98% of business owners aren’t prepared for the emotional toll of selling their companies…
Could you be one of them?
In this episode, JB Brown, founder of White Buffalo Advisors, reveals the secrets behind successful business exits and the often-overlooked emotional impact that follows.
You’ll discover:
- The gripping story behind the name “White Buffalo Advisors.”
- Why 75% of business owners regret selling their companies within a year.
- The importance of planning for life post-exit—beyond just financials.
- JB’s insights on industry trends and what to expect in 2025.
- How mergers and acquisitions are being revolutionized by AI and creative deal-making strategies.
Mentioned in this episode:
Transcript
Patrick Stroth: Hello there. I’m Patrick Stroth, trusted authority in executive and transactional liability and national practice leader for Liberty Company Insurance Brokers. Welcome to M&A Masters, where I speak with the leading experts in mergers and acquisitions, and we’re all about one thing here. That’s a clean exit for owners, founders, and their advisors.
Today, I’m joined by JB Brown, founder of White Buffalo Advisors. White Buffalo Advisors represent sellers of lower middle market companies in successfully moving through the M&A process with confidence from listing to close. With 266 and counting completed transactions, they have the experience to get owners and founders where they want to go. JB, it was great that we got introduced. So it’s great to have you here today.
JB Brown: Thank you so much. I really appreciate the time, Patrick.
Patrick: Now, JB, before we get into White Buffalo. And you know this new environment we’re going to have in 2025 for M&A, let’s start with you. What brought you to this point in your career?
JB: Well, I started my career in corporate America, I think, like a lot of us, and really found myself over decades in the role that I can best describe as a fixer, is really what I was. And so when there was a difficult to define, but expensive problem, or a problem that was very important strategically, it would just sort of send me in behind enemy lines to figure out, all right, what’s going on and how do we ensure an optimal outcome.
And did that for quite a long time. Mostly the latter half of that career was with some fairly large medical companies. And what I realized in doing that was I really was an entrepreneur. I always was, I just had sort of accidented my way into the one role within a large corporation that somebody who is entrepreneurially bent can thrive.
But eventually, when you’re that type of person and you work in a corporate environment, there usually comes a point where you yourself become sort of unemployable, because the very things that make you attractive, you know, and the entrepreneurial traits that you have can sort of go against the grain a little bit.
Within a big, structured culture, you tend to have folks like that tend to have little patience for bureaucracy, and you know, phrases like, well, that’s the way we’ve always done it, and so you’re a natural agitator. So I had seen that coming for a while, mostly just in my own soul, and so decided to start a company while I was still employed.
And that first company was a direct-to-consumer e-commerce brand. Grew that thing like crazy. It was sort of a happy accident. Sold that company, and that was my first exit. And then, you know, ended up doing that a few more times. And if you’re a certain type of personality, you naturally tend to look at where the friction points are in anything that you do.
And so that’s what I did in corporate America. That’s what I did when I started those companies and built those and sold them, and then in my exits, the same thing was happening, Patrick where I was like, man, this, this part of the process seems really inefficient, or it could be better and just tucked that away.
And what happened was, when I exited the final company that I built, I was having folks just over lunch say, hey, I’m selling my company. You’ve exited. Would you help me? I never really wanted to be a broker. Never grew up a day in my life thinking, you know, I’ll be an M&A guy. But finally, the right person asked after me, saying no a bunch of times.
And we were at a lunch, and he was trying to exit his business. It was, you know, about a $15 million exit, and he was having this animated conversation with the person that he had hired to represent them. And it had been just dragging on, and things weren’t going well. And as I’m listening, mid-bite, I’m sort of trying to make hand motions to him.
And I’m sort of telling him, like, no, ask him this. And he finally put his hand over the phone. He says, would you please just help me? So I did. I ended up doing that. And the darndest thing happened, Patrick, where I loved it. I really found that I was naturally good at it, sort of seeing around the corners of what might happen and the cause and effect of different decisions, different positioning.
And so to this day, I’ve just sort of grown by referral and word of mouth. And we’ve really built, you know, a pretty strong practice and don’t advertise. Never have needed to, only because we’re very niched, and we’re very specific with, you know, who we work with. So that’s the story in a nutshell.
Patrick: You’re very, very niche indeed. But let’s get drilled down into that with White Buffalo Advisors. Let’s start with the name. You didn’t name it JB Brown Advisors. So, you know, give us the thinking behind that, and then you gave us the genesis of, you know, what this started as and, you know, talk about the offering now that you make.
