Introduction

Gwenevere: Welcome, everyone, to today’s Scaling With People podcast. I’m Gwenevere Crary, your host and the founder and CEO of Guide to HR. On this episode, we’re talking about the part of entrepreneurship nobody puts on the highlight reel: what your business is actually worth, why founders get emotionally handcuffed to the company they built, and how to sell without setting off a five-alarm fire inside your business.

Joining us today is Gregory Kovsky, president and CEO of International Business Associates. He has personally closed more than 300 deals and helped turn the Pacific Northwest’s oldest business brokerage firm into a 10-office regional force. If you think valuation is just math, retirement is just timing, or a sale can happen without strategy, this conversation is about to lovingly wreck that illusion. I can’t wait to dive in.

Gregory, welcome. Before we start, would you like to introduce yourself to the audience?

Greg: Certainly. Gwenevere, thank you for the opportunity to be on your podcast. I have been a business broker since 1994. I joined IBA after they sold my father’s veterinary hospital. He had been impressed with them during the process. After graduating from the University of Texas McCombs School of Business and pursuing my first career, I was looking for a new challenge. So I joined IBA and emerged as one of the top salespeople between 1994 and 2000. Then the founder, Bill Osavski, approached me about being his successor in ownership.

I took the helm of the company in 2000, rode through the Great Recession, rode through COVID, and I’m standing here today with, as you said, 10 offices in the Pacific Northwest and about 20 brokers facilitating transactions for entrepreneurs.

Gwenevere: That is amazing, and definitely needed. It’s not something we talk about much on this podcast, or even generally as business owners. You might start a business thinking you can sell it eventually, or you might start a lifestyle business and realize five or ten years later that you could turn it into a sellable business for retirement.

The Biggest Valuation Myth

Gwenevere: Most founders, including me, want to believe their company is worth more than it probably is. What’s the biggest valuation myth you can bust right now for all of us founders?

Greg: Great question. The interesting thing about valuation is that it’s a sophisticated, subjective science. Ten experts can look at the same business, come up with different valuations, and all be accurate.

A business run by an owner-operator at its present level would have one value if that continued. A strategic acquirer who wants to increase market share or pick up relationships may pay a different value. Another buyer may look at the business model and say, “This is really scalable. I can take this concept to a much bigger level.” They look at it as a value proposition, because they’re not focused on what the business is worth today. It’s like being an early-stage investor in a company that’s going public. Even the IPO value could be a fraction of what the business is worth in 10 years, and getting on that train early can be very lucrative.

So it’s about engaging someone who knows the market conditions for your company and the demographics of the buyers.

I’ve also had people come into my office who think their business has no value. I recall an owner in the flooring business. They installed carpet, tile, and laminate in homes. To him, there was nothing there, because he had no inventory. He ordered product directly for each installation. But he had a phone number and a multi-decade brand that people called, and we sold that company for almost a million dollars.

Gwenevere: Wow.

Greg: The only reason it sold was that his CPA said, “Before you shut it down, you should talk to IBA and have them take a look.” And the buyer has done really well with that business model since then.

Gwenevere: That’s amazing. What a difference for that owner to have a million dollars for retirement. If he had shut it down, that would have been a million dollars lost.

Greg: Exactly. You walk into the showroom and see carpet samples, tile samples, a number of people working the phones, and installation crews that go out and install. If you only look at the asset base, which is what the owner did, you’re thinking about liquidation value. What he didn’t realize is that the brand, the website, the phone number, the past customers, and the Google reviews all have value in the marketplace.

Gwenevere: Absolutely. And as an HR professional, I also think about how many employees kept their jobs. The showroom staff and the installers likely got to stay.

Buying a Company to Solve a Staffing Problem

Greg: As an HR professional, this will resonate with you: sometimes people buy companies because they’re having difficulty growing from a staffing perspective. Think of the service trades: plumbing, HVAC, electrical. There’s a shortage of skilled, experienced people. If you can buy a smaller provider in your market that has, say, 10 plumbers, that’s a great way to fuel your growth and address your bandwidth concerns.

Gwenevere: So true. I love that idea.

