Introduction

Zach: Welcome to the Entrepreneur’s Logbook podcast. I’m your host, Zach Bernard. In each episode, I bring on experts from various industries to learn about the strategies and insights driving business growth.

Today we’re joined by Gregory Kovsky, president and CEO of International Business Associates, also known as IBA, the Pacific Northwest’s oldest and largest business brokerage firm. IBA helps business owners navigate the complex process of selling their companies and maximize the value of what they’ve built. Gregory has personally facilitated over 300 business transactions across industries ranging from manufacturing and technology to marine and automotive, with deals spanning multiple states and typically between $1 million and $30 million in enterprise value. He purchased IBA in 2000 and has grown it into a regional powerhouse with 10 offices across Washington and Oregon. The firm has completed over 4,400 transactions in its 50-year history.

Gregory, it’s great to have you on the show. Welcome aboard.

Greg: Thank you, Zach. It’s a pleasure to be with you today.

Zach: I was really looking forward to this conversation. As we were saying off the mic before we started recording, we’ve had a lot of business owners on the show from marketing, e-commerce, and other areas. But one thing we’ve never touched on, which I think is a pretty important part of business, is selling a business. As entrepreneurs, you’re building a company, an asset, and you’re thinking, “Maybe in 10 or 20 years I’ll sell this asset.” There’s so much about that process that many people don’t know, and you’ve gone through it hundreds of times. So I’m really excited to cover all of it.

Screening and Hiring Quality Talent

Zach: Since this is an entrepreneurship podcast, what I always like to ask guests is this: if you had to rebuild your company from scratch, knowing everything you know today, what’s the one thing you would do differently that you feel many entrepreneurs get totally wrong?

Greg: One thing I think entrepreneurs underestimate is the importance of screening and hiring quality people. To scale my business, I need talented business sale intermediaries who can problem solve, articulate, educate, and persuade.

Early on, I didn’t think this was as difficult as it is. It came somewhat naturally to me. I’m a salesperson by personality and by birth. I went to the University of Texas McCombs School of Business and studied investment finance and accounting. So there were elements I brought with me when I joined IBA in 1994 that I probably took for granted in my own skill set, and some of my early hires as I began growing the firm disappointed me.

Over the years, I’ve developed metrics and characteristics I look for when hiring new people, and I’ve had a much higher success rate with what I’d call my 2.0 team.

I bought the company from the founder in 2000 and did well with the heritage brokers, adding some of my own, up until 2008. We had about 15 brokers in the field doing deals. Then the Great Recession happened, and by 2012 we were down to six brokers. I’ve scaled back up to about 20 now.

In a way, the recession was a bit of a blessing. Some brokers retired, some moved on to other professions, and some I let go. From 2012 to the present, I was able to hire with the knowledge and experience I’d gained in my first decade of owning the company. So if I went back in a time machine, I wish I had known what it really takes to be successful in this profession, the way I do today, when I was onboarding new people.

Zach: I feel like every founder goes through that either way. You have to learn to hire better and create better processes. It’s a live, learn, fail, and improve-as-you-go experience. You’re not the first guest to mention it. It seems to be a common thread: get good people on your side, and put a good process in place so that the next hires, your 2.0 team, are the right people, and you can deliver great results for your clients.

Viewing Your Business Sale as an Investment

Zach: Moving to the selling side of things: many entrepreneurs spend years, even decades, building their business with the idea that eventually they’ll sell. And it can feel overwhelming. Do I have the right processes? Can I get the valuation I need? There are so many misconceptions. Could you walk us through what the process looks like when a business owner comes to you? What does IBA do, and how do you guide someone from that first conversation all the way through closing a deal?

Greg: Certainly. You made a good observation, and it starts with having the right perspective on the sale.

Look at the sale of a business as an investment, because it truly is one. You put time, money, and resources into it over a period of time. You have to look at what your initial investment was, what annuity you earned in profits over the years you owned it, and what your exit value is. So many people make the mistake of judging their success on the exit value alone.

Let’s use round numbers. Say a business cost someone half a million dollars to launch. For the last five years, they’ve been earning a million a year running it. Ultimately, they sell for $5 million, five times EBITDA of $1 million. Just over the last five years, the business has generated $10 million for them: $1 million a year for five years plus the $5 million exit.

So you shouldn’t look in the mirror and judge yourself only on the exit value. Take a longer-term view of how the investment did for you. Did it put your kids through college? Did it let you buy a nicer home, go on vacations, and so on? The business was truly the vehicle for all of that.

Starting With a Valuation

Greg: As for our process, and feel free to interrupt me with questions, it starts with a valuation of the business: what is the market value of the company today? That needs to be looked at in terms of your future goals. About 70% of our clients are retirement sales. So you share that number with your wealth advisor and ask: is it enough to retire in comfort, do what you want for your legacy, and maybe donate to the charities you care about? If the answers are no, it’s probably not time to sell.