JB: Sure. So as far as the naming goes, that’s actually an interesting story. So I, I knew one of the core tenants of, sort of my philosophy in helping folks to both grow a business, scale the business, decentralize themselves as an owner from being relevant in the business, which has a sort of a side effect of making it a more valuable business and a more enjoyable business to run in the first place. Thus giving them the decision at any time if they want to exit, but don’t necessarily have to.
I take my own advice, and one of the core tenets is that you really want to be cautious in creating a business that is overly reliant upon either your name very specifically, or even you as sort of a very visible kind of cult of personality type thing. Because what that will do if you ever do want to step back from the business, or if you want to transition it to someone else, it’s an impediment to doing that.
Patrick: So goes the person, so goes the business. Yes.
JB: Absolutely. And so you sort of accidentally create what I call a key man’s prison that you’ve built around yourself, and now you’re sort of stuck. So I knew I didn’t want to name it after me. I didn’t want myself to be overly relevant to what the business did. So then it’s like, what do you name it?
And you go through, you know, I went through services where you have sort of groups of creatives that you tell them what you’re doing, and they come back with hundreds and hundreds of names. And I just, I didn’t really like any of them. And this was about a six-month process. We were doing the work but didn’t have a name. And so literally, went to sleep one night, and I had this dream and woke up.
I don’t remember a lot of the dream, but I remember waking up and white buffalo just came into my mind. I was like, oh, that’s kind of a cool name, and I’m sort of a combination of a data person, but also there’s a gut component. I said, I think that’s the name. So I named it. And here’s what I found out afterwards about white buffaloes in general.
There are two things that are relevant. One, there’s a lot of Native American folklore around the white buffalo. It’s a very important figure in their culture. And there’s this idea that as rare as they are when you see a white buffalo, it’s always a sign of tremendous prosperity that’s coming. A really important thing in that culture. There are other cultures that have a similar thing.
But here’s the other thing, just from nature that’s fascinating about bison in general, but obviously white buffalo, it’s the only animal that in the middle of a horrific snowstorm or storm of any kind, they don’t run away from the storm. They actually instinctively will run directly towards the middle of it, because they know that if they get through the worst of it to the middle, they’ll find the eye, and they can sort of hang out there. And so the symbolism of those two things was a happy accident, but it fit really well.
Patrick: Oh, that works. And everybody likes prosperity when they’re coming into that phase of their life. One of the things that really intrigued me with mergers and acquisitions is it’s the most exciting business event that an owner or founder could have. I mean, a lot of people think it’s going to be, you know, going public, but to me, that’s like being drafted in the first round of the NFL.
It’s like, great, you know, you’ve been picked, you still haven’t proven anything, and you know, you still have all this to do. But with this, I mean, it is, can be life-changing, and in some cases, generational changing, for a lot of owner’s and founder’s families. And who wouldn’t want to be, you know, willing to go contribute to that. So, you know, it excites me tremendously.
Talk about some of the things that you’ve learned in helping your clients that you know owners and founders in our audience would like to know because one of the things that I enjoy about having White Buffalo Advisors here is without this channel, there are a lot of owners and founders that don’t know what to do. They haven’t been planning ahead of time.
And so unless a friend of theirs has engaged you, then they may default to either finding a strategic, you know, a competitor or somebody down the road, or some other organization and institution that may not have their best interests at heart. So talk about, you know, some of the things that you learn and things to look out for.
JB: Really, I would say the biggest thing, and it’s informed the way that we engage with clients, is it’s very emotional. You know, if you’re a founder, or even if you acquired a business and grew it, and you’ve spent a large portion of your time sort of growing this baby, it becomes almost one of your children, it’s a very there’s a deep emotional connection for owners and leadership to the business.
And that’s a great thing because it makes us get up in the morning and makes us go to extreme lengths to grow the business and to do right by the folks who work with us in the business and our customers. But the downside to that is it can create an excessive draw on your identity. Your identity can become too enmeshed with what you do and who you are in that business.
And so what can happen often is folks will think because of burnout or life situations or just the maturity of the company, you know, they got it to the point where they know it’s probably time for someone else to take it to the next level. Or they’re getting a little older, and they want to sell. And then they go through the process and they sell.