Three Things That Drive Valuation

Gwenevere: What are the top three things that actually drive valuation that founders often ignore when they’re busy running the business?

Greg: The first thing I would say is systems and processes.

Gwenevere: Get it out of their head, right?

Greg: Exactly. It’s having an up-to-date employee manual and an up-to-date website. It’s the things that help with scalability and transfer of knowledge, so that everything isn’t centralized with you. There’s an expression: working on the business versus in the business.

Gwenevere: I say that all the time, Gregory.

Greg: If you’ve set things up so you can go on vacation, and you have good infrastructure on your team, that enhances value. That’s the first thing.

The second is to mitigate customer concentration. For a buyer, their CPA, a bank, or investors, if 30% of your revenue comes from one customer, where is the business if you lose that customer? You need to be aware of that effect and mitigate it, ideally keeping each customer under 10%. That said, I’m based in Seattle, and if you manufacture aerospace components, Boeing is probably a big customer. There aren’t many alternative customers in that space. You can navigate those situations, and we do, but it’s a concern.

The third, plain and simple, and this gets down to Main Street: have clean, transparent financial records. As an entrepreneur, it may make sense to barter and trade, to pay employees under the table, or at a hospitality business, to take $500 home a week that somehow doesn’t get on the P&L. All of those things hurt your valuation at the time of sale. So I encourage people to get ahead of the curve and run their books transparently, so they can be reviewed by a buyer, a CPA, a CFO, a bank, or an investor.

It’s actually a good conversation to have today, Gwenevere, because with tax filing day on April 15 coming up, it’s a reminder that you have an opportunity in 2026 to clean up your books. If you want to sell in 2027, look at your P&L and say, “Yes, I go to Costco and pick up things for the family through the business, but maybe I won’t do that this year.”

It may not seem like a lot. Say you run $50,000 of personal expenses through your business, a few thousand a month. If we’re talking about a four or five multiple of EBITDA at the time of sale, that could be a quarter million you lose because you can’t document it.

Gwenevere: Wow.

Greg: Yes, on that $50,000 you’ll probably pay $15,000 to $20,000 in taxes at the end of the year. But wouldn’t you rather have $200,000 to $250,000 than save $15,000 to $20,000?

Gwenevere: Exactly. How far back do the books need to be clean? It sounds like maybe a year or two?

Greg: I look at three years.

Gwenevere: Three years, okay.

Greg: Three to five years of financials. But we’re coming out of a period where, honestly, the pandemic years don’t tell you much. 2020 and 2021 were chaos years, so we don’t look much at five years right now. We’re back to having three good years in a reasonably stable economy.

And the most important year is what you’re doing right now. We’ll look at the last tax year, but we’ll also look at trailing 12 months. We may pull data from April 1, 2025, through March 31, 2026, because December 31 is an arbitrary cutoff date. It’s no different than a publicly traded company. You see how the stock market goes up and down based on quarterly earnings reports. Business values at the Main Street and middle market level go up and down based on quarterly performance as well.

Gwenevere: That makes complete sense.

Increasing Value Over the Next 12 to 24 Months

Gwenevere: If a founder wants to start increasing the value of their company over the next 12 to 24 months, what should they focus on first?

Greg: First, make sure your books and records are transparent, which we just talked about.

Second, a business is more attractive if it’s in growth mode. I often joke with clients: imagine you’re running a marathon. Let’s kick the last two miles. If I can show a buyer 5% to 10% growth in 2026 over 2025, it looks much better than an owner who has checked out, wants to retire, and has a business that shows it.

Third, build your team infrastructure. If it’s a husband and wife team and one of them is the CFO, maybe you start transitioning that position. Then at the time of sale, you only need to replace the top of the pyramid. You’ve already trained someone in that CFO-type role, so that position doesn’t need to be replaced at the same time.

And you know HR, Gwenevere. How long is it taking right now to find a quality executive, like a CFO or a CMO?

Gwenevere: Usually three to six months, depending on the industry and what’s happening. I think you can shorten that if you, as the hiring manager, have a really clear understanding of what’s needed. I see founders struggle with that a lot. They go to market looking for one thing, realize during the recruiting process that it’s not really what they need, and have to start over. They’ve lost one or two months right there. So it’s about identifying your needs, and the characteristics and skill sets that will fill them, before you start looking.

