Jamar Cobb-Dennard with Indiana Business Advisors

Stone Payton: [00:00:00] Welcome to another exciting and informative edition of Buy a Business near Me. Stone Payton here with you this afternoon. This is going to be a marvelous conversation. You guys are in for a real treat. Please join me in welcoming to the broadcast with Indiana Business Advisors, Mr. Jamar Cobb-Dennard. How are you, sir?

Jamar Cobb-Dennard: [00:00:21] Very, very good. Thanks so much for having me.

Stone Payton: [00:00:23] Yeah, it’s a delight having you on the program. Really been looking forward to this conversation. I think maybe a good place to start is if you could articulate for me and our listeners mission purpose, what are you and your team really out there trying to do for folks?

Jamar Cobb-Dennard: [00:00:41] Indiana Business Advisors has been in business for 40 years. We’ve done 2100 small business deals and we like to say that we’re like investment banks for small business. Our average client has 1 to $5 million in annual revenue in their business, and primarily they’re in the building services, professional services and the light manufacturing sectors. I personally have been in this industry for three years. Prior to that, I was a business consultant and small business owner. Also, I’m a licensed attorney, so I’m able to bring my business experience and legal training to bear to help our clients sell their businesses and also help other companies who are looking to go grow quickly, acquire other companies.

Stone Payton: [00:01:26] Well, the back story makes perfect sense. Was there a catalytic moment or a series of events that influenced you to to make the the shift or add this to your repertoire? What was what compelled you to get into this line of work?

Jamar Cobb-Dennard: [00:01:43] Sure. The shift came from really two events. One, I met our senior and founding partners about a decade before I started working with them and looked at some businesses for sale. Wasn’t quite ready in my career to purchase a business, but said This has got to be the coolest thing ever. To do, is to sell businesses and to analyze financials and to look at what the future opportunity looks like for companies. And then I ran for mayor in 2019, in a small suburb of Indianapolis called Lawrence. About 50,000 folks live in Lawrence, and I lost that race by just over 100 votes and had to figure out what to do next. Remember the experience that I had looking at businesses for sale and then decided to sell them myself?

Stone Payton: [00:02:30] So speak to, if you would, because a great many of our listeners, while it might be on their mind, they may even have an exit in mind. Some folks may be at least entertaining the idea that the barber shop or the bar about buying a business. A great many of us just have zero experience actually participating in the process of buying or selling a business. Can you kind of paint the picture in general terms for some of the some of the high points?

Jamar Cobb-Dennard: [00:02:58] Sure. And both processes are a little bit different, but get to the same end, which is a deal, right? Exchange of cash and keys. On the sell side, the sellers need to understand what their business could potentially bring forth on the market or the market price. That’s not necessarily the valuation. We do have some tools that can help business owners understand what the what the recast or add backs in their business are or expenses that can be added back into into profit and also what multiples the industry will assign to that cash flow number so that we can get what we think that the market will pay. But at the end of the day, what the market pays is what the market price is. But first we’ll understand that. Second, it’s always good to develop confidential marketing materials so that not everyone knows customers, vendors, suppliers, competitors, that a business is for sale, and then marketing the business and bringing multiple buyers to the table so that sellers can get the right buyer at the right price for the right terms is important. So email marketing, emails and direct mail and telemarketing to strategic buyers and competitors. Also thinking through that there’s 15 business for sale websites that we actually will syndicate to to make sure we bring buyers to the table who are going to put forth an offer. We’re going to go through financing and due diligence and actually then close the deal. So that’s on the sell side. On the buy side, it’s very similar with some of those same pieces once we get to sourcing deals. But prior to, I think the biggest thing a lot of buyers miss is being very specific in exactly what they’re looking for. What’s the what’s the geography, the size of the business? The industry of the business. Is the business a turnaround or is it growing, etc. and really making a matrix or a rubric? So as buyers or acquirers are looking for businesses to purchase, they’re able to whittle down a very large market of companies that they could potentially go after and be laser focused and find the right ones.

Stone Payton: [00:05:01] Well, I got to tell you, you have convinced me in 90 seconds or less that this is definitely not terrain that I want to try to navigate on my own on either side of the table. You really need someone that has the the the expertise, the experience and understands the the landscape so well. Articulate it. I’m glad I asked.

Jamar Cobb-Dennard: [00:05:25] Thank you.

Stone Payton: [00:05:26] Thank you. It must be, though, incredibly rewarding work. I can hear it in your voice. I know our listeners can hear it over the airways. What are you enjoying the most at this point in your career?

Jamar Cobb-Dennard: [00:05:38] Best part of my job is seeing the Millionaire Next Door or the simple family that goes to work. They own a small business. They’ve worked over the past 15, 20, 30 years sometimes, and having them walk out of my office with their nest egg in their hands. So, for example, I have one client that we closed on their professional services business last year, and it’s her and her little dog in a one 200 square foot house in a small community outside of Indianapolis. And she had run her business for 15 years, did a good job. Cash flowed 300,000 a year for many of those 15 years in the last year, 600,000. But when she left our office, we were able to get her an offer for $3.2 million. And I asked her what she was going to do next. And she said, I don’t know, but I’ve got the time and the money to be able to take a little rest and figure it out and being able to give people that kind of freedom and that type of outlook on the rest of their career and or life makes me really happy and makes this valuable work to do.