And there’s an interesting statistic that holds true pretty consistently, where one year after exit, 75% of business owners, quote, deeply regret selling the business. And that’s stark. And you would, you would think immediately that they didn’t get enough money. And look, sometimes that’s true, but that’s actually not the true underlying reason. The real reason, when you dig into it, is that there’s a tremendous sense of loss and grief that the owner didn’t expect to happen.
Who they were before the close before they transitioned that business out. The people that they were interacting with. What their daily schedule looked like, and this very core of sort of what made them, is no longer true. And usually there’s about two to three months of sort of honeymoon period where they’re, you know, flying high on cloud nine, and have all this freedom that they didn’t have before.
Patrick: Playing golf.
JB: Yes, yeah. And it’s funny, that’s this example I use. For men, you can only play so much golf or do so much fishing before honestly, it gets boring. If you didn’t have a plan for what you were going to do in the next phase of your life that was meaningful to you, at least as meaningful, if not more so, than what you were doing professionally.
It’s a recipe for entrepreneurial depression. Really is what it is. So that’s the biggest learning is it’s just as important to have a plan for your personal finances and also what you’re going to be doing after you exit that business in your day-to-day life as it is to have a plan for how to maximize the value of the asset. And there’s a lot of things that need to happen in that process, and then how to have a as smooth as possible transition out.
Whether that’s a sale to a strategic, as you mentioned earlier, a sale to an interested third party, or even now you’re seeing a proliferation of folks selling back to their own management teams or employees in an ESOP all really, it doesn’t matter the way that the asset is is transferred. It just matters very much that you have a deeply, well-thought-out plan as to what you’re going to do after you sell the business.
Patrick: Okay. And then for our audience out there, could you give us a profile of your ideal client? Who is White Buffalo Advisors looking to serve?
JB: Yeah. So generally, it’s founders or partnership teams that have built a business that’s $100 million value or less. And what we used to do was we would handle the entirety of the process from the initial benchmark meeting where we give you the today value of what your business is, and we compare that to what the business could sell at if you know a number of things were true about it that are not true today, that’s just an initial valuation.
And we go a lot deeper than probably most do, and that we’re going to look at the value gap of the business. We’re going to look at profitability gaps compared to best in class, but we’re also going to look at your personal financial net worth, and if there’s a gap between what you’re likely to need after you exit, no longer have the revenue coming from the business, and then leadership gaps that might exist for transition and who’s going to stay and who’s going to go, any number of things to make sure that we truly understand the asset that we have.
And if there’s a gap between what we need to sell the business for and what the business is worth today, you know, we’ll spend 2, 3, 4 years helping clients to address those gaps and to eliminate and remediate those issues. So what we used to do was handle the entirety of the process, including the exit, so we would essentially act as an investment banker.
We don’t do that anymore, and the reason is, we found the sweet spot to be really being almost the sort of in-house fractional M&A advisor that mostly handles decision support throughout that process. And a lot of M&A people, whether it’s certainly a broker, but even investment bankers, they’re incredibly gifted at creating a market and finding a buyer for a business.
But they don’t really have anything to offer when it comes to actually addressing some of the issues that may exist in the business to get it prepared for sale. And we’re great at that. So we mostly live in that space, and we’ll work from the very beginning all the way through the end, including helping to hire the exact right investment bank and to help through sort of the natural up and down decision process that comes during the M&A process.
Patrick: And because you’ve got the background in e-commerce, any industry specifics that you like or don’t like? Geographic, territorial limitations?
JB: We’re pretty agnostic. It’s more of an exclusion process. So I would say it varies by season. Lately, it’s been a lot of software, a lot of SaaS, and still, some larger e-commerce companies, but the up-and-comers lately have been marketing, manufacturing, and health care.
Those are all industries that are booming, and some of that has to do with demographics. There just were, especially with manufacturing and healthcare, there are a lot of folks that, from a demographic perspective, they’re in that older generation X, maybe younger baby boomer age.
Patrick: Owners and founders.
JB: That’s it. They’re just ready to transition. So we’re pretty agnostic. We avoid, we don’t do anything to do with the restaurant business for a lot of reasons. And I would also say we’ve had a lot of opportunities to work on some very large actual cannabis, you know, grow other things. We avoid those, not for any moral reasons, but because there’s still too much murkiness around the federal regulations around them. So we just avoid it.
Patrick: There are more problems than solutions in that sector right now. Everybody wants to rush off. I think that’s been an ongoing trend and concern for the last seven or eight years. So it’s nothing new.
