Seller Frequently Asked Questions

Seller Frequently Asked Questions

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The sale of a business is an unfamiliar, sophisticated, nuanced process for many entrepreneurs. IBA believes the best business sale transactions are completed in an environment of full disclosure between the parties employing a sale process that utilizes “best practices”.

The “best practices” employed by IBA facilitating/negotiating business sale transactions have been developed through the successful sale of over 4000 privately held companies and family businesses in the Pacific Northwest since 1975.

All questions related to selling a business are welcome by IBA business sale intermediaries. If a question cannot be answered, an answer can generally be obtained either internally or through collaboration with a professional partner in the business community.

The following is a selection of Frequently Asked Questions received by IBA from potential clients during the broker selection process. They are grouped by general subject matter.

History & Leadership

Is IBA the oldest business brokerage firm in the Pacific Northwest?

IBA is the oldest business brokerage firm in the Pacific Northwest. IBA has represented owners of privately held companies and family businesses in business sale transactions since 1975. IBA was founded by G. William Ososke in 1975 in Portland, Oregon. A permanent IBA office was opened in Bellevue, Washington to more effectively serve Washington business owners in 1991. Smaller satellite offices have been operated in Alaska & Idaho over the years based on client demand for professional representation services.

Does IBA have experienced, executive management?

The current President & CEO of IBA, Gregory Kovsky, joined the company in 1994. Mr. Kovsky assumed management of IBA’s Bellevue office in 1997 and purchased the company from Mr. Ososke in 2000. Mr. Kovsky has personally facilitated over 300 transactions. Many of the top business brokers in the region have been mentored & supervised by Gregory Kovsky. Mr. Kovsky has a reputation for knowledge, collaboration, and “best practices” nationally in the business brokerage industry. He is a frequent seminar speaker and writer on subjects relevant to the sale and purchase of privately held companies and family businesses.

Industry & Geographic Representation

How important is industry specific knowledge by an intermediary in brokering the sale of a business?

It is valuable for a business owner to have an intermediary that is familiar with a specific business model and industry to facilitate the sale of a business. The value is found in knowledge of how market conditions have impacted transaction price & terms for similar company sales, ability to convey industry specific & business model information to potential buyers in an educated, persuasive manner, and the knowledge & ability to address industry specific liability & transition issues effectively & efficiently in facilitation of a transaction. The present deep & talented team of IBA business brokers has owned or served in leadership positions in manufacturing, distribution, technology, industrial, construction, automotive, marine, transportation, education, military, hospitality, retail, cannabis, franchising, elder care, veterinary medicine, law, accounting, and a spectrum of service industries.

Can a business broker unfamiliar with my business model sell my company?

Every year IBA successfully facilitates the sale of businesses in industries we are not familiar with from prior transactions. Many of these transactions involve new industries that are emerging in the economy. IBA was a leader in facilitating merger & acquisition activity in the Internet Service Provider (ISP) arena in the 1990’s and is a sought after broker for cannabis businesses today. The reality is, that although it is preferred to have a business broker with relevant experience, the business sale process is substantially similar with all business models. Relevant knowledge can also be drawn from similar business models. IBA also has a reputation in the marketplace for its ability to sell unique, sophisticated service companies. Past “one of a kind” business sales successfully facilitated by IBA have included an environmental chemistry audit firm, a pathology laboratory database management software company, and a mold remediation professional education program.

Will IBA represent my business for sale in a rural Pacific Northwest community?

IBA is often sought after to represent entrepreneurs in business sales in rural Pacific Northwest communities. The reasons IBA has been the preferred business broker for these business owners for approximately 45 years includes a lack of experienced, knowledgeable, highly skilled local representation, IBA’s ability to keep the sale confidential until public disclosure is desired, and IBA’s ability to create a regional, national, and, in some situations, international marketplace for a company. IBA’s resume of successfully completed transactions include company sales in Point Roberts, Forks, North Bend (Washington & Oregon), and Redmond (Washington & Oregon).

Will IBA represent my business for sale outside of the Pacific Northwest?

