Introduction

Jason: You’ve found the Business Broker Growth Show, with your host, Jason Cutter. This is the podcast for brokers who are ready to stop hoping for deals and start growing their pipeline. Our goal is to bring you strategies, stories, and insights that will be a catalyst to move you quickly from transactional dealmaker to trusted advisor. Time for business broker growth.

On this episode, I have Gregory Kovsky, president and CEO of IBA, the Pacific Northwest’s leading business brokerage and M&A firm. Gregory, welcome to the Business Broker Growth Show.

Greg: Thank you. Honored to be here.

Jason: I’m super excited to have you here, and the audience will find out why as we go through this conversation. To give people a little background: you started in the M&A industry over 30 years ago and worked at IBA as a broker. After six years as a top performer there, you purchased IBA from the founder, and you’ve been running it ever since. You now have 10 offices in Washington and Oregon, and over the company’s 50-year history, I believe it’s done around 4,400 transactions. Gregory is also a published author, a seminar speaker, and an advocate for entrepreneurship. His expertise spans basically everything you’d think of for small and medium businesses, and he’s constantly speaking and sharing knowledge.

I’m so glad you’re here, because you’re really the catalyst for Business Broker Growth and for this podcast. Did you know that?

Greg: I did not know that, but I’m honored. As you know, you’ve been a sales development guru for my team for multiple years, working on-site at our annual off-site events focused on training, education, and skill development.

Jason: It’s been a fun relationship. It all started in 2020, early in the pandemic, when I connected with you on LinkedIn. At the time, I thought business brokers would be good people for me to connect with. As you help a business exit, owners might want to improve their revenue side so they can sell for more. So I thought, “Let me meet lots of business brokers, because they should refer me to their clients.” That didn’t happen, and it isn’t actually a good referral source, because business owners don’t think that way. But it led to us connecting, which led to you being a guest on my original podcast, The Authentic Persuasion Show. In 2020, that was already episode 325, about a year into the podcast. And here you are on episode number one of the Business Broker Growth Show. Because of how influential you’ve been in my life and in helping me focus on business brokers, it had to be the first conversation for this show. Does it feel like we’ve been connected for five-plus years?

Greg: It feels like you’ve been a friend and a resource for much longer.

Every Business Is One of a Kind

Greg: And as we’ll probably cover, business brokerage is one of the most sophisticated, nuanced, big-ticket sales you can engage in. A business is both an investment and a piece of art, because each one is unique, with no direct comparable. Even the most cookie-cutter franchise has different labor rates, occupancy costs, and potentially tax rates in a different location. So even the most standardized franchised restaurant we all go to faces different issues by location, which makes each one unique.

Jason: It’s interesting to think about. One pest control company in one area versus another is a totally different business. A broker’s prior industry background is helpful. But where do you see it as valuable and necessary, and where is it not enough?

Why Local Knowledge Matters

Greg: That’s where I believe local knowledge and experience are critical to success in this business.

Here’s an easy example. IBA’s first office was in Portland, Oregon, the Rose City, and the Portland metropolitan area includes both Oregon and Washington once you cross the Columbia River into Vancouver. Oregon has a state income tax. Washington doesn’t. So the same business, with the same revenue and even the same profitability, will produce different net income for the owner after taxes. If we lean into the investment side, that should result in different valuations based on what the owner takes home. And these businesses could literally be separated by a bridge and a mile or a mile and a half.

Jason: And understanding the tax differences between states and how they affect value. So are you saying local awareness trumps business experience, or do they go hand in hand?

Greg: I think they go together. There are definitely areas of knowledge you need wherever you work, given the sophistication of this business. A top-tier business broker needs knowledge of accounting, tax, finance, law, real estate, business, and sales psychology to move a transaction forward, because on any given day, you won’t know what the critical issue in a transaction will be.

It could be a non-compete issue. Say the child of an owner who wants to sell and retire doesn’t want to work for the new owner and wants to set up a similar business of their own. Does that competitive threat damage the value of the business being sold, since it comes from someone who knows everything about it?