JB: It is. And I’ll tell you if we get to a point where, and this may happen where, from a federal level, the legislation changes, and those organizations have the ability to bank. That’s the real problem right now is that they don’t have bankability. If they get the opportunity to bank, if you only look at it, if you blinded what they were selling and you looked at it from a sheer business perspective, they’re fantastic businesses.
So I think that if and when the legislation changes, and instead of being state specific, it’s just federally, yeah, it’s fine, it’ll be a great niche. Just right now, it’s one that sometimes in what we do, we also negotiate on the acquisition side.
Because one thing that may need to happen in order for someone to realize the maximum exit they can is actually to acquire a few things before. But one of the things that we always recommend is to avoid that space, because there’s just, there’s too much uncertainty and unknown with it. And it could actually drag down the overall transaction.
Patrick: That could distract you from the main thing.
JB: Yeah, it’s, it’s managing risk, really. Everything is about risk. And the whole process of M&A is really just risk mitigation and understanding what they are. So you have to put yourself in the eyes of whoever you think the avatar is that’s going to acquire your company, and look at your own business and say, if I were in their shoes, what would worry me?
What are the things that could be potentially risky? Is it what we talked about earlier? Am I or someone else on my team who isn’t going to transfer over too important to the day-to-day operations? Are there some financial issues? Are we clear on what our financials look like, or are they a mess?
That’s probably the most common thing that I see, is that there’s always this push and pull between how much revenue and income you show from a tax perspective and the legal ways that you might decide to mitigate revenue. But that can hurt you down the road when you’re asking for a premium price, but you can’t show. There are a lot of things that have to do at their core with balancing risk versus attractiveness in the eyes of a potential acquirer.
Patrick: JB, I couldn’t have picked a better transition point to talk about this, because one of the things that’s a key concern in, you know, M&A transactions is risk and where you’ve got buyers that don’t want to get stuck holding a lemon and sellers who don’t want to be on the hook to the buyers, you know, years after closing for things that they may not have known about at the transaction date.
You know, that’s been a real push-pull concern in M&A that has slowed a lot of deals and derailed quite a few. What the insurance industry did years ago is they came in with a product called rep and warranty insurance where the buyer essentially is protected if there’s a breach of the seller reps and the buyer suffers financially.
Rather than the buyer pursuing the seller, the parties just go to the insurance company and say, here’s the loss, and it gets it taken care of. It’s nice because the buyers get assurance of remedy. The sellers get a clean exit, and it has worked on larger deals quite a bit. I’m just curious for you. Good, bad, or indifferent, what’s been your experience with rep and warranty insurance?
JB: Candidly, I didn’t know it existed until a few months ago. And I can look back and think of some deals where it would have been really helpful to have.
Patrick: The common understanding with rep and warranty insurance and probably how you hadn’t heard about it until recently, it is a product that was reserved for companies that were priced at $100 million enterprise value and up. And when you’re making those types of purchases, there’s a lot of due diligence is performed, a lot of reports done, a lot of analysis. And so you’ve got, you know, the insurance up there to address that.
The challenge is that you know what happens to deals, and you know for rep and warranty on those 100 million dollar deals, the product has gone from a 5% usage rate to a 95% usage rate in about five or six years because it’s been so reliable. Of course, when you’re up there in the larger deals, they’ve got all, like I said, they’ve got all the information and they’ve got the resources there to put together and assess risk and so forth.
But what do you do for the deals that are under 20 million or under 10 million? There’s still needs, there’s still exposure, there’s still risk out there, and there’s got to be an answer to, you know, help those owners and founders that are looking for that. And to that end, one of the markets that came out and set up a policy called TLPE, transaction liability private enterprise. It’s a sell-side rep on warranty policy.
It’s a mirror image of what the popular buy side rep and warranty policy does, and it steps in, and it provides that same kind of protection, and at $15,000 per million in limits, that’s the average cost with no underwriting fee. It’s now a fit for the lower middle market where we want to be. Because, you know, rather than writing a couple mega deals here and there, you know, this underwriting facility at Lloyd’s of London decided, why don’t we write a scale? And at scale, you’ve got to do three things.
You got, you know, provide a solution. It’s got to be easy to implement, and it’s got to be affordable. And with what we have here, I think it works out very well. It’s called TLPE, transaction liability private enterprise. Now JB, what do you see going forward? We’re just at the beginning of the year. What trends do you see? Either M&A in general, or for White Buffalo Advisors in particular?