As one of the premier business brokerage firms serving the middle market in the United States, IBA is often approached with requests to represent business owners in the sale of their privately held companies and family businesses outside of the Pacific Northwest. It is IBA’s preference to limit its representation services to the Pacific Northwest, however on a highly selective basis will work with clients outside of our region. IBA has successfully represented entrepreneurs in the sale of businesses from California to Massachusetts and Arizona to North Carolina in the past.

Business Valuation

Does IBA value businesses “in house”?

All business evaluations are performed internally at IBA by the business broker who will be representing the company for sale in collaboration with senior management. It is our belief that the best salesperson for a business is an individual with comprehensive knowledge of the company, business model, and industry who will be personally accountable for the value the business is brought to market. IBA commonly employs 3 – 4 business models in the valuation of a privately held company or family business incorporating accounting & finance principles in combination with market knowledge.

Does IBA charge for its business evaluations?

IBA provides professional opinions of the market value of a business to potential clients on a complimentary basis. We do not charge for business evaluations for the following reasons:

1. We believe a business evaluation provides an excellent opportunity for a potential client to assess our knowledge, experience, and professional skill set without legal or financial commitment.

2. IBA is selective regarding the projects it takes on as a business brokerage firm. We use the evaluation process to determine if the business is one we want to represent and the owner is someone we want to work with collaboratively.

3. We want to insure the business owner is realistic related to the market value of their business.

How accurate are IBA’s opinions of the market value of businesses?

The businesses IBA represents for sale traditionally sell for within 10% of the original list price. IBA has a vested interest, since it is paid 100% on performance, for accuracy in its business evaluations. Our business evaluations incorporate the analysis likely performed by a buyer, their CPA or CFO, and bank or investor related to value since completion of a business sale will likely need the endorsement of one or more of these parties.

Why do other business brokerage firms charge for business valuations?

It is our belief that business brokerage firms that we compete with in the marketplace charge for business valuations for the following reasons:

1. They need the revenue to support their business model. IBA traditionally completes 3 – 7 transactions a month as a firm. We do not need revenue from business valuations to support our business model. We prefer to be paid on performance at the completion of a transaction by a satisfied client.

2. They outsource the business valuation. Many firms do not have the internal knowledge & experience possessed by IBA to value businesses “in house”. They need to hire professionals to complete this activity. One problem, besides the obvious of incurring external expense, with this business model is it is “best practice” to have the salesperson who performed the valuation sell the business, so they can convey the information employed and the analysis performed behind the pricing of the business. A salesperson using an externally performed valuation parrots information with limited ability to engage in a dynamic discussion of value with a potential buyer and their professional advisers.

3. They lack confidence in their ability to properly value a business and/or complete the sale and want to be paid upfront rather than on performance.

Confidentiality

How do I keep the information I am selling my business confidential from employees, customers, venders, etc.?

IBA has a multiple step process for protecting the confidential information a business is for sale for its clients. If a business owner trusts IBA’s systems for maintaining confidentiality during the sale process the probability of the sale becoming public knowledge before the transaction being announced or completed by the parties is very low.

Broker Representation

What size businesses does IBA represent for sale?

IBA serves the upper Main Street and Middle Market as a business brokerage firm. A majority of the transactions we facilitate are in the mid six to eight figure transaction size ($500,000 – $20,000,000). IBA’s small business transaction team will represent businesses with values between $250,000 – $500,000 on a select basis in an effort serve a segment of the business community that has limited quality choices for representation.

Will representation be virtual or personal by IBA?

The sale of a business is a sophisticated, nuanced process requiring comprehensive communication between a business broker and their client. All IBA representation projects start with a face to face meeting with a potential client, so we have an opportunity to understand the business model & the seller’s goals & objectives for the transaction. The meeting also provides an opportunity for the IBA business sale intermediary to provide an overview of our representation services, the sale process, and answer questions. Future communication will occur in person, by phone, and via email based on client preference. It is difficult to sell a sophisticated product like a business without direct, personal engagement by the business broker with the seller & buyer. IBA business brokers welcome the opportunity to travel anywhere in the Pacific Northwest to meet with a client and/or engaged buyer about a company we are representing for sale.