In another situation, it could be customer concentration, and the challenge of getting a buyer and a bank comfortable with 30% of revenue coming from one customer. If that customer isn’t retained, profitability and debt service become a problem.

That’s why knowledge and experience are so important, along with that local thread, so you’re not applying something that’s true in one case to a case where it isn’t. It’s autumn right now, and parts of the world are dealing with rain and flooding. You’re in Florida. If a hurricane comes through, a property in a 10-year flood plain versus a 50-year flood plain should have different values, or at least different considerations. Businesses in different locations should have different considerations too.

Why a Defensible Valuation Matters

Jason: That leads to another area I know is huge for IBA and all the brokers on your team: properly valuing a business, the valuation process you pride yourselves on, and then listing the business for sale. Why is that so important from your side, and why do you think it separates the professional, effective brokers from the rest?

Greg: Wonderful question. Let’s start on the buyer side. Every buyer is going to value the business. They won’t make an offer without a valuation, and they may enlist a CPA, a business appraiser, or another expert to support them. It takes two to reach agreement and sell a business, so recognize that the buyer will value it too. As a professional salesperson, you need to establish a value you can justify.

In the sale of a business, we actually have to sell the business four times.

The first sale is to the buyer. The buyer is the easy one. They have emotion. They’re excited about the acquisition. They can see themselves driving this Porsche down the road.

The next sale is to their CPA or CFO. They generally aren’t emotional. Think of your mental image of an accountant. It’s probably not an emotionally charged person. It may be someone with the classic green visor, working a calculator that’s printing out a paper tape.

The third sale is to the attorney. Attorneys tend to be afraid of their own shadows. They sell fear. They’re not necessarily looking at value in terms of dollars. They’re looking at liability and risk: the exposure points, the Achilles’ heel that could lead to a negative situation.

And the final party you have to sell, under the old axiom that he who has the gold makes the rules, is the bank or investors. If they don’t bring their money to closing, you’re probably not completing the transaction.

All four of those parties need to be sold. That’s why I believe it’s critical to enter the market with a vetted business that you’ve looked at from 360 degrees and whose value you can justify.

And recognize that 10 people with similar experience and knowledge could value the same business and come up with 10 different values, and each of them would be correct, give or take some variation. Our job as brokers is to get the parties to yes and to shake hands. That doesn’t happen instantly. And as you know so well as a sales expert, different messaging and different arguments resonate differently with different people, whether you’re selling fruit, a house, or a business.

Jason: I love that. To recap, I think what’s so important is that the salesperson, the business broker, has to establish a value and then be able to justify it. Not just put a value out there, not just post a listing, but justify it. If you cover all the bases and can explain all the logic behind it, it’s tough to argue with the logic and the numbers. It’s not a dart thrown at a dartboard. It’s a calculated figure. It’s not a number the business owner made up because that’s what they want to exit for.

And you said there are four sales that need to happen, which are also four hurdles, which is why sales effort and persuasion are needed to overcome them: the buyer, the CPA or CFO, the attorney, and whoever has the gold, the bank or the investors.

That’s important, because I see a lot of brokers who just get listings and put them out there. If they go with the number the owner wants and hope it works out, they’re playing a numbers game. One thing you’ve told me is that people will marry the number you list a business at. Where does that get brokers in trouble if they’re not careful with their valuation?

Using Debt Service Coverage to Set Realistic Expectations

Greg: It’s a big problem. You either have to persuade and do the heavy lifting up front, or you have to do it in negotiations. The seller is open to education at the beginning. Obviously, they want the highest value possible, but that’s where you bring in the end in sight.

If you work with a local or national SBA lender, they can go up to approximately $7 million in financing using tools like pari passu structures. Say you’ve talked to a lender, and they tell you, “We need a debt service coverage ratio of at least 1.35 for this loan.” You can do the math and educate your client.

Let’s say a business earns its owner $1 million, for a round number. And say the owner’s labor in running the company is worth a quarter million, which is needed to cover their mortgage, their kids’ schooling, and so on. That leaves $750,000. That $750,000 needs to cover the debt service on the business. When the bank asks for a debt service coverage ratio, it wants a margin of error in case inflation hits, expenses increase, or a key customer is lost. A premium of 15% to 35% over the monthly principal and interest payment is fairly standard in the market.