The value of a business is what the market will pay. You hear this often in residential real estate: people fall in love with their home. They have memories of their kids in the sandbox and watching games in the den. In their mind, the kitchen is filled with wonderful smells and family gatherings. But someone else looks at it and says, “I don’t want to maintain that sandbox. The audio-visual system in this house is so 2008, I’ll have to redo everything. And I’ll have to renovate the entire kitchen, cabinets and all.”

So it’s about market value, and the true definition of value is what a willing buyer and seller agree to. We can make educated estimates based on the number of transactions we’ve done, but I’m the first to say I’ve seen businesses sell for more than I expected because of market dynamics. I’ve also seen businesses sell at what I’d consider a bargain because I couldn’t find someone willing to relocate to run the company.

I know we both live near the water. There are some wonderful businesses on the Washington and Oregon coast. For example, we sold a veterinary hospital in Forks, Washington, which is about as far west as you can go in the continental United States. The town is actually famous from the Twilight book and movie series, with the vampires and werewolves. But finding a veterinarian who wanted to run that community hospital was a challenge. It took a while, but eventually we found someone who loved to hunt and fish. They loved that if they had no appointments on a Wednesday afternoon, they could hang up a “gone fishing” sign at 3:00, get a line in the water, and maybe catch a steelhead.

Those are the kinds of dynamics that affect price. But that’s where we start. I’m happy to continue with the process, but I’ll pause and let you ask a question or comment.

Zach: When people think about selling their company, the first thing on their mind is probably how to maximize what they get. Do I have the right systems in place? Will I get a good valuation? But many people forget that someone actually has to want to buy it at that price. You might have a number in your head, and then an offer comes in that’s totally off, and you wonder why.

I also love that you called the business a vehicle. It’s not just about the sale price. It’s about the entire history of the company: the 10 years you’ve been running it, making money from it, supporting your lifestyle. The exit is like a bonus at the end, and I think a lot of people forget that.

I’m sure you have plenty of stories about exits that failed: founders who poured money into a company, gave up a lot of equity, and then basically broke even or lost money when they sold. That’s obviously something people want to avoid. You’ve been involved in over 300 transactions personally. What common mistakes do you see business owners make that either kill a deal or leave a lot of money on the table, and how can they address them early, before they become problems?

Three Drivers That Enhance Exit Value

Greg: There are three things that enhance the value of a business that you can plan for ahead of time.

The first is that you want to work on the business, not in the business, which ties back to our conversation about hiring the right people. Businesses sell at higher multiples if you can go on vacation and have a good staff infrastructure in place. A restaurant where the owner is the head chef sells for less than one where the owner just greets guests each evening.

The second is clear and consistent financial records, because one of the decision makers in a sale is frequently a bank or investors. You can have a buyer who is very excited about the opportunity, but if they can’t bring the bag of gold to complete the deal, it doesn’t matter what the buyer and seller agree to. They need to be able to get the money in place, and most commonly it’s not just coming out of their checking account. A bank or investors are involved.

The third is the future potential of the business. Two things drive value. There are the historical numbers, which are predictive of the future but don’t guarantee it. And there’s what drives motivation and gets buyers engaged: the appreciation potential of the company.

Balancing Historical Performance With Future Potential

Greg: I’m a fan of Elon Musk. I like Tesla and what he’s done as an entrepreneur. Right now, people aren’t as excited about his electric vehicles as they once were. I still think it’s a phenomenal product, but it’s not as hot in the market right now. So you might think, “I’m not going to invest in Tesla stock anymore.” But I’m actually quite excited about it, because he’s transitioning to robotics. He has converted two of his plants from building cars to building robots.

He comes from a mining family background, and I’ve heard him on podcasts talk about building a workforce for mining. No one is raising their hand right now saying, “I want to go into the mines as a career.” But with robots, you don’t have to worry about oxygen or working conditions. You can reach mineral deposits you might not be able to reach with humans. You could maybe even scale it to mining on the Moon or Mars, if you have those aspirations.

So is Tesla a vehicle company or a robotics company going forward? We don’t know where the stock will be in five to 10 years, but my bet is it will be higher than it is today, and the business model will keep evolving.

It’s the same with a privately held company or family business. Going back to the restaurant example: if you’ve developed the recipes, systems, and processes in one location, and you have a line out the door and a full reservation book, it’s logical to ask why not expand to a second, third, or fifth location. That’s a different model, and it requires different management skills. But in my experience, a 10-location restaurant chain will sell for significantly more than a single iconic restaurant.

Those are the kinds of things that go into maximizing your value: thinking about more than where the business is today. My favorite question to ask sellers on behalf of the buyers looking at their businesses, especially our retirement-level clients, is this: “If you weren’t retiring, and you were going to own this business for another five to 10 years with unlimited money, what would you do?”

Zach: Interesting. So when you look at a business, you want to think about its potential for innovation. What could a new owner do differently to grow it faster and better? No one wants to buy a company and have it crash into the ground.

