Introduction to IBA

Chris: Gregory, tell me a little about your business. I know you’re a business brokerage, and not just any brokerage. I think you’re one of the largest in the Pacific Northwest. You help business owners like me position and sell their businesses. Is that correct?

Greg: That is correct. IBA is the oldest and largest business brokerage firm in the Pacific Northwest, so we’re on the other coast from you. We help owners of privately held companies and family businesses sell what is often their life’s work, and we exclusively represent the seller side. Every one of my brokers, and I, holds one or more state real estate licenses, so we can sell both asset classes for a client. We help owners navigate the sale process through to closing.

One unique thing about my firm is that we don’t charge our clients a penny until project completion, whether it’s a six-, seven-, or eight-figure transaction.

Chris: Let me look at my notes here. You’ve done this 4,400 times?

Greg: The company has done it 4,400 times. I’ve personally done it over 300 times. The company was founded in 1975. I joined in 1994 and succeeded the founder, Bill Osavski, in 2000, when I bought the company from him.

Why a Brokerage Needs Local Offices

Chris: That’s fantastic. And you’ve grown it to 10 locations. When I was thinking about this, I wondered why you would need multiple locations to broker business sales. Tell me about the thinking behind having additional locations rather than one central office.

Greg: Wonderful question. We’re doing a podcast, and it’s a virtual world, but the reality is that this is a local business. One reason we have physical offices is that people do business with people they know, like, and trust.

Chris: Absolutely.

Greg: And in many cases, you’re selling a child. You’ve put a lot of time, energy, and resources into that business, and you really care who your successor is, because it’s not only about price. It’s your company family. You know them intimately. You know their kids. You know if they’re planning for retirement or putting kids through college. So you care who you hand that group off to, just as you care about your customers and vendors. You probably have relationships with all of them, and you want to pick the right successor, someone who can be successful.

Maybe we’ll talk a bit about valuation, but everyone knows business valuation is essentially EBITDA times a multiple. When you talk about a five multiple, that’s a 20% return on investment, which means there’s substantial risk. If you want less risk, you can buy a mutual fund, real estate, or a variety of other assets. So we need to transition ownership smoothly.

The example I often give, since we’re in the Northwest: say you love clam chowder and go to the same place every Friday for it. If they change the recipe, you as a customer may not keep going there. Even in a simple model like that, if we don’t pass on the recipe that’s been there for 50 years and is the reason people adore the place, the business can struggle. That’s one reason we have physical offices.

The other is confidentiality. You don’t want people knowing you’re selling until it’s a reality. If you meet at a Starbucks or a restaurant, you may run into people you know in the community. Because we have physical offices with private conference rooms, we have a place for discussions to happen out of the public eye.

And though Zoom is great, there’s nothing better than engaging with someone in person, on a multisensory level, and having a dynamic conversation without people looking at their phones or turning the camera off. That’s one of my frustrations with Zoom calls. When someone turns their camera off, I always assume they’re multitasking.

Chris: I agree.

First Steps Toward an Exit

Chris: I love this. Now let’s get into the weeds a bit and go back and forth. I’m fairly familiar with this. I’ve exited two companies, small ones, but I have two exits under my belt. And when I build businesses now, and I have 18 of them, the goal is always to build them the right way so they could be exited.

I think there are lots of business owners listening to this podcast who are probably thinking, “What are my first steps? If I might want to sell in two, three, four, or five years, when do I start getting things ready? What do I start doing? And what’s the process for bringing it full circle to an exit?”

Greg: Great question, Chris. There’s a lot of education involved in selling a business. One of my complaints about the industry is that there’s no significant barrier to entry, but a good business sale intermediary needs to know accounting, tax, real estate, law, business, sales, psychology, and a spectrum of other areas. So you want to sit down with someone and understand the road ahead.

Assemble your team. Do you have an attorney who understands M&A? That may be different from your general business attorney. Do you have a transactional CPA who can help you with tax allocation, and maybe a quality of earnings report? Those sorts of things.

As for a business broker, the process starts with a business valuation. We do it for free at IBA because it serves two purposes. It lets the business owner assess our knowledge, experience, and customer service and learn what the business is potentially worth. On our side, we’re determining whether we believe in the business model, whether we want to work with this owner, and whether they’re realistic about value.

Why Honest Valuations Matter

Greg: One of my frustrations in our industry relates to business models. With ours, we have a vested interest in being honest, because if the business isn’t going to sell, we won’t get paid. So why start a project that won’t be successfully completed?

Unfortunately, many firms in our industry, and I have friends at firms that use this model, charge upfront for the valuation. In theory, if they’re honorable, the total cost of professional representation will be about the same at the end of the day. But often they’ll give the owner the answer they want to hear and avoid the hard conversation.