So you can do the math. At a given sale price, if a buyer puts the traditional 10% to 20% down and seeks an SBA loan for the balance, can you clear that hurdle? Can you get a lender to deliver the money needed? In a perfect world, with, say, 10% down and appropriate debt service coverage, you may be able to get your client close to all cash for the business. If you can’t get a lender, maybe the seller is asked to finance 70% or 80% of the deal. Does the seller want to take that risk, especially if they’re retiring, betting on someone they met yesterday who has never run this specific business?

Jason: No way, not usually, I’d guess. And I feel like those factors, when they aren’t set up properly, are why so many business listings don’t sell.

Greg: They are. Nationally, I hear that 15% to 20% of businesses put on the market sell. I believe a slice of those that don’t sell are overpriced, with unrealistic values. Some are for sale by owner, or listed by inadequately skilled brokers who fumble the ball and can’t move it forward. Others are failing business models, where someone hopes a buyer will buy their idea.

Say someone was going to sell key lime pies from grandma’s recipe and built out a key lime pie store. Then they realize they’re busy, but only from 4 to 9 at night. The rest of the time, they’re paying for rent and staffing, and not many people come in the morning asking to buy a pie.

Why Passing on Listings Pays Off

Jason: Right. I know we’re going to talk about growth strategies next, in the rapid-fire segment, and this is a bit of a paradox, so let me step back. I want your ideas on what successful brokers do to grow their business, and I know you’re big on referrals and referral partners. But I also know that one thing that makes you and IBA’s brokers successful, at the rate you sell, which I believe is somewhere between 80% and 90% of your engagements, compared with the national average of 15% to 20%, is that you pass on more engagements than you take on. How does a broker balance that in their mind? They want more listings, but it’s quality over quantity.

Greg: I think you have to have an abundance mentality. You’re correct. We pass on two out of three opportunities that come to us, for three reasons.

First, the owner is unrealistic about value. As a firm paid 100% on performance, if we’re not going to complete a sale, why start? I’d rather go for a walk with my wife and two dogs than work on a project that isn’t going to sell.

Second, you don’t trust the person. It’s going to be a close short-term relationship, and you should pick your clients to make sure you’re aligned and your goals match.

Third, you don’t believe in the business model. I was just reading an article in the Wall Street Journal about TiVo stopping production of its products. I bought a TiVo when my wife was pregnant with our first child, and it was a godsend. It was the most wonderful thing. She could record shows, and if she had morning sickness or the baby was crying, she could pause what she was watching and come back 45 minutes later without being tied to the schedule the way we were growing up. If you wanted to see the Fonz jump cars or find out who shot J.R., you had to be tuned in when it aired, or you missed it. That was it.

TiVo was a game changer when it was created, but it’s no longer a needed product, and its day in the sun has passed. You need to look at business models, including as a buyer, and ask what the three-, five-, and 10-year horizon is for the company.

I went to the University of Texas McCombs School of Business, and my degree is in finance. When buying any investment, you need to think about the exit strategy. If you buy a business and receive the annuity of income over time, but your exit value is zero, that changes the dynamics of the investment. At the right price, you may still be fine with a five-year annuity from owning a business in a building you know will be torn down in five years. There may still be a market for that business, but it’s different from one that knows it can stay put for the next 20 years.

Jason: Makes sense. I also remember when TiVo came out and how big it was, because you no longer had to schedule your life around watching TV. It changed my life for basketball, because I no longer had to plan my life around being available to watch games. I could record them and watch whenever. But it’s interesting to think about how business models go away. If you’re trying to list that business, is anyone going to want to buy something that may not have a future, or that could be replaced or made unnecessary?

I like all those reasons for passing. And you mentioned the abundance mentality at the beginning: if you trust that there are enough businesses, you’ll find the right ones, and you don’t have to work with the wrong ones. Any broker watching already knows it’s a relationship. You have to trust that person, and they have to deliver what you need from them. If they’re not doing their part at the beginning, you’ll just be chasing them and forcing it.