Stone Payton: [00:06:43] I’ll bet. So speak to time timing. What kind of runway does one need or should one have if they want to exit, if they want to sell their business? This is not something you get together and try to do in the next couple of months, right?

Jamar Cobb-Dennard: [00:07:00] Correct. The average business takes 8 to 12 months to sell once it gets on to the market. And that’s everything from the initial market price analysis through the exchange of keys and cash. The very first deal that I did, it was exactly eight months from the first meeting I had with the seller. So that number rings true over and over again and it’s pretty consistent. But prior to that, prior of getting it on the market, sellers should start to think about selling their business 1 to 3 years before they actually put their business on the market. Primarily because there are three things that buyers are looking for, and I use the acronym CEO to remember this and for our sellers and buyers to remember this too. First C is cash flow. Second E is employees, and third O is opportunities for growth. So cash flow is what drives value and the market’s not going to pay a certain amount of money for the business just because that’s what you want. They’re going to pay that because that’s what the market actually values the business at, and that’s based on cash flow. So getting cash flow as high as possible, decrease in cost of goods sold and increasing sales, and then also being aware of how taking cash out of the business or the tax deductions can also impact that cash flow. Second, employees, especially having general managers who can run the business without the current owner and then employees who can also help the client relationship stick. And finally, opportunities for growth. So as I think about the marketplace and selling a company and preparing for exit over those 1 to 3 years, those are the primary three items that business owners need to make sure are in a row before they go to actually put their business on the market. Now, the reality is most people don’t have that stuff in a row and we have to work it kind of navigate around issues that surround the C and O, But that’s okay. But if a business owner has time, they can get more value out of their business when they sell, if they’re well prepared.

Stone Payton: [00:09:01] So when you’re engaged in helping a business get prepared, do you find yourself, I don’t know, kind of quarterbacking a team that includes other trusted advisors that may have expertise in a specific domain to help them get their their books clean or these different aspects of getting ready?

Jamar Cobb-Dennard: [00:09:20] Absolutely. So my unofficial title is that I’m an intermediary and I bring buyers and sellers together to get the deal done. I represent the deal within that deal. Every single one of them requires an attorney and a CPA. Wealth advisors are also very helpful insurance, commercial insurance agents. So a new business will need a key man insurance policy and a new general liability insurance policy, bankers and lenders, etc. So there’s an entire team around every single deal to make sure that they happen.

Stone Payton: [00:09:52] So you’ve mentioned the phrase cash and keys or the exchange of cash and keys a couple of times. And I’m learning actually from from hosting this series, there’s a lot of different ways to structure the deal. It’s not always just write me a big check and I hand you the keys, right?

Jamar Cobb-Dennard: [00:10:10] Correct. There’s a few ways to structure a deal, and 95% of the deals do not have 100% cash at closing. That’s a misnomer. And that’s one of the first things that we tell sellers is, hey, don’t expect to walk away with $3 million at closing. And for example, the woman who I told you about a little earlier, you had an exit. That was exactly that amount, 3.2 million. There was a component of an earnout. So basically pay for performance. There was a component of of equity or shares in the parent company that was purchasing her business. There were also hold backs. So, for example, indemnity hold backs to make sure that there aren’t any errors, omissions or lawsuits that are going to come back and basically take money out of a deal or out of the business for events that occurred before the transaction. Seller financing is also a big piece and usually it can be up to 25% of a deal is financed by the seller. And part of that just makes sure that the seller is selling a good business that they believe in, but also that helps with the debt stack and debt structuring with bank financing.

Stone Payton: [00:11:29] So did you have the benefit of one or more mentors as you got into this line of work?

Jamar Cobb-Dennard: [00:11:38] I do, and I’m really, really fortunate to have them. Our senior partners combined have goodness over 100 years of experience, 125 years of experience. Two of them are in their seventies and they’re still working every single day grinding deals out. And so I partner on a lot of my deals with them a lot of times just to hear how they go through the deal. Obviously there are some unique issues or anomalies that I haven’t dealt with yet, that they have experience and can navigate and help with. But a lot of the time I just sit on calls and listen to how they handle deals and write myself scripts of what I need to say and how I need to handle things so I can get better, faster and do more deals.

Stone Payton: [00:12:19] So there’s the marketing of my business. For example, I own 40% of a pretty successful media company. So there’s there’s there’s, there’s marketing the clients business. How does the whole sales and marketing thing work for you and your team? Do you have to get out there and kind of shake the trees or does the business come? How do you get the new clients?

