[00:00:00] Speaker A: My favorite question from buyers, if you weren't retiring, if you were going to own this another five to 10 years and you had unlimited money, what would you do? You got to look at what your initial investment was and what your exit value is. So many people make the wrong conclusion of judging their success just on the exit value.
So three things enhance the value of a business. The first one is you want to work on the business, not in the business.
[00:00:40] Speaker B: Welcome to the Entrepreneur's Lockbook podcast. I'm your host, Zack Bernard. You can find me on Social at. It's Zack B. In each episodes, I bring on experts from various industries who learn about their strategies and and insights driving extreme business growth. The Entrepreneurs Logbook podcast is sponsored by Weptup pr, where we're dedicated to helping entrepreneurs build their thought, leadership and business by getting on them on podcasts and launching their own podcasts. Today we're joined by Gregory Kofsky, President and CEO of International Business Associates, also known as iba, the Pacific Northwest's oldest and largest business brokerage firm. Helping business owners navigate the complex process of selling their companies early and maximizing the value of what they built. Gregory has personally facilitated over 300 business transactions across industries that range from manufacturing technology to marine and automotive, with deals spanning multiple states and typically between 1 to 30 million dollars in enterprise value. He purchased IBA back in 2000 and has grown it into a regional powerhouse with 10 offices across Washington and Oregon. And the firm has now completed over 4400 transaction per across its 50 year history. Gregory, it's great to have you on the show. Welcome aboard.
[00:01:52] Speaker A: Thank you, Zach. It's a pleasure to be with you today.
[00:01:55] Speaker B: I love it. Well, I was really looking forward to this conversation. I know we were speaking off the mic before we, we started recording, but we've had a, a lot of like business owners that are maybe in, in marketing, E commerce or anything like that. But the one thing that we've never talked about or touched on, which I feel is a pretty important component in business, is selling a business. A lot of entrepreneurs, what you're doing is you're building a company you're building, but you're thinking of the thought process, okay, maybe in 10, 20 years I'm going to sell this asset. And there's so many things that a lot of people don't know about this process that I know you've had the experience of going through hundreds of time. So I'm really excited to touch on all those components here. But as it's an entrepreneurship business type Podcast what I always love to to cover with any guests that we have on the show is if you had to like rebuild your company from scratch knowing like everything that you know today, what's kind of like the. The one thing that you would do differently that you feel a lot of entrepreneurs, business owners get totally wrong.
[00:02:56] Speaker A: One thing that 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, persuade.
And early on I didn't think this was as difficult as it is.
It came a little naturally to me. I'm a salesman by personality and birth.
I went to the University of Texas McCombs School of Business, studied investment finance and accounting.
So there were elements that I had when I joined IBA in 94 that I probably took for granted in my own skill set and some of my early hirings. As I began to grow the firm disappointed me.
And over the years I've been able to develop metrics and characteristics that I want in the hiring of new people and have had a much higher success rate in terms of performance with what I would call my 2.0 team.
I bought the company in 2000 from the founder and did great with heritage brokers, adding some of my own. Up until 2008 had about 15 brokers in the field doing deals. Then the great recession happened and by 2012 we were down to six brokers and I've scaled back up to approximately 20 at this point.
But it was a little bit of a blessing the recession. Some retired, some moved on to other professions, some I let go that I got to hire.
Ramping up from 2012 to the present with my knowledge and experience over my first decade of owning the company. And so if you went back in the time machine, I wish I had known really what it takes to be successful in this profession like I do today when I onboarded new people.
[00:05:54] Speaker B: Yeah. And I feel like when you start a company you will go through that. Either way you will have to learn to better hire people, create better processes. It's like a live learn, fail type experience and improve as you go. So interesting. And you're not the first person that mentions that. It seems to be like a commonality. You want to make sure that you get good people on your side, you hire the right people and then you get a good process in place. Make sure the next hire is the 2.0 team that you mentioned and is the correct people on board and you can obviously deliver great results for your Partners and clients here and just taking a step to the selling, buying side of things. For a lot of entrepreneurs, they've literally spent years, sometimes even like decades building their business to. They eventually just have like this idea that like, okay, I'll sell off the company or maybe I'll do something else. But typically selling the company is usually the main thing that they have in mind. And it feels like a bit overwhelming. Like you have to think like, hey, we need to have all these processes. Can I actually get the evaluation that I need? I need this, this, this, this. Like there's so many misconceptions as well. But I'd really love to hear if you could walk us through that process of what it looks like for a business owner when they come to you. Like what does IPA do and how do you guide someone that comes from like that initial conversation all the way through actually closing a deal?