Greg: Right. And what’s your opportunity cost of taking a listing you don’t sell but still have to spend time on, versus the business development and projects behind door number two you could be working on? As salespeople, we want to pursue every lead, but the best salespeople pick their projects.

Jason: I think that’s so vital for people to understand. There are times when a new broker takes on more, and then realizes which kinds of deals and which people they really like working with. Some of that is just a learning process, rather than accepting everything and throwing it against the wall. It’s an evolution.

The Broker Growth Playbook

Jason: And that’s a good segue into the next part, the rapid-fire segment: the broker growth playbook. You’ve been doing this for over 30 years and running IBA for a long time. You’ve grown it to a lot of brokers across a couple of states doing a lot of transactions, as I said in the intro. So you know a thing or two about growing a business and a pipeline as a business broker and being successful. I’d love to hear your tips. I know you have some on deck. And I know from your abundance mentality and everything we’ve done together that you’re happy to share with everybody, just like I am. So what’s the first one on your list of ways a broker can grow?

Greg: IBA has a collaborative corporate culture. In general, I want business brokers to succeed and deliver quality representation throughout the industry. I don’t think it’s good for the industry to have used-car salespeople and people failing.

For IBA, as a sell-side firm, the only time we compete with others is when an owner is interviewing a couple of brokers to choose one for the project. I put the burden on us to tell people why IBA, why me, and why I should be their business broker. If we fail and the project goes to someone else, we should look in the mirror. Now, the other broker may have offered an inflated price, as we discussed earlier, and that may be an acceptable reason to lose.

My managing broker for Oregon, Stephen Cohen, was selling a three-location chain of The Little Gym franchises. He interviewed me and other brokers for the project, and I didn’t give him the highest price. He came back to me and said, “I want to hire you, but I want you to match the list price this other broker said they could deliver.” I looked him in the eye and said, “I know that broker. You may know things I don’t, but I’m uncomfortable with that price. You should go with them.”

He went with them and came back to me several months later. He said, “I have no offers. I’m ready to listen.” We listed the business and sold it. He ended up joining me about a decade ago and has been my broker of the year, because knowledge, experience, and skill matter, and he recognized that not all brokers are the same.

Growth Tip One: Market With Caution

Greg: So let’s go into the elements of success, and interrupt me if you want to go deeper. The first thing I’d say is that it’s easy to ramp up marketing. You can pay for pay-per-click, run seminars, do direct mail, whatever you want. But you don’t want your product quality to suffer if you don’t have the bandwidth to provide superior customer service to the leads you generate. So market with caution, because in this business, our only asset is our reputation, and people share negative experiences much more than positive ones. If you market heavily, and then someone reaches out and you don’t return their call, or you tell them you can meet in three weeks, how does that make you look?

Jason: It’s true. With the brokers we work with, it’s a constant awareness and a constant conversation: what volume does the broker want? What’s the right amount of effort and inputs, if this were a factory, to produce outputs that can be managed and handled properly? There are companies out there you can pay to send 10,000 cold emails a month. First, do you want that reputation in the marketplace? Second, if it does work, can you handle even a small percentage of responses? And what happens when you get busy with listings? I don’t know how many times you’ve seen someone end up with too much work, and then, as you said, service quality falters, and that’s what people share online more than anything.

Greg: And that’s where I teach my team an abundance mentality. It’s okay to turn off the spigot of leads for a while to focus on the task at hand. With 18 brokers in the field, that will happen to different people at different times. Recognize that when your spigot is off, someone else’s is on, and when theirs is off, yours is on. From a global perspective, you’ll be fine. Trust that a positive future will come, that the sun will come up tomorrow.

Growth Tip Two: Make the Owner Feel Heard

Jason: So recapping number one: ramping up marketing is easy to do, but be careful. Build the infrastructure and plan for quality service. What’s number two on your list of growth tips?