Jamar Cobb-Dennard: [00:12:41] I wish that they all came without shaking any trees, but I got to do a lot of tree shaking like omen farming, so I actually just came from a marketing event. I went and did some some networking at CPA firms, CPAs, attorneys, business coaches are some of our primary referral sources. I also do a lot of content marketing. A lot of that is CPA for accountants as well. And we’ll either teach hard skills around M&A or leadership skills. Also, we do a lot of online marketing to drive buyer traffic to our listings, online marketing, blogs, podcasts, etc. to drive sellers and build relationships with them over the long term. And also a ton of email marketing as well. So yeah, we have a full scale marketing operation to make sure that we bring really strong and high quality listings and sellers beget buyers. So as soon as we get a good engagement and a seller, buyers always come to the table because they’re searching for good deals.

Stone Payton: [00:13:42] Yeah. And do you find yourself working with sellers more than once, like people who buy and sell businesses and they just have kind of come to to trust you?

Jamar Cobb-Dennard: [00:13:53] We do. That’s more on the buy side, especially when they’re working on a roll up strategy. So many times they’ll either buy a larger company from us as a platform and then they’ll come back and buy a number of smaller companies and then other times they come to us just for the smaller companies as roll ups, as they’re continuing to build a portfolio of companies for potential exit. So many times we’ll work with buyers over and over. Most of the time the sellers, unless they own multiple businesses after they sell, they’re out for a good period of time because they’re either tired and 40 and want to spend more time with their families or they’re retiring and in their sixties or late fifties and they are riding off into the sunset.

Stone Payton: [00:14:39] I think I saw in in the notes that you have a credential certified Main Street business broker. Can you speak to that a little bit?

Jamar Cobb-Dennard: [00:14:48] Sure. I spent about 40 hours learning really a lot of the financial analysis, pieces of being able to understand how to sell businesses and then the marketing piece of getting new sellers, and then also how to sell those businesses to the open market. So it’s the Sunbelt business network that provides that designation. They’re the largest franchise business broker network in the country, and that’s their first designation for certification of business brokers.

Stone Payton: [00:15:18] So I would love to leave our listeners before we wrap, if we could, with maybe a couple of pro tips on either side, buyer or seller or maybe both. Just some things that we ought to be thinking about reading, doing, not doing, you know, and the number one pro tip gang reach out and have a conversation with Jamaa or somebody on his team. But maybe there’s some stuff we can begin thinking about and some that we can start tapping into if we want to learn more on this topic.

Jamar Cobb-Dennard: [00:15:47] Sure, there’s a Business Exits for Dummies and I’m forgetting the exact title, but here we go. It’s called Selling Your Business for Dummies. Duh. And actually, the president of Sun Belt Network, Brian Nutter, who’s also one of the partners here at Indiana Business Advisors, he co-wrote that book. So for the basics of information and actually some pretty good depth, folks can read that understand how to sell their business, how to understanding how to purchase a business. On the other side of that from the same book. And that’s a that’s a great resource. The MF is a great read What they don’t teach you in Harvard Business Schools. Also a great read. The other thing to consider right now in the market is that the market is changing and there are three things to think about. If someone’s planning an exit or thinking about which companies to purchase. Number one is the impact of the increased prices of supplies, and that’s impact on cost of goods sold and then profitability. So keeping costs low is very important right now. Second, interest rates, we can’t do really anything about the interest rates except find multiple bankers who are willing to take some points off of a loan in order to make sure that a deal works. But keeping in mind and an eye on interest rates and acting quickly before they go up any higher. And then finally, employees, everyone across the country is has a concern about employees. We need to get that problem fixed primarily because there are businesses that are losing revenue because they can’t. Do deals because they don’t have people, employees to do the work. Right. So keeping our eye and our pulse on supply and its impact on cost of goods sold, interest rates and its impact on debt service. And finally, employees and its ability to grow a business are very important as we look to the future.

Stone Payton: [00:17:39] Okay, let’s make sure that we leave our listeners with a an easy path to reach out and have a substantive conversation with with you or someone on your team or tap into some of this thought leadership, whatever you feel like is appropriate, whether it’s email, website, LinkedIn. I just want to make sure they can they can get connected and tap into your work, man.

Jamar Cobb-Dennard: [00:18:01] Sure. The best way to contact me and to engage with me directly is through LinkedIn. Again, my full name is Jomar Cobb Dennard and also Indiana Business Advisors. We’ve got some resources there for folks who are thinking about selling their business or doing some exit planning. We’ll also do free valuations and you can connect with me through our website, Indiana Business Advisors, or through LinkedIn, Jamal Cobb, Denard. And also there are nearly 100 listings of businesses that are available for sale at Indiana Business Advisors dot com as well. So really look forward to interacting with some of the folks who are listening today, either building a relationship on LinkedIn or by getting some connection through our website at Indiana Business Advisors.

Stone Payton: [00:18:51] Well, Jamal, it has been an absolute delight having you on the program this afternoon. Thank you for investing the the time and the energy to share your perspective and your insight. The work you’re doing is so fundamental, I think, to what makes this country so great and so important. And I want you to know, man, we sincerely appreciate you.

Jamar Cobb-Dennard: [00:19:14] Thank you so much. My pleasure to be here. And and thank you.

Stone Payton: [00:19:18] All right. Until next time, this is Stone Payton for our guest today, Tamar Cobb Dennard with Indiana Business Advisors and everyone