[00:07:11] Speaker A: Certainly I think you made a good observation and it starts with having the right perspective on the sale.
When you look at the sale of a business as an investment, and it's truly an investment, you put time, money and resources in over a period of time. You got to look at what your initial investment was, what the annuity you earned in terms of profits over the 10 year that you owned it, and what your exit value is.
So many people make the wrong conclusion of judging their success just on the exit value.
If a business, and we'll use round numbers, costs someone a half million to launch effectively they for the last five years have been earning a million a year running their enterprise and they ultimately sell, we'll say, for 5 million, 5 times EBITDA of the million.
Well, just over the last five years it has generated them $10 million between the last five year annuity of 1 million and the $5 million exit.
So you shouldn't be looking in the mirror and simply looking at that exit value.
You should be looking at a more long term perspective on how did this investment do for me? Did it put my kids through college, did it allow me to buy a nicer home, go on vacations, et cetera? Because that truly was the vehicle. But with our process and interrupt me and ask questions, but it starts with a valuation of the business.
What is the market value of the company today?
And that needs to be looked at in terms of your future goals.
70% of our clients are retirement sales.
So you take that money, you share that amount with your wealth advisor and is it enough to retire in comfort, do what you want for legacy, maybe donate to the charities you want if the answers are no to that question, it's probably not time to sell.
Because the value of a business is what the market will pay.
You know, you hear frequently in residential real estate, people fall in love with their home.
They have memories of time with their kids in the sandbox. They have, you know, watching sporting events in the den.
The kitchen in their mind is filled with wonderful smells and family events that filled it.
But someone else looking at it says, I don't want to maintain that sandbox.
The audio visual in this house is so 2008. I'm going to have to redo everything.
This kitchen
[00:11:04] Speaker B: doesn't have to renovate the entire thing.
[00:11:07] Speaker A: Cabinets. I see.
So it's what the market value is.
And the true definition of value is what a willing buyer and seller agree.
And we can give educated guesses based on doing as many transactions as we've done. But I'm the first to say I've seen businesses sell for more than I thought based on market dynamics.
And then businesses sell at what I would deem a value proposition because I couldn't find a person who wanted to relocate to that location to run that company. I know both of us live on marine environments. There are some wonderful businesses on the Washington, Oregon coast.
But 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.
It actually was famous. It was involved in the Twilight series, if you were familiar with that book and movie series, vampires and werewolves.
But finding a veterinarian who wanted to run that community hospital was problematic.
Took a little while, but eventually we found someone who wanted to hunt and fish.
And they loved, if they had no appointments on a Wednesday, that they could hang up a gone fishing sign at 3 o' clock and get their line in the water and maybe catch a steelhead or a salmon in the local area.
So those are the type of dynamics that will impact price. But that's, that's where we start. And I'm happy to continue with the process. But I'll pause and let you maybe ask a question or comment.
[00:13:23] Speaker B: Yeah. Because I know a lot of people when you think about selling your company, the first thing you're thinking about is probably like, okay, how can I get. Maximize the amount of money I get for it. I have the, the correct systems in place. Am I going to get a good valuation?
But one of the things I feel like a lot of people forget is like, yeah, someone needs to be interested in buying this. Like, there needs to be a buy for this automatically you're just thinking, like, okay, maybe I could sell it for this, that, that. But you're not thinking there needs to be someone that will pay for that price. And again, as you mentioned, you need to find a willing buyer that will purchase it and will see certain market price for what you're offering. And you might have a number in your head, but when they give you maybe their offer, it's like, totally off. And then you're like, why is that? There's, like, a few things maybe that you didn't have, like, in mind. But I love the fact that you mentioned that it's like a vehicle. Like, it's not just about the selling price. It's also about, like, the entire history of the company. Maybe like the 10 years you've been running it, you've been making money out of it. It's been like, helping your lifestyle, maybe entertain a certain lifestyle. And then once you get thorns yen, it's like that little, like, bonus in the end, like the end of the year. Same thing with your company when you're exiting it. And I feel like a lot of people totally forget that. And there's so many stories. I mean, I'm sure you probably have hundreds of stories around, like, exits that completely failed, founders that poured so much money into, like, the company gave up so much equity and then they arrived to sell their company, and then they basically break even or they maybe lose money. And for a lot of people, that's obviously something that you want to avoid. And one of the things that I'd love to understand is you've been in over, like, 300 transactions personally, as I recall here. But I'd love to hear if there's any common mistakes that you see a lot of business owners make that either kill a deal entirely or perhaps it leaves a lot of money on the table. And if there is any way where they can address those, like, a little bit earlier, before these mistakes even start. Because I think that that's a big pitfall for a lot of business owners that are looking to exit or sell their company.