Greg: Every business owner considers their company their baby. It doesn’t matter whether it’s a drive-thru espresso stand or a large technology or manufacturing company. To them, it’s often their life’s work, and they’ve put their heart, soul, blood, sweat, and tears into building it.

So provide superior customer service, and listen more than you talk. There’s the old adage that you have two ears and one mouth, so listen twice as much as you talk. I think it’s really important in business brokerage to make your customers feel important when you’re engaged with them. It may be a very basic sales premise, but don’t look at texts on your phone in a meeting with a business owner who’s considering hiring you to sell their life’s work, their passion for the last 20 years.

Jason: I think that’s important, and I’ve shared this with your group many times to help them sharpen the saw. As humans, we all think we’re the center of the universe and the hero of the story. The challenge is that salespeople think they’re the ultimate hero, because they’re there to save the day or make a transaction happen. But as you said, the business owner who created or bought the business and built it into what it is sees it as their baby. It’s everything they’ve put into it, and they need to feel like the star of the show and the hero. That’s a great reminder. People get distracted, or get busy with transactions, and aren’t as responsive as someone might expect. You always have to remember the other side.

Greg: And I’d add that people tend to be understanding if you send them an email or a text that says, “I’m in a meeting right now. Can I call you first thing tomorrow?” Usually people are reasonable and understand you have a life too. Or, “I’m at a parent-teacher conference this afternoon. Can I call you tomorrow?” They’ll probably say, “I’ve been there myself,” and be fine. It doesn’t have to address the whole situation, but it makes them feel valued.

Growth Tip Three: Deliver Quality and the Money Will Follow

Jason: What’s number three on your list?

Greg: Something my mother taught me growing up: if you deliver quality, the money will follow. As a business broker, you’re being hired as a trusted guide. Your client doesn’t know what they don’t know. Take the debt service coverage conversation we had earlier. I’d guess more than 90% of sellers don’t understand the lending process a buyer goes through to buy their business. So educate them, and provide resources. The seller isn’t seeking the financing, but you can ask, “Would you like to talk to the banker who’s financing this acquisition? They probably have some questions about your business for underwriting, and you may have questions about timing or why they need a particular piece of information.”

To me, transparency and open, honest communication are the foundation of a successful deal. There’s enough risk in entrepreneurship without unknowns. I believe both the buyer and the seller should go into the transaction in an environment of full disclosure and full sunlight.

Say the tires on the vehicle you’re buying are fine for summer, but when rain comes in the fall, or snow, you’ll need to replace them. That doesn’t mean you can’t sell the vehicle, but shouldn’t the buyer know that? Wouldn’t you even want the buyer to know when they say, “I’m buying this used vehicle to take my kids to school because we just had our third child and need our first minivan”? As a parent and as a human who cares, I wouldn’t want to set anyone up for failure in any situation. As I said, there are a lot of risks in entrepreneurship. As long as the buyer knows the risks, I believe I’ve done my job as a broker.

Jason: When I think about focusing on quality, I also think about understanding, as a sales professional, that anything you’re selling has trade-offs. Nothing is perfect. There’s the triangle of good, fast, and cheap: you can get two out of three, but never all three. Take your minivan example. The price might be right, but you may need winter tires. If it came with perfect tires, the price would be higher. There’s always a trade-off. It’s either more expensive, or there’s something else. So understand that it’s okay to disclose whatever needs to be disclosed. That’s also quality, because nothing will be perfect, but you’ve looked around the corners and you’re willing to disclose things with transparency. People make those decisions all the time.

Greg: I have a 20-year-old daughter and a 22-year-old son who recently got new iPhones, and they chose different amounts of storage, which affected the price. I’m blessed that they’re at a point where they can buy them. But it was interesting to listen to their decision process and see them reach two different conclusions. As you said, it was attributes versus price. My daughter chose the cheaper phone with less storage. My son, who uses the camera more to post online, wanted more capacity, and he paid for it.

Jason: That’s the trade-off. It’s all about trade-offs.

Greg: Exactly. So I’d emphasize doing the best job you can for your client and for the transaction in general, and don’t be afraid to show a defect. It’s actually a good thing.