Will my sale be a “team sale” or delegated to a junior broker?

The IBA business brokerage representation model assigns a lead broker for the transaction from day 1. The lead broker will be the hub of all communication between the business owner and IBA. It is our belief that the best way to sell a sophisticated product like a business is to have the lead business sale intermediary directly involved in the valuation of the business, knowledgeable of all elements of the business model, and as the facilitator of all negotiations and communication between parties and professional advisers. The sale of a privately held company is commonly compared to a game of chess. It is important to have an experienced, knowledgeable, business broker with a high skill set facilitating the process to achieve the best possible outcome. IBA’s training program and institutional support for its business brokers is recognized as one of the highest quality existing in the United States.

How important is broker experience in the sale of a business?

The sale of a business is a sophisticated, nuanced process requiring knowledge, experience, and a high professional skill set. Superior business sale representation services require a diverse knowledge set with legal, accounting, tax, business, and estate planning elements. To use an analogy, consider this the map of the preferred route on a river with Class 1 – 4 rapids to a successfully complete sale. Navigation of a whitewater river requires more than a map, it requires an experienced guide. The best river guides to hire will have previously navigated the relevant river. IBA offers a deep & talented team of guides through the business sale process. Each has contributed to the 4000+ transactions successfully facilitated by the firm and is willing to take the helm of the boat without compensation until the river has been safely navigated to its conclusion.

How long is IBA’s representation agreement?

IBA’s standard representation agreement is six months. This is one of the shortest term agreements currently used in the business brokerage industry. The reason IBA’s agreement has such a short term is that we traditionally sell the companies we represent for sale in 60 – 270 days. If an extension is necessary past 180 days, it our expectation that we will need to justify the need for more time to finish the project.

What is the cost of using IBA for professional representation?

IBA operates on a “paid on performance” business model. IBA collects no upfront administrative fees or retainers from our sell side clients. We are paid a percentage of the sale price at completion of the sale. The percentage paid to IBA depends on the sale price of the business. A potential client will be given a quote for professional representation services simultaneous with IBA’s recommendation regarding the sale price for the business.

Can IBA represent me in the sale or lease of the real estate occupied by the business?

IBA is a commercial real estate firm. We have the ability to comprehensively represent our clients in the sale of their businesses and the sale or lease of associated real estate simultaneously. It is advantageous for our clients to have one intermediary facilitating communication & negotiations related to the sale of both assets.

Does IBA have the ability to facilitate both asset & stock sales?

IBA has facilitated numerous asset & stock sales since 1975. Approximately 95% of the transactions we facilitate annually are asset sales. A compelling reason, commonly contracts with assignability issues, generally needs to exist to motivate a business buyer to purchase the stock of a privately held company. We welcome a collaborative discussion of the legal & tax issues associated with selecting the appropriate type of business sale with our clients and their professional advisers.

Prior Transactions & Marketing

Has IBA merged privately held companies into publicly traded companies?

Yes

Has IBA sold businesses to private equity firms?

Yes

How does IBA locate buyers for businesses?

IBA employs a comprehensive, multiple tier marketing program to locate potential buyers for our clients. As a general rule, any party actively looking for a business acquisition opportunity in the Pacific Northwest will already be part of IBA’s exclusive, buyer database program and familiar to the firm or touched proactively through marketing efforts with confidentiality safeguards. IBA’s 100% commission compensation business model creates a strong incentive for aggressive marketing efforts since a timely sale is in both our clients & IBA’s best interest.

Are any marketing or advertising costs passed onto their clients by IBA?

IBA operates on a “paid on performance” business model. No marketing or advertising expense is passed onto our clients. 100% of our fees from our sell side clients are paid by satisfied customers at the completion of the project.

Questions and information requests from the business community are always welcome at IBA. If a question exists that was not addressed or completely answered in the previous section, please send your question via email or call our corporate headquarters at (425) 454-3052 and a business broker with relevant knowledge will be happy to respond to the inquiry.

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Bruce Lee