Say I look at a business with $1 million of EBITDA, and given the risk, I think it’s a 4.5 multiple, so it’s worth about $4.5 million. If someone tells the owner it’s worth $6 million, the owner will be very happy, and maybe they’ve written a check for $25,000 or more to start the process. They listen to the broker in good faith, but unfortunately the broker has left all the heavy lifting to the buyer to convince the owner what the business is actually worth. And the broker has cemented a view in the mind of a seller who was open to learning why their business is worth what it is.

Maybe it’s not worth a six multiple because 30% of the revenue comes from one customer, and losing that customer would create substantial risk. Would the business even survive? Those are the kinds of things that go into dialing in the correct multiple.

That’s my frustration with the market. There are companies that run seminars and are very slick in their sales presentations, and they get people excited about prices that aren’t achievable in the marketplace. We have a vested interest in the outcome. We do this full time, we’ve been doing it for 50 years, and we’re paid 100% on performance. There’s no motivation for us to be dishonest about value.

Valuing Data, IP, and Brand

Chris: That’s a good point. Let me ask you about that. I’m fairly familiar with the EBITDA multiple, but are there other factors that come into play for different kinds of businesses? Here’s an example from my business. One of the big things we’re just starting to look into is the value of our data. We’ve gotten some valuations back on it, and I was blown away by what our data is worth. We’ve never monetized it, though we probably will in the future. When you look at a company, you have the EBITDA, but if you also have proprietary technology, IP, and data, do those get added in? How do you factor something like that?

Greg: Great question, and I love geeking out on valuation. It’s one of my favorite subjects. There are several components to valuation. The first, which we’ve talked about, is the investment side.

The second side of the triangle is the art side. Each business is unique, and what is the brand, and its potential for appreciation, worth?

I love to travel, and when you fly, you have a choice of airlines that can get you to different destinations. I’m going to Germany for the holidays. My wife is German, and I prefer to fly Lufthansa to Germany because it’s a higher-quality experience, just as I like Singapore Airlines when I go to Asia. It’s not that you can’t fly other airlines, but you get different levels of comfort and quality. The same is true of businesses.

So when you talk about appreciation, you’re talking about where the business can go with the assets it has in place. To stay with airlines: if Lufthansa offered a flight from Seattle to South Africa and I wanted to go on a safari, I might consider that airline, because it’s a long flight and comfort matters.

Tying that together, it’s no different than buying a publicly traded stock. What’s the potential of that company moving forward? People look backward in valuation, but in reality, if you bought a business on January 1, and we have multiple closings on January 1, you’re more concerned about what it will do in 2026, 2027, and 2028 than what it did in 2024 and 2025. It’s no different than buying one of the AI stocks right now, like CoreWeave or whoever else. You’re not betting on today’s revenue. You’re betting on the future.

I’m a fan of Elon Musk, and I love his compensation model, where it’s all performance-based. He’s saying, “Don’t pay me if I don’t deliver.” To me as an investor, that says he believes in the future of his company, and maybe I want to get on that train with him.

Chris: I couldn’t agree more on Elon.

How Far Ahead to Start Preparing

Chris: If someone wants to exit, how many years ahead should they start preparing? There are a lot of things that have to happen. Sometimes companies need to be reorganized, and sometimes you have to put together data rooms and all sorts of things just to get the business ready to sell. How far out do you usually want someone to be? If they come to you and say, “We’re looking to exit two years from now,” how do you handle that?

Greg: Wonderful question. That’s where the valuation is important. We’ll give them a sell-now value, and we’ll educate them on how to adjust the levers.

We don’t provide consulting on how to improve businesses, but we have an extensive Rolodex and can introduce them to people. If the accounting and financial side needs improvement, maybe it’s an outsourced CFO. If marketing needs improvement, maybe it’s an outsourced CMO or a new sales professional. So we’ll educate them.

Our clients generally don’t need to sell. They want to sell. If you look at the demographic, they’re doing what they enjoy, executing their vision, and making money. It’s like what you just described with your company, your podcast, or any of your entities. If you’re enjoying it, what’s the urgency to sell?

Life After the Exit

Chris: I think when someone is going to sell, there are a lot of factors to consider, including life after the sale. If you’ve been in a business a long time, it becomes like your child. You’re there every day. It’s what you do. So what happens when you stop doing it because you got a big check? Money doesn’t buy happiness.

I think about life after the exit all the time, because money is only a small part of the equation. I’d guess a lot of people think exiting their company is all about the money, and then after they exit, they fall off the wagon because they’ve lost their purpose. My wife and I talk about it all the time, because we’ll certainly have an exit in the future. I’ve had to get very clear about what life will look like after that. Not so much what life is like now, or what it will be like when the big check arrives, but what you do with it. How do you find purpose again? What do you build next? Do a lot of the people you work with talk about life after the exit more than they talk about the check?