[00:15:22] Speaker A: So three things enhance the value of a business that you can think ahead of. The first one is you want to work on the business, not in the business. We start the conversation about hiring the right people.
Businesses sell at higher multiples in value.
If you can go on vacation, if you have a good staff infrastructure in place, a restaurant where the owner is the head chef sells at a lower value than one where they just greet people who come to the establishment each evening.
So that's the first thing, the second thing that enhances value is clarity of financial records and consistency. Because one of the decision makers in a sale is frequently a bank or investors.
So you can have a buyer who's 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.
They need to be able to get that money in place to and most commonly it's not just coming out of their checking account. They have a bank or investors involved.
So that's the second thing. And the third thing is what is the future potential of the business?
Cause there's two things that drive value.
So it's historical numbers which are predictive of the future, but not guaranteeing the future.
But what drives motivation and gets people to engage is appreciation value for the company.
I'm a fan of Elon Musk. I like Tesla and what he's done as an entrepreneur.
People right now are not as excited about his electrical vehicles as they were during a previous time. I still think it's a phenomenal product, but it's not as hot in the market as a product right now.
So you would think maybe I'm not going to invest in Tesla stock anymore, but I actually am quite excited about it and we'll see where it goes.
Because he is transitioning to robotics, he has transitioned two of his plants from building cars to robotics.
He comes from a mining family background and I've heard him on podcasts talk about building a workforce to mine.
And if you can think, no one is raising their hand and saying, I want to go into the mines as a career path right now.
But with robots you don't have to worry about oxygen work conditions.
You can access mineral deposits that you maybe couldn't access with humans. You can maybe scale it to mine on the moon or Mars if you have aspirations.
So is Tesla a vehicle company or is it a robotics company? Moving forward, we won't know. But where the Stock is in five to 10 years, my bet is it's greater than it is today and the business model is going to continue to evolve.
And that's the same thing with a privately held company or family business.
If you using something that everyone knows, the restaurant again, if you have developed the recipes, systems and processes in one location and you have a line of people out the door reservations, well then it's logical.
Why not expand to a second, third, fifth location?
Well, that's a different model, different management skills are required.
[00:20:09] Speaker B: But
[00:20:11] Speaker A: my experience is a 10 location restaurant chain is going to sell for significantly more than a one location iconic restaurant. So those are types of things that come into maximizing your value and think about not just where the business is today. My favorite question from buyers who are looking at businesses, especially from our retirement level customers.
If you weren't retiring, if you were going to own this another five to 10 years and you had unlimited money, what would you do?
[00:21:00] Speaker B: Interesting. So it sounds like when you look at a business you want to think like the potential of innovation and one standpoint, like, okay, what could they do differently that's going to help grow the business forward for that new business owner that might acquire the business? For example, you need to think in nursery it was like, okay, what could I come into the business do differently to grow it faster, do it better to grow the company. No one wants to buy a company and have it crash into the ground. Obviously that's not like the end goal here. But I love the fact that you mentioned like the restaurant example. If you have like one mom, pop, like family restaurant, it's like famous, not one city location. That's great, you're maybe going to get a decent valuation. But if you have one that has repeatable system, repeatable processes that you're able to expand and basically clone and into multiple location, even if you only have like three, you've built this system, this like asset that you're able to replicate, which has so much more growth potential in the right hand of like the right buyer here. And I think that's something that a lot of business owners need to think about. It's like, okay, if I want to exit the company, what can I do to make this asset more appealing to like anyone that I'm selling it to to basically raise like that valuation.
[00:22:14] Speaker A: Correct. And the opportunities are endless to look at younger, fresh eyes.
We frequently will sell businesses to people who bring their own skill set and knowledge to take it to a higher level. One that we're seeing right now, kind of akin to Tesla is body shops. You know, fender benders, car accidents, et cetera.
Well, they knew how to repair a Ford, a Jeep, a Mercedes.
Now you need to with all the sensors and electronics to really combine computer knowledge with body shop repair knowledge.
And the body shops that can do that are scarce right now. But if someone can dial in that model and be the body shop for EVs, they now become very valued in the community. Because I can tell you a lot of body shops will pass on that work right now. Which means, yeah, scarcity drives value, meaning insurance companies are paying a premium to make those repairs.
[00:23:43] Speaker B: There you go. Are you going to be opening a body shop? Gregory, you have these amazing ideas. I mean, maybe that's your new project here.
[00:23:52] Speaker A: Well, we have a very robust transportation division at iba. And so that's where we.
The beauty of what we do is people lift up the hood and teach us about their businesses.
And it's so wonderful to think about these business models and what can be done with them. And that's truly one of the things we sell, is the potential.