I always tell my sell-side clients that it’s good to share everything. If the buyer buys knowing that 30% of your revenue comes from one customer, and you don’t see that customer going anywhere, and then the buyer loses that customer, maybe because the customer goes into bankruptcy, the buyer went in with open eyes. There were businesses that made a lot of money selling products to Sears and Kmart, and they’re not doing that today. You can sleep at night, and you won’t face a lawsuit for failing to tell the buyer that Kmart was on the ropes and you sold a lot of product to Kmart.

Jason: Everyone knows there’s a downside to things, and people always worry about the gotcha, the hidden thing. The more you disclose, and the more honest you are about the pros and cons, the more people can see it, and they don’t feel like anything else is hidden. I love that. Focus on quality, and the money will follow.

Growth Tip Four: Follow the Golden Rule

Jason: How about number four? Do you have a fourth one?

Greg: This is the overarching concept at IBA: the golden rule. Do unto others as you would have them do unto you. I convey it to both the buyer and the seller. Walk to the other side of the table and look at the transaction from their side. If you were in their shoes, would you agree to that term? It seems very simple, but I don’t think enough people do it well. We tend to be self-centered: “I’m in it for myself.”

I’ve known people who have a party on the weekend, go to Nordstrom and buy a brand-new pair of shoes, wear them to the party, and then return them to Nordstrom because of its liberal return policy. That bothers me. The shoes now go to the Rack. They can’t go back on the shelf as new. Is that person truly thinking about Nordstrom’s business model and its ability to carry inventory? Of course Nordstrom has a liberal return policy, but its intent wasn’t for you to use free shoes for a party. That’s not why the policy was established. You’re working an angle without thinking about all the parties involved.

Jason: I appreciate that. Seeing it from the other side is what has always made me successful in sales, including advising buyers not to buy something we’re discussing because I don’t think it’s the right fit. The sale starts in one place, but it never stops. It continues long term. In your business, you help a seller, and a buyer buys the business, and technically you’re done. But as you said earlier, can you sleep at night? Did you do the right thing? Is it a transaction you stand behind?

Greg: We live in a litigious society, and people often don’t look in the mirror and say, “I failed.” It’s human nature to point fingers and say, “Here’s why I failed. It must have been you.”

Jason: It must have been the bad coffee cup design, or anything else.

Growth Tip Five: Never Let Effort Be the Reason You Fail

Jason: How about number five? Do you have one more for the audience?

Greg: My first career was as a college basketball coach, and something I always believed in athletics, which I extended to IBA and to life, is never let effort be the reason for failure.

When everyone else is going to the beach, are you in the gym working on your jump shot? In the summer, no one sees you in the gym taking 100,000 shots. They’ll see the results next season. But if you don’t make the effort, you probably won’t be as successful next season. You have to show up and make the effort.

It ties back to what we discussed about business valuation, where you have to look at competition. A gas station at a highway exit with no other gas station for 10 miles in either direction is one business. If you’re in downtown Memphis, you probably have many gas stations to choose from. Those are different variables. So what are you doing to outwork the competition? The downtown Memphis gas station may also sell wonderful fried chicken, giving people a reason to stop and get a to-go order beyond the fuel, which is just a commodity.

Jason: I love it. Outwork the competition. The subtext is: don’t be the grasshopper.

Greg: The old story of the grasshopper and the ant. Don’t let effort be the reason for your failure. It’s always easy to procrastinate, and it’s always easy to do the projects you enjoy. We all tend to prioritize the fun, rewarding stuff. But don’t ignore everything else you need to do, and sometimes it’s best to address the hard stuff first.

Jason: Eat that frog first. And, as they say, chop wood and carry water. Just do the work and put in the effort. I love all of those tips. We’ll have them in the show notes for anyone watching or listening who didn’t write them down. I took a lot of notes myself.