Greg: They do. It’s an important consideration. I always use a simple metric: if you don’t want to get out of bed in the morning to go to work, whether you’re an employee or an entrepreneur, it’s time to make a change. Life is too short to just go through the grind. But you do need to think about what the next chapter looks like.

I had a client who sold products for the nuclear industry. He still loved his company, but he sold because he wanted to give away the parts he no longer wanted to deal with. He actually stayed with the business for seven years in an outside sales capacity.

Chris: Wow.

Greg: We negotiated seven weeks of vacation a year for him. And why wouldn’t the new owner want someone who knew all the customers and product lines well? He just decided he didn’t want to deal with all the parts of running a manufacturing company: production, accounting, taxes, and compliance issues, since they manufactured products out of lead and had environmental issues to deal with. He said, “I’m happy to be a rainmaker,” and he did that for another seven years. So it depends on what you want to do with the transaction.

The Second Bite of the Apple

Greg: Many times, we sell companies to private equity firms or family offices, and our clients retain a percentage of ownership. There have been many times when the second bite of the apple was larger than the first. You sell two-thirds of your company, and the buyer brings different experience, knowledge, and resources. Maybe you’re a regional chain and they help you expand domestically. When they exit a number of years later, your 30% ends up being worth as much as or more than your 67%.

Chris: I’ve heard that a lot. There’s a lot of private equity activity right now.

What Buyers Want Right Now

Chris: Speaking of which, you see all sorts of businesses. Are there businesses right now that are on every PE firm’s list? I have a lot of friends in services, heating and cooling, and anything service-related, and they’re getting gobbled up left, right, and center by private equity. What types of companies are the easiest to sell, or the most desirable to be acquired right now?

Greg: Wonderful question again. Market demand is actually the highest I’ve ever seen in my 31 years.

Chris: Wow.

Greg: It ranges from the trillion dollars private equity has on the sidelines, and publicly and privately held companies looking to grow by acquisition, all the way down to individuals. I’m based in Bellevue, near Amazon and Microsoft, and the tech layoffs are driving people into entrepreneurship. If you’re 57, you may not have the resources to retire, so you solve the problem: your spouse has a job, your kids are in school, and you buy a company. And there’s a whole founder culture right now where younger people don’t necessarily want to work for companies. They want to create businesses.

But to get back to your question, hot spaces right now include services, like the home services you described. We just had 17 offers on an education platform. Coming out of COVID, people need more support. My mom was a schoolteacher, and unfortunately our public school systems don’t seem to be getting it done for a lot of families. So supplemental education, both online and in person, and vocational training schools are a hot space.

Health care is another. We just sold a virtual mental health business. Rather than spending time driving to see a psychologist or psychiatrist to talk about family issues, aging, or whatever it may be, you can log on for half an hour and have that conversation from the comfort of your den. Business models that combine technology with people’s needs aren’t going away.

Chris: That’s interesting. I have a lot of friends who have exited at multiples I never thought their industries would generate, which ties right into the demand you’re describing.

Win-Win Whiskey

Chris: I want to pivot quickly to a different business you have. There wasn’t much information on it, but I found Win-Win Whiskey. Is that company still going? What’s the story behind it?

Greg: It’s a passion project, and it hasn’t fully launched. I’m a bourbon drinker, and I wanted to create my own bourbon. My VP of business development, Curt Maier, a gentleman of Irish background and a Notre Dame grad, and I decided to create a celebration whiskey. We trademarked the name Win-Win Whiskey. We believe there’s a market for a high-quality celebration whiskey, whether you’re celebrating a successful lawsuit, a real estate deal, or an M&A transaction.

So we created it and perfected the recipe. We’re working with Heritage Distilling, a local distillery that makes a wonderful product for us. We haven’t taken it to the public market yet. It’s more of a friends-and-family product at this stage. But I’m excited about it, and I’d love to toast you with a Triple W.

Chris: That’s really cool. I like the concept, because you’re right. When someone sells a company or celebrates a win, whatever it is, you usually think of champagne. But I don’t like champagne. I get the worst headache the next morning if I drink more than a couple of sips. Bourbon, though, is a novel idea, because bourbon is definitely the drink to drink.

Greg: It’s nice to pass around glasses and share a celebratory drink. Like you, I’m a creative thinker, and I come up with ideas constantly.

American Dream Achieved

Greg: For example, there’s a book that hasn’t been published yet, though it’s available virtually on our website. I hear wonderful stories from our past clients that are often only known within their families or small circles. So I hired two writers to tell our clients’ stories in a series called American Dream Achieved. We’ve done over 50 profiles so far, telling the inception-to-exit stories of Pacific Northwest businesses we’ve sold over the years.