You know, what can someone do with this business?
And on the buyer side, people get paralysis by analysis, looking backwards.
And like, people will come to us and say, what was the financial performance in 2019 before the pandemic?
And I will say we're happy to share those numbers. It was entirely different economic environment than we have in 2026.
You should be more focused not on what it did in 2019, but what it can do in 2030.
What is the potential with this platform? Because my belief in my lifetime, we will never see the environment of 2019 again, where the economy was overheating, interest rates were relatively low.
There were pieces there.
You know, it was a global economy where now it seems to be transitioning more to domestic manufacturing economy, at least in the United states with tariffs, etc.
So things change.
And if you're not adjusting in real time and being aware of what's going on, you're gonna fail as an entrepreneur.
Yeah.
[00:25:58] Speaker B: You're gonna be be left behind. And that kind of brings me to like some last, like, two, three pointers I wanted to like, touch on before we wrap things up. So any entrepreneurs, they're looking, they're running a business company. They're like, I'm gonna run this couple more years. Like, definitely. Like, I want to build like some more traction. But like, hey, I have an end goal. I want to sell the company at some point in time. Like, I want to exit the company. Is there like two, three bullet points or piece of advice that you would have for these business owners at this point in time, Things that they should be looking to do, looking to prove upon, to help increase your valuation when they actually get there, but not only increase the valuation, but also making sure that they can get one in the first place. And there is a buyer interested in what they built.
[00:26:43] Speaker A: So returning to some prior themes first, have crystal clear financials that a buyer, their cpa, cfo, a bank, investors can look at that's, you know, good systems and processes, you know, employee manuals, business plans, Those sort of things sops that a buyer again, can replicate and use to learn the business.
And I would also say just like selling a car, detail out the business.
So if your website is a brochure with no video and no current information, realize everyone's going to go there. You only have one chance to make a first impression.
So get your house in order. If you're a manufacturer and you have a boneyard of miscellaneous unfinished products, excess materials, get those to the dump and out of there so that someone is not walking your shop floor and saying, what's this 200 square feet that seems to be the junk pile? Why would you want to have that?
Now, you may organize the junk pile and show value of what's there, but it can't just be a pile that people are dumping stuff on.
[00:28:25] Speaker B: I love that. Yeah, I mean, I see this like so many times. Like, you see like a lot of companies, you look at their website and you're like, what's going on there? Like, there should be some adjustments and I think that can be like your turn off. And I love what you mentioned around the first impression, because they definitely do matter. I'm big on that. I mean, I know I run my own podcast. You can own podcasts too. But that's like one of the main things I tell everyone is like, hey, your first impression is going to matter a lot and it's going to be the exact same things when it comes to selling your business. Potential buyer looks at your business, they have that bad first impression.
Probably not going to put too much intention in considering and looking at all the details to see what's actually under the hood. So what's out there matters a lot. I love that. So thank you so much for, for joining us, Gregory. And as far as like reaching out to you, if anyone later down the road, they want to sell their company or they're like, hey, I want to sell the company now. Or they just want your advice, input. You've obviously been in the space for quite a while. Is there any places they should be looking at? I know you're decently active on LinkedIn, you have your website, but anywhere they should be finding you on.
[00:29:27] Speaker A: Yeah. So I would start with our website, which is ibainc.com so Ice Cream Boy, Apple, Ice CreamNancy, charlie.com and two elements I would point out. There is a, we have a blog which publishes twice a week which has had approximately 200 guest authors.
So from attorneys to CPAs to bankers to business sale intermediaries, a lot of information there that you can learn about buying and selling a business.
Also, we have a video page where we share podcast appearances like this in addition to having our own corporate videos sharing information on what we do.
So that's our a wonderful place to start. You can always reach out to me at our corporate headquarters at 425-454-3052.
I love being a resource. I speak at seminars, I go to universities and share information with people thinking they want to enter entrepreneurship through acquisition, which is an emerging educational field at universities.
So the best decisions are made from a foundation of knowledge. And that's why I created our blog. I wanted to give more knowledge out there in an industry that doesn't have a great knowledge out in the public domain.
[00:31:10] Speaker B: Yeah, I mean, that's one of the reasons I had you on the podcast. Like I told you, we haven't had anyone like selling exit businesses, et cetera. So there's definitely some missing information out there. So thank you so much for for taking the time here to join us here. And for anyone that wants to get in touch with you, head over to ibinc.com if you want to learn more. There's also the blog. We'll put you a LinkedIn too, if anyone wants to to reach out there and then to your listeners. If you've enjoyed this episode, don't forget to subscribe to the podcast. Like it? Review it. You can also find more
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