, it was bringing in just under $2 million in sales, by the time they sold the business they had doubled that.
After 12 years, Khasha and Mike realized that they had done all they could to grow the company. They decided to sell. Luckily, they knew just the broker! In 2015, Gregory Kovsky helped them list Black Pine. Like Tom was for them, the pair are still close friends with the current owner.
Another reason the pair decided to sell was an opportunity that had presented itself in internet marketing. A friend of theirs had started a company doing lead generation for universities and had become highly successful. He wanted Mike and Khasha to help secure funding through which he could buy out his competition. “He said, ‘why don’t you guys help me buy some of the competition take ownership of the entities, and I’ll absorb their operations into my existing infrastructure?’ So, what we did was we raised money to help him buy his competition and we had a little piece of that transaction,” Khasha recalls.
From 2015 to 2021 Mike and Khasha helped grow that business. Three years into their partnership, they were able to raise $10 million to help build the business even further. “We acquired more assets through raising those funds, and that actually allowed us to build the top and bottom line, so we were attractive to a strategic buyer,” Mike explains. Having done the work they love, they helped their friend sell the company in December of 2021, eager to move on to the next big thing. “It was a great run, it was awesome,” Mike says of the experience.
For the last nine months, the pair have been on the lookout for their next business venture. “The goal is to acquire something that’s within the particular budget we have in mind and then take that business, grow it for the next four to five years, and hopefully have another exit,” Mike says. Some people are serial entrepreneurs; Mike and Khasha are serial business growers.
The pair recognizes that their success is in part due to the strength of their own relationship. “Most partnerships fail,” Khasha says. “I have a very, very good one with Mike, but I’ve seen firsthand the rare, delicate chemistry that is required for it to work. The biggest killers [of business partnerships] are matters of integrity and matters of arrogance. Arrogance requires one guy to be the bigger of the two bosses or have his ideas be the ideas. If you can have two people who can put their egos aside and always treat each other with the highest integrity, you’ll probably get there, but that’s a tall order, it’s just not normal.”
Khasha and Mike have the added benefit of having known one another for decades. Not only are they very close friends, but they went through some of their most formative experiences side-by-side. “We became who we are next to each other,” Khasha says, “So we adopted the same values. There are forks in the road where certain principles get tested, and if you both choose the same path, then those are the kind of guys you are going to be. When you make all of those choices together, you end up in a similar place. We made decisions really early on about integrity and transparency, right versus wrong, and it translated into the business.”
“Trust is a huge issue,” Mike adds. “You’ve got to be able to trust someone to do their job, and they need to trust you to handle your side of things. It’s been 27 years of friendship, the bulk of which we’ve been in business together, so it’s pretty special.”
In interviewing both, the pair gave very different answers to identical questions. Yet they also know the other so well, that both would (correctly) predict the other’s response. Between their charisma and pragmatism, their track record in helping businesses succeed comes as little surprise. “I don’t take it for granted,” Mike says of their partnership, “and I don’t think it’s common.”
Having been working together for so many years, they not only learned how to be businessmen together, but how to be business partners together. “We bought Black Pine when we were 25, there was a lot of maturing to do,” Mike says. “But at the end of the day, we never let [arguments] go unresolved, we never walked away and then forgot about it or pretended it never happened, we’re not like that. We realized that sometimes you dig your heels in because you don’t feel understood, so we always put each other in the other’s shoes. At the end of the day, we would make decisions based on who feels more strongly. We’ve always trusted and supported each other in that way.”
One steadfast element of Mike and Khasha’s career has been their relationship with Gregory Kovsky and IBA. “We’ve known [Gregory] since the late 90s, early 2000s,” Mike says. “Greg is only a year or two older than me and I’m so impressed with what he’s done and his level of professionalism and integrity. His process is top-notch.”
“I’ll say this, and I’ll say it to anybody,” Khasha says. “Gregory is a class act. He’s made of the best stuff on earth. He’s smart, he’s diligent, he is a wealth of information, and great integrity. He’s not the kind of guy whose goal is to beat your price down to get a deal because he wants his commission. I would always see him doing things that were functionally in the best interest of maintaining the value [of the business] and the deal for you as the seller. I have deep respect for Greg.”
Today, the pair are working together on securing their next venture. Mike from his home in Mercer Island , and Khasha from Spain where he and his family have relocated.
Khasha has a unique view of the American dream, as he’s an American that is not currently living in the US. “We didn’t come here because we were sick of the US. I understand the US does certain things really well and other things not as well. The US does work ethic and innovation really, really well. But the US does not do family and quality of life very well. I wanted our kids to see that innovation and work ethic are important, but also that the quality of their lives is paramount.”
This message becomes especially prevalent for entrepreneurs, who often sell their businesses not because the companies are not thriving, but because the owners are burnt out from years of intense work. “When Mike and I bought Black Pine at 25, we were working six, seven days a week, just killing ourselves,” Khasha says. “But we still realized that lifestyle was paramount, once a year, each of us would take a month off and give the other a heads up. So even as we were killing ourselves, we made time to live.”
“I have nothing against being successful, I intend to be successful, but the goal is to collect experiences as you go through your life. I’m proud of us that we didn’t murder ourselves for success. We decided to live too, and we lived along the way.”
For Mike, while there is an appeal in the ability to find success on his own terms and control the circumstances of his own career, the real American dream is in creating something of value. “What I love about owning your own business is that you get the flexible lifestyle, you make your own hours, make your own income, and control your own destiny, but at the end of the day you have built value into this asset, and this asset is something that other people would want. You get to build value and then sell it to someone who can take it further and benefit from it, it’s a beautiful thing.”
Mike and Khasha’s partnership continues to grow and develop, just like the businesses they acquire. “Hopefully in the next 10 years, we can write part two of this and we’ll have a bigger story to tell you,” Mike says. “But I value all of it, I couldn’t have done it any other way. The entrepreneurial spirit, it kind of gets in your blood, right?”
Indeed, it does.
Nesha Ruther is a writer and editor from Takoma Park, Maryland. She received her BA in English Creative Writing from the University of Wisconsin Madison, where she received a full tuition scholarship through the First Wave program based on academic and creative merits. She was a 2016 Young Arts winner in spoken word, a 2016 winner of the DC Commission of the Arts Larry Neal Writing Award, a 2017 winner of the Mochila Review Writing Award, which was judged by Nikki Giovanni, a 2020 winner of the University of Wisconsin’s Eudora Welty Fiction Thesis Award, and a 2022 Tin House Winter Workshop Participant. She has been commissioned to write and perform for the National Education Association, and has had work published in NarrativeNortheast, Angles Literary Magazine, Beltway Quarterly and more. She currently lives in Cincinnati Ohio and is the Lead Manuscript Developer at Holon Publishing and Collective Press.