I love the restaurant example. A mom-and-pop family restaurant that’s famous in one city is great, and you’ll probably get a decent valuation. But if you have repeatable systems and processes that let you clone the concept into multiple locations, even just three, you’ve built an asset you can replicate, with much more growth potential in the hands of the right buyer. That’s something business owners need to think about: if I want to exit, what can I do to make this asset more appealing to buyers and raise the valuation?

Greg: Correct. And the opportunities are endless when younger, fresh eyes look at a business. We frequently sell businesses to people who bring their own skill set and knowledge to take it to a higher level.

One area we’re seeing right now, akin to Tesla, is body shops: fender benders, car accidents, and so on. They used to know how to repair a Ford, a Jeep, or a Mercedes. Now, with all the sensors and electronics, you need to combine computer knowledge with body repair knowledge, and the body shops that can do that are scarce right now. If someone can dial in that model and become the body shop for EVs, they become very valuable in the community, because I can tell you a lot of body shops are passing on that work right now. Scarcity drives value, which means insurance companies are paying a premium for those repairs.

Zach: There you go. Are you going to open a body shop, Gregory? You have all these amazing ideas. Maybe that’s your next project.

Greg: Well, we have a very robust transportation division at IBA. The beauty of what we do is that people lift up the hood and teach us about their businesses. It’s wonderful to think about these business models and what can be done with them. That’s truly one of the things we sell: potential. What can someone do with this business?

On the buyer side, people get paralysis by analysis looking backward. People will come to us and ask, “What was the financial performance in 2019, before the pandemic?” I tell them we’re happy to share those numbers, but it was an entirely different economic environment than we have in 2026. You should focus less on what the business did in 2019 and more on what it can do in 2030. What’s the potential of this platform?

My belief is that in my lifetime, we will never see the environment of 2019 again, when the economy was overheating and interest rates were relatively low. It was a global economy, and now, at least in the United States, it seems to be shifting toward domestic manufacturing, with tariffs and so on. Things change, and if you’re not adjusting in real time and staying aware of what’s going on, you’re going to fail as an entrepreneur.

Zach: You’re going to be left behind.

Pre-Exit Checklist

Zach: That brings me to a couple of last points before we wrap up. Say an entrepreneur is running a company and plans to keep building traction for a couple more years, but the end goal is to sell. What two or three pieces of advice would you give them now to improve their valuation, and also to make sure they get an offer in the first place and that there’s a buyer interested in what they’ve built?

Greg: Returning to some earlier themes: first, have crystal-clear financials that a buyer, their CPA or CFO, a bank, or investors can review.

Second, have good systems and processes: employee manuals, business plans, SOPs, and so on, that a buyer can replicate and use to learn the business.

And third, just like selling a car, detail the business. If your website is a brochure with no video and no current information, realize that everyone is going to go there. You only have one chance to make a first impression. Get your house in order.

If you’re a manufacturer with a boneyard of miscellaneous unfinished products and excess materials, get them to the dump, so no one walks your shop floor and asks, “What’s this 200 square feet that looks like a junk pile?” Why would you want that? You might organize the pile and show the value of what’s there, but it can’t just be a pile people keep dumping things on.

Zach: I love that. I see this so often: you look at a company’s website and wonder what’s going on. That can be a real turnoff, and first impressions definitely matter. I run podcasts myself, and one of the main things I tell everyone is that your first impression will matter a lot. It’s exactly the same when you’re selling a business. If a potential buyer has a bad first impression, they probably won’t put much effort into looking at the details to see what’s actually under the hood.

Where to Find Gregory

Zach: Thank you so much for joining us, Gregory. If someone wants to sell their company down the road, or now, or just wants your advice, where should they find you? I know you’re fairly active on LinkedIn, and you have your website.

Greg: I would start with our website, ibainc.com. I’d point out two parts of it. First, we have a blog that publishes twice a week and has had about 200 guest authors, from attorneys and CPAs to bankers and business sale intermediaries. There’s a lot of information there to help you learn about buying and selling a business.

Second, we have a video page where we share podcast appearances like this one, along with our own corporate videos about what we do. That’s a wonderful place to start. You can also always reach me at our corporate headquarters at 425-454-3052.

I love being a resource. I speak at seminars, and I visit universities to share information with people interested in entering entrepreneurship through acquisition, which is an emerging field of study. The best decisions are made from a foundation of knowledge, and that’s why I created our blog. I wanted to put more knowledge out there in an industry that doesn’t have much of it in the public domain.

Zach: That’s one of the reasons I had you on the podcast. As I mentioned, we haven’t had anyone on to talk about selling and exiting businesses, so there’s definitely some missing information out there. Thank you so much for taking the time to join us. For anyone who wants to get in touch, head over to ibainc.com to learn more and check out the blog. We’ll put the link in the show notes as well.

And to our listeners, if you enjoyed this episode, don’t forget to subscribe, like, and review the podcast. Until then, keep pushing, and we’ll see you in the next one.