A Year In The Life Of A Business Broker

Year 2020 has been nothing if not adventurous and educational.  Looking back, it’s a tough call as to which is more challenging, successfully navigating the obstacle course of 2020 or summarizing the process in review. The year that no one expected was filled with valuable lessons and opportunities, and routinely and indiscriminately unleashed upon us rigorous aptitude tests in perseverance, agility, and the ability to think outside the norm. Despite the roadblocks and challenges, I look back with a sense of gratitude and accomplishment. Ready to turn the page, I’m taking some time to unplug, rest, and reflect. As I look ahead to 2021 with optimism and anticipation, my last bit of business is a quick glance in the rear-view. It has been an incredibly busy year for this business broker. My review is in the style of Gonzo journalism pioneered by Hunter S. Thompson-known for real time, boots on the ground reporting directly from the trenches.

An Emerging Marketplace

Historically a frequent traveler abroad, I am routinely struck with “traveler’s remorse” as I survey Washington’s majestic landscape out of the airplane window on my way out of town. There is too much unexplored beaty in our own backyard to necessitate going anywhere. With air travel restrictions in place throughout most of the year, many vacationers and adventure seekers have mastered (or remastered) the art of the road trip, and discovered Washington’s backroads, quaint coastal communities, vibrant mountain towns, and the best of what our state has to offer. Many a small town and remote county saw not only a record number of visitors and a surge in temporary influx of tourist dollars in 2020, but sustained population and economic growth. Seeking a change of pace and attracted by a combination of lifestyle options, cost of living, and remote working arrangements, travelers and weekend warriors frequently turned into permanent residents. A large segment of these new residents opted for business ownership as a way to plant roots and build meaningful connections in their new-found communities, resulting in strong demand for quality lifestyle businesses in smaller markets. I saw significant activity including multiple offers on my listings in Snohomish, Jefferson, Okanogan, and Grays Harbor Counties. Current projects on my desk include businesses and associated commercial real estate in Clark, Thurston, Benton, Lewis, Cowlitz, and Okanogan counties, all likely to experience the benefits of a highly competitive marketplace. I do not see this trend receding and anticipate the demand for quality businesses in a variety of sectors including hospitality, manufacturing, construction, and retail serving Washington’s smaller communities to remain strong in 2021.

The Pivot

The now proverbial “pivot” quickly became the favorite buzzword and the umbrella term for deployment and implementation of adaptive strategies. The misconception is that companies that remained relevant did so by tapping into a big, brand new idea, reinventing themselves from the ground up. In reality, success was frequently found in optimizing and fine-tuning existing operations, and exploring the immediate, adjacent possible. Seasoned business owners materialized additional revenue streams they had long suspected existed.  My bakery client nearly doubled their average ticket as customers instantly embraced the release of a long-awaited, online pre-ordering platform to avoid waiting in line. A busy sandwich shop invested into a street-facing pick-up window and was able to shut down the dining room with no significant impact on sales figures. A painting contractor utilized the full spectrum of their staff’s skill set to expand their list of services to boost revenues and acquire new customers. In the middle of the pandemic, these businesses remained attractive to investors with significant listing activity, multiple interested parties, and competing offers to purchase. The peripheral narrative of such companies demonstrated agility and perseverance under the most challenging of circumstances, signaled strength and resiliency of their business model, and further bolstered investor demand. 

Unique Asset Class & Market Conditions

As an asset class, no other financial vehicle endows an entrepreneur with the level of autonomy and control over their investment rivaling business ownership. Presently, a snowballing momentum of market forces is generating a bullish investor mentality around successful, privately held companies with outsized returns anticipated in this market sector going into 2021. Continued pandemic relief efforts resulting in a second wave of federal stimulus money aimed at reenergizing the private sector are widely expected to be the first order of business for the new Democratic presidency. The directional arrow of progress points to the high probability of the virus vaccine becoming available to the general public in the next several months. Wound ever so tightly, the spring-loaded mechanism of pandemic fatigue will likely uncork the pent-up demand for all goods and services representing a return to normalcy. If the dedication of the people sitting in outdoor tents under radiant heat in University Village and other venues around the Pacific Northwest this holiday season despite inclement weather and extensive safety measures is any indication, retail is primed a roaring return. An effect similar to joyful, post-war consumerism, the desire to double down on and recapture time and experiences lost in 2020, is liable to favorably impact consumer behavior in 2021 and beyond. Businesses that survived the pandemic and lived to tell the story will be rewarded with the benefits of increased market share and strong demand for their products and services in the environment of diminished competition.

In an economy already primed for recovery and growth, this potent cocktail of undercurrents and intangibles highlighting the benefits of business ownership will significantly boost buyer demand for fairly priced, quality business opportunities across the board for the next 12-18 months.  Where the hot ticket mentality and the investor equivalent of a perfect storm meet quality inventory, a robust, competitive marketplace exists. A, rare, uniquely qualified pool of buyers currently present in the marketplace completes the circle.  Pandemic related layoffs, restructuring of workplace arrangements, and uncertainty about future job security have many employees formerly in leadership and managerial roles questioning their return to the corporate environment and evaluating small business ownership instead. These highly competent industry professionals are ideal candidates to build on the departing ownership’s legacy and write the next successful chapter in the history of an established business. As the strong, relevant industry experience ensures the likelihood of the business’ continued financial viability, such transitions inspire lender confidence manifesting in approval of financing for the acquisition. Packaging commercial real estate with the sale of the business was another trend that produced excellent results at the time of sale and is likely to continue to the mutual benefit of buyers and sellers. My sell side clients received top dollar for their businesses and real estate in 2020 when the assets were marketed and transitioned as a package. The buyers took advantage of low interest rates over extended amortization schedules and secured long-term equity in commercial real estate in addition acquiring an income producing business asset. 

Strength In Numbers

Networking, the grassroots kind, was critical this year. With no one person, entity, or agency in possession of the playbook for navigating the health crisis of 2020, the ability to share information and receive real time feedback from one’s personal and professional sphere was crucial. It became not only customary, but necessary to pay it forward, answer the call, and seek out opportunities to lend a helping hand or share knowledge relevant to an area of expertise with others. Many challenges in this turbulent year fell outside of my direct, core competencies and saw me routinely reaching out regarding a variety of issues to trusted professional in my network. As the premier, full-service brokerage serving business owners in the Pacific Northwest since 1975, IBA is blessed to have the relationships and the trusted councel of the best, most qualified professionals in the industry and the privilege to serve as a resource to the business community in return. These connections were utilized and tested to the full extent in 2020 and emerged ever stronger as a result. With over 4200 successfully completed transactions since 1975, team IBA is turning the corner and closing the books on a near recording breaking year. I would like to thank our collaborative partners and clients for their hard work in achieving our common goals. I’m immeasurably impressed by the display of strength, compassion, perseverance, and teamwork, and look forward to our journey and continued success in the new year.