JB: Well, I’ll tell you, the election had a lot to do with what I think we’re going to see because it really could have gone either way. The credit markets have been tight. Part of the reason that they were tight is just uncertainty over what was going to happen. Because every time you have a, you know, a new administration and the sort of power dynamic changes in Washington, it makes credit providers very nervous, and it just makes the markets nervous.
So there’s almost a whoever wins, it doesn’t matter, we just need to know so we understand what the rules of the game are, so we can play it. Now that the election finished and we know who’s in charge, you have to look into their policy agenda.
And what I see when I look at it is this particular administration, and this Congress is very pro-business, and they tend to also have, they tend to be very pro-employer. So what does that mean? I think you’re going to see a loosening of some credit restrictions, some more availability of funds, which will help to grease the sort of wheels of commerce moving forward with deals getting done.
But the other thing that I think we see is there’s a demographic issue that isn’t going anywhere for about the next 10 years, where you have so many folks who have built these great businesses, blood, sweat, and tears, and they’ve built these wonderful assets, and they don’t have anyone necessarily to inherit them or take them over, or if they have kids, the kids aren’t interested.
And some of these are, you know, small, Main Street type businesses, but there are plenty of them that are in the middle market and even larger that there’s not necessarily a plan. The plan is either, well, I’ll just keep going until I die, I guess, or even shutting it down, which, to me, is just one of the greatest tragedies.
To shutter a business that’s worth $50 million because they don’t have any other plan. I think 2025 will be a year where you do start to see more things happening. There will be an increased need for, I think, really creative deal-making. Understanding, what is it that that the owner truly wants, whoever owns the business really is trying to accomplish.
And what are some creative ways that you can sort of integrate that with what a seller might be trying to do so that really both sides can win. One example of that is hold backs and it fits right into what you’re doing. Holdbacks people, I think, make a mistake, and brokers have a this is another part of the reason we shifted out of being sort of a broker and being responsible for the transaction, is that there’s an inherent conflict of interest there.
I don’t care what anyone says between a broker or investment banker advising a client, it might be in the client’s best interests to delay some of the cash compensation coming to them. Whether they take stock in the new company and it’s structured over a certain amount of time, especially if it’s a public company or just to delay buyout.
Most brokers are going to strongly advise against that. Not because it’s not what’s right for the seller, because it’s what’s not right for their commission, that’s the problem. And so they’re never going to recommend something that could delay commission into the future. When, in reality, there could be some significant tax advantages to structuring a deal in a way that you don’t get the gigantic chunk of money in one year because the tax code is changing every year.
2025 and 2026 are crucial years when it comes to capital gains treatment, nobody still quite 100% knows what’s going to happen. So depending on how it plays out, it could be beneficial to take a larger amount of money in 2025 or 2026 or to defer it into 2027, 2028. It just depends. These are the things that you have to have your finger on, the pulse on.
And then I would think the final piece, and this may seem a little out of left field, but it isn’t. And if you’re not paying attention to this, you need to AGI, not adjusted gross income, but artificial intelligence, artificial general intelligence, specifically, is coming like a freight train down the tracks.
It’s going to significantly and materially change the business landscape as we know it, because of the level of quantum computing that’s going to be available and accessible even to Main Street businesses. And beginning to understand that landscape and get your arms wrapped around it, it will make deals in some ways faster. It will make due diligence for those deals easier.
Document collection will be simpler, but also predictive financial modeling, both on the sell side and the buy side will become a lot more accessible and cheaper to do because we have the resources at our fingertips with a little bit of work to have really smart artificial intelligence do some of the things that would take a human longer.
Patrick: Okay, yeah, that’s, I think those are two accelerators to the deal. I would say, you know, for organizations that are thinking about an extended withhold, that’s where it’s nice to have a rep and warranty policy, because in the event there is a sizable withhold, and you’re postponing payment for an extended amount of time if anything were to happen, then the buyer may put that withhold at risk. Having a rep and warranty policy covers that withhold from dollar one, so it makes it a great way to hedge any kind of risk that way.
JB: And I would agree.
Patrick: Well, JB Brown from White Buffalo Advisors how can our audience members find you?
JB: I’m very active on social media. You can find me on Facebook, you can find me on Instagram. You can also go to meetjb.com or you can look us up at whitebuffaloadvisors.com.
Patrick: Great, it’s been great to have you here. And for owners and founders out there that are looking to move on to the next level, here’s a professional that a lot of people don’t know about but should get to know. JB, thanks again for being here.
JB: Oh, thank you, Patrick.