The One That Got Away: Walking Away From a Paycheck

Jason: Let’s move into the next segment, Gregory: the one that got away, the lessons from the lost deal. Every broker has one, and I love it when people share them, because there are a lot of lessons in them. You’ve seen a ton of transactions over 30-plus years, your own and other brokers’, so I don’t even know how you narrow it down. Maybe it’s a trend you’ve seen. What’s the deal that got away, the story behind it, and the lesson that could help other brokers move away from used-car-sales status and get better at what they do?

Greg: Jason, may I share two brief stories?

Jason: Go for it.

Greg: I’ll share two, and at some level they have a common theme.

The first gets back to selecting your client. Do you trust them? Can you work with them? If you identify something down the line that doesn’t smell right, remember that your reputation is on the line.

Many years ago, I was selling a restaurant in Seattle, and I discovered that the business’s accounting was dishonest. I didn’t catch it when I valued the business, but as we got into due diligence, with a deal in escrow pending sale, the numbers didn’t line up. With my experience, I was seeing things the buyer wasn’t, and I was uncomfortable being part of that transaction.

So I went to my client and said, “I don’t want to be party to this. I’m going to walk away and void our agreement. You can still sell to this buyer if you want. I’m not going to sabotage your deal, but I’m withdrawing as your representative.”

Jason: Interesting.

Greg: The buyer saw what happened. I communicated that I had decided not to continue working on the project, that they had my blessing to buy it, and that there was no liability to IBA. The buyer actually completed the transaction and failed with the business.

I ran into the buyer later, and they made a point of coming over to talk to me at another restaurant. They said, “I really respect you, because you walked away from getting paid. You knew I was mentally and emotionally committed to this. It wasn’t if you were going to get paid, but when. But I didn’t read the tea leaves and ask why this broker was walking away from a commitment. It’s not something you see every day.”

He praised me. He said that in today’s world, there aren’t many people with enough integrity to sacrifice dollars to do the right thing.

So my recommendation is this: you only get one reputation. There can be short-term economic gain, but if you want to do this business long term, protect your reputation like gold, because once it’s tarnished, once you start getting bad Google reviews and so on, it’s really hard to change.

Jason: It’s so true. You get one chance. And it’s interesting to think that when you started 30-plus years ago, the internet wasn’t what it is now. If someone in business or sales had a bad reputation or did bad things, they could easily hide it. There was no way to check what others were experiencing. Now you can’t hide or run from it. It will get online, and fast. As they say, it’s like getting pee out of a swimming pool. You’re not undoing it once it’s out there. It’s always going to be there.

I think it’s fascinating to think about what it takes to do the right thing, and then for the buyer to still go through with the transaction because they were so emotionally committed. That’s very valuable. You said you had two. What’s the other one?

The One That Got Away: Greed

Greg: The other is a characteristic as old as time: greed, and IBA has faced it.

I just had a situation with six offers. One of my brokers, Andrea Lines, who specializes in the education space, had, I believe, seven offers for a client, with a likelihood of 10. Kate, another broker, has numerous offers on a manufacturing company in the technology space.

Just because you do a good job as a salesperson doesn’t mean the valuation of the business changes. You can see greed when a seller tries to move the goalposts on the broker and the buyer.

Now, market conditions can move the goalposts on their own, and a good professional intermediary will play that hand and may be able to get a premium. Andrea, the same broker I mentioned, previously sold another education company for a $500,000 premium in a 10-offer situation. Those buyers were pursuing a goal, no different from a one-of-a-kind waterfront property with a unique view. People will pay a premium, but they do it out of their own motivation. To me, that’s a positive price adjustment based on market conditions.

That’s different from saying, “If they offered X, see if you can get them to X plus two,” even though we went to market at X and we all agreed it was a fair price. In fact, we saw X as the high end of a 10% range where the business could sell. The broker did their job and got the seller the high end of the range. That doesn’t mean the range changes.

And going back to what we talked about several times, the debt service coverage still has to work. You still have to get the deal financed, or get the investment dollars. That can be achieved perhaps with more capital from the buyer, or with the seller carrying a note. There are ways to do it, but you still need to stay on the playing field.