Greg: And we all know that, unfortunately, the first person you hire may not be the right person. If you’re working ahead of the curve and you bring someone in for a month and realize they’re not a good fit for your culture, you have some runway to find the right person. You really want stability on your team at the time of sale.

Gwenevere: Especially leadership. That’s a valuable asset buyers are acquiring.

Greg: Exactly.

Why Founders Struggle to Step Away

Gwenevere: When you’re thinking about selling your business as an entrepreneur, why do you think so many founders struggle with the idea of stepping away from what they’ve built?

Greg: Wonderful question. For a lot of people, it’s their identity. It’s fun to golf with your buddies and talk about the past week in business. Golf may not be the same if you take away your main topic of conversation.

I also think, and I fall into this category, and you may as well, that business is the ultimate competitive sport. It’s an adrenaline rush. Many of my clients don’t want to golf. They get up in the morning thinking about marketing initiatives. How do I open a new office? What do I do next? That’s what makes life fun for them. It’s not uncommon for people to keep working into their 70s. Look how many years Warren Buffett worked. Financially, he probably could have retired 25 years ago and been just fine.

Gwenevere: You have that drive. You’re an entrepreneur because you have that drive, so how do you dial it back? So many of my friends say, “You work at Mach 10. You’ll never get down to Mach 7.” And I think, “Hmm, what would that look like for me?” And it’s identity too. I totally agree. If I’m not the founder and CEO of my business, the podcast host, the author of this or that, who am I? What do I do with my life? I think you nailed it.

What a Healthy Transition Looks Like

Gwenevere: Have you seen founders who sold and made a healthy transition? What does good look like?

Greg: Certainly. Maybe I’ll divide that into three groups.

In the first, sellers stay on and continue to work for the company part time, doing what they like. For example, Graham Hollingsworth, one of my past clients, loved sales and his customers, but he didn’t want to manage people or worry about finances anymore. He stayed on for six years with the new owner, doing exactly what he enjoyed. When we negotiated his employment contract, it included seven weeks of vacation.

Gwenevere: Nice.

Greg: Including the month of December. He said, “I’m happy to help when I’m in town. I still enjoy this, but I need the freedom.” That’s the first group.

In the second, founders need quiet space to come up with their next idea. I have one client in the tech space who has sold four businesses through IBA. He builds them to a certain level, and at that point he doesn’t like the HR element…

Gwenevere: People don’t like the HR element, let’s be honest.

Greg: He likes it when it’s a small, dedicated group of people working pedal to the metal together. So he sells, goes and travels, and enjoys life. And then, and I’ve been doing this for 32 years, he’ll call me and say, “I built another company. I want to sell it again.”

The final group has the freedom to do what they want, maybe working with nonprofits. I’ve seen many people take their knowledge and experience into that space and give back to society, which is wonderful.

I have a brother with special needs, and I’m an advocate for that community. I’ve served on the boards of organizations that help people with special needs find employment. I’m not ready to retire, but I could see continuing my advocacy in that space.

I’m also a voracious reader. I joke with my wife that I could be a librarian in a beach town and be happy if no one came in, just getting lost in the stacks. Or a student comes in and says, “I’m doing a report on the Amazon,” and I sit down with them, pull books, go online, and say, “Let’s learn about the ecosystem of the Amazon.”

You have to find your why. I believe we all need a reason to get up in the morning and do something. I don’t think having no purpose in our lives is good for our mental health.

Gwenevere: Exactly. I love the nonprofit idea, because we all have so much experience owning, managing, and working on our businesses, and that translates so well to the nonprofit space. They need that kind of skill set and knowledge.

Greg: To close on that, I have multiple members of my team who volunteer at SCORE, a Small Business Administration resource partner. It’s a wonderful program where entrepreneurs can reach out to free experts and sit down with them, and SCORE tries to pair them with people who have industry or relevant experience. We’ve sponsored that organization for years, because there are resources out there for entrepreneurs.

Gwenevere: And often people don’t even know about them.

Greg: Exactly.