Working with these clients, I’ve found they have wonderful stories. Businesses that started in kitchens and garages. It’s amazing what people have built over the years. Everyone hears the stories of Jobs or Elon, but it’s much more relatable to learn about a guy who started with one truck and a buddy and grew it into a roofing company doing eight figures annually.

Valuing a Group of Companies

Chris: Absolutely. The last thing I wanted to ask is more personal. Say you have an enterprise of companies, eight companies under one parent company that’s going to be sold. Would you value each one, or just the parent company? How do you do a valuation of a group of companies?

Greg: This goes back to our valuation process. You’re correct: we want to value each entity on its own and then as a whole. We may package some together, or spin something off if its value isn’t enhanced by being part of the whole.

An easy example: I sold an eight-location chain of Arby’s restaurants. Geographically, some locations made more sense to pair than others and were more attractive together. So did it make sense to sell them in groups of three, three, and two, or as a chain of eight? We want to evaluate all the options and then decide on the best path forward.

Chris: That’s a really good answer.

How to Get Started With IBA

Chris: This is a fairly good-sized podcast with lots of listeners, and I’m sure many of them are thinking, “I want to get on the phone with Gregory and get my company valued.” Is there a process? How would someone start working with you and your company?

Greg: Every relationship starts with a conversation. If someone reaches out to us, in person or virtually, we’ll engage with them. I’ve sold companies throughout the Northwest, but also in California, the Triangle in North Carolina, and the Boston metro area, so we can represent companies nationwide. We’re a bit more selective if we have to get on a plane to work with them. But you start with a conversation and progress to a valuation to strategically plan the best path forward.

It’s a slow walk. Say we value your company and you take a couple of months to decide to go to market. It then generally takes us three to nine months to complete a transaction. After that, there’s usually a transition period where the selling owner stays on as a consultant or employee to make sure the transition goes smoothly and the business isn’t hurt.

What I always tell people, since we’re dealing with an aging baby boomer population, is this: if you’re 68 years old and want to retire by 70, time can be of the essence. Add, say, a year total to get the transaction done, plus a six-month to one-year transition period, and you’re at two years. If you don’t get that train moving, you could easily be past 70 by the time it’s done. And no one wants to sell from weakness, whether it’s due to a health issue, a divorce, or a partnership breakup. So plan ahead.

A common situation for us is partners whose goals diverge. One wants to keep doubling down and investing in the business. The other wants to exit and reap the rewards of their success. Maybe it’s not an internal sale but an external one, where one partner exits with their bag of gold and the other stays on, invested in version 2.0 of the business, and it’s a positive outcome for everyone.

Chris: Absolutely. Folks, we’ll put that in the description. If any of you want to book a call and take that first step, we’ll put it right in the episode description. Everyone is at a different stage with their business and its growth, and it’s worth a discussion to figure out whether exiting and moving on to the next phase of your life is in the cards. That’s how I look at everything. Whether or not I want to sell a company, and whether or not I love everything going on in it, everything’s for sale, and there’s always a next thing you could be doing.

The one exception I see a lot is when a father or mother has a business they want to pass down to their kids. I think that’s sometimes a big mistake, because the kids often don’t even want to inherit the company. They want to go off and do their own thing, but they get forced into the role because someone has to take over. I’m sure you see that as well.

Family Succession and SBA Financing

Greg: I’d comment on that. One solution is an SBA loan. We’ve seen cases where a child does want to go into the parents’ business, but the parents don’t want to finance the sale. So the child gets an SBA loan for, say, 80% of the value, and you can go up to $7 million or $8 million with the right lenders, to cash out the parents. The parents may keep an equity stake for a transition period, but the business and the child pay off the loan over time, rather than the parents’ retirement depending on the child’s success.

So again, there are many different ways to execute an exit strategy, and you just need to talk and explore ideas. I believe, and I think you share this, Chris, that the best decisions are made from a foundation of knowledge, and from bringing in the right professionals to educate you.

It may sound really good to buy a rental house. But if you’ve never owned one, don’t live close enough to monitor it, and will have to outsource every maintenance job, it may not be as good an investment for you as for your best friend, a handyman with a huge tool collection who can fix everything. You’ll have costs they wouldn’t have when a drain gets plugged.

Chris: I completely agree. We all have that friend who has a tool for everything.

Where to Find IBA

Chris: International Business Associates is the name of the company, folks. Is there a website people can go to?

Greg: It’s ibainc.com.

Chris: Perfect, ibainc.com. We’ll put that in the description. Gregory, this has been great. Thank you for sharing insight into what it’s like to get your company ready for sale, and how your firm helps people find the right buyer so they can ride off into the sunset or do whatever comes next.

Greg: It’s been a real honor. Thank you, Chris.

Chris: All right, folks, we’ll see you on the next episode of the Money School podcast. Until then, have a blessed day.