Jason: Makes sense, and I appreciate that perspective. There’s a difference between someone wanting to pay a premium and playing the game of pitting people against each other in a bidding war just to squeeze more money out of something, which may ultimately make the transaction hard to close, or leave someone with a business that will be really difficult to run.

Business Sales Are Not About Price Alone

Greg: I’ll close with this. In that six-offer situation on a manufacturing company, my client didn’t accept the highest offer in the end. The offer they took was actually $200,000 less than the highest offer on this multimillion-dollar business. They picked the buyer they thought was best for their employees, customers, and vendors, because those were important issues to them as they exited the business.

But having higher offers let us move the preferred buyer, both financially and on other terms. So we left some meat on the bone, but we achieved secondary and tertiary negotiating points from our preferred buyer that we wouldn’t have gotten without the leverage of the other buyers. That’s where experience, knowledge, and skill matter.

Business sales are not just about price. You’re not buying a diamond ring, where many jewelers have the same or a similar ring and it’s a commodity price decision. This is a one-of-a-kind entity, often the seller’s life’s work, and honestly, the fulfillment of a dream or aspiration for the buyer. This has the opportunity to be a magical exchange, because one party is exiting stage right and the other is excited to take the stage and be the lead performer in the story.

Jason: I love it. That’s a great perspective. It’s what makes the business of intermediaries and business brokers so fascinating and challenging: it’s not just price, it’s not a commodity, and it’s not one-size-fits-all. It’s not like looking in a catalog to see what the last Corvette sold for and pricing yours the same way. It’s much different.

One Piece of Advice for Winning More Listings

Jason: To close out episode number one with you here: if you had to give brokers just one piece of advice for winning more listings and growing the sales pipeline side of their business, what would it be?

Greg: Great question. First of all, I’d say this is a wonderful profession, and it’s needed with the baby boomers retiring. It’s a robust garden of opportunity. If you’re choosing this profession, there is opportunity.

And I’d say play the long game. Build a network of collaborative referral partners: attorneys, CPAs, wealth advisors, and real estate brokers. Become part of the community. To borrow from Sesame Street, be the business broker in your neighborhood whom everyone calls, and be willing to simply be a resource. Let people call you and ask questions. Be the giver, because you will get the gains.

Jason: I think that’s great, and important for any business and anyone in sales. Play the long game. It’s quality over quantity, in both relationships and transactions. This isn’t about selling 100 widgets a month. It’s about a certain number of deals per year. And I know that for you, relationships, referral partners, and involvement in the community and in entrepreneurship are huge. I appreciate that.

Where to Find Gregory

Jason: For anyone tuning in who wants to get in touch with you or read more, you can find Gregory on LinkedIn, where he posts regularly. It’s Gregory Kovsky, spelled K-O-V-S-K-Y, and all of this will be in the show notes. You can also go to ibainc.com, and you can email Gregory. There’s a very active blog there that Gregory writes for, his team writes for, and guests like me have written for. It covers anything that helps business brokers, the industry, entrepreneurship, and business owners in general. You’re always putting content out there. So if you’re interested, follow what Gregory is doing and reach out to him. I know he’s always willing to be a resource and always loves talking business and sales.

Gregory, thank you for being here, and for moving up from episode 325 on my previous show to episode number one and guest number one on the Business Broker Growth Show. I appreciate you sharing all this with us today.

Greg: Thank you, Jason. You’re an asset to the sales community.

Jason: I appreciate that. I’m super excited about this show and this podcast coming together. As I said at the beginning, it was all sparked by my interactions with Gregory and his team, seeing the business and the amazing environment there, and seeing what it all makes possible: helping businesses exit successfully. That’s what we focus on here at Business Broker Growth: working with brokers, to Gregory’s point, to separate the professionals and help them succeed, and hopefully reduce or remove the used-car-sales approach that leaves business owners in a bad place.

Thanks to everybody for tuning in. Make sure to follow the show wherever you found it. There’s also a YouTube channel, a LinkedIn page, and a website, all in the show notes. Just search for Business Broker Growth and you’ll find it. Until next time, stop hoping for deals and start growing your pipeline.F