Selling Confidentially Without Causing Panic

Gwenevere: Let’s switch gears to selling in stealth mode and not causing a five-alarm panic in your business. One of the biggest fears founders have is employees finding out they’re selling. How do you market and sell a business confidentially, so that when you do eventually communicate, you’re not setting off panic and fear that sends people out the door and costs you value?

Greg: You just hit on one of the biggest reasons to hire a professional to sell your business, because we walk a fine line. On one side, just like selling anything, you want to create a competitive marketplace where as many buyers as possible are looking at the product. Competition drives up price. On the other side, when you sell a business, you want no one to know it’s for sale. You don’t want your employees, customers, or vendors learning it’s for sale, because that could damage the business.

So a firm like IBA screens buyers. We have them sign non-disclosure agreements saying they won’t make public that a business is for sale. Very importantly, we qualify them financially. You may have the most relevant experience to run the business, but if you don’t have the chips to play at that poker table, there’s no reason to start the game.

Gwenevere: Agreed.

Greg: The last thing we look at is relevant experience, which is also something the Small Business Administration considers for SBA loans. You can get up to $5 million with an SBA-backed loan to buy a business. But if you’re a tech worker who wants to buy an Italian restaurant and you’ve never worked in one, you probably won’t get SBA backing for your loan.

Gwenevere: Exactly.

Greg: Conversely, you may make YouTube videos cooking Italian recipes handed down for generations, and you may be a great Italian cook. That doesn’t mean you should buy a video production company and manage that operation. Relevant experience matters.

We assess potential buyers, and we frequently have multiple-offer situations where our sellers have choices. One of the metrics they choose on is who will be able to take the helm of this ship and guide it into the future. As we touched on, sellers care about their employees. They know their life stories. Employees may have kids in college or be preparing for retirement, and sellers don’t want to throw their lives into chaos.

Sellers care about their customers. They don’t want them to be dissatisfied with the products and service the business offers in the future. And they care about their vendors. Say you’re a roofing company that has bought plywood for years from a local lumber yard, and the owner is a friend whose kids played Little League with yours. The lumber yard needs those plywood sales as part of its business model. You’re both well known in the community, and you don’t want to damage that community’s ecosystem, because it’s interdependent.

All of those things matter to sellers. People focus on the exit price, but many elements go into deciding who a seller should sell to, or wants to sell to.

Gwenevere: That makes so much sense.

How Leaks Happen

Gwenevere: What mistakes do you see that cause leaks before the news reaches employees, vendors, and customers?

Greg: Not having a professional process, and that includes marketing. IBA’s first office was in Portland, Oregon. If we’re advertising a business in Portland, we’re not going to name the neighborhood it’s in. We may just say the business is located in Multnomah County, to give us coverage so people can’t identify it from the ad.

We actually have to be much more careful in advertising today than we’ve ever had to be, because people put our listings and the information we share into AI. If you pull wording directly off a company’s website, people may be able to trace who’s for sale, and competitors are curious about who’s for sale. So you need to be strategic and thoughtful at every stage of the sale process, and it helps to have a guide with knowledge, experience, and skill leading the process.

Where to Find Gregory

Gwenevere: So true. I have so many more questions, but looking at the time, I’m going to wrap up. Any final tips or thoughts you’d like to share with the audience?

Greg: Gwenevere, I would share our website, ibainc.com, and point you to two parts of it. The first is our blog. My mom was a schoolteacher, and I believe there’s poor information out there in our industry. We’ve had about 200 authors in the history of our blog, and we publish twice a week: attorneys, CPAs, bankers, and business brokers. There’s a lot of information there that can help whether you’re interested in selling or buying.

The second is our video page. We have our own corporate videos with information, and we also publish podcasts like this one from YouTube, so people can go back and listen to these interviews. Whether you’re driving in the car, listening on Apple or Spotify, or watching at home on YouTube, knowledge is power.

Gwenevere: 100%. We’ll definitely put those links below. Gregory, it was great talking with you. There’s a lot of food for thought here, especially for me as an owner. I really appreciate your insights into how to start thinking about exiting and the many different forms that can take. Thanks again for joining us, and to our listeners, we look forward to seeing you on the next episode. Have a great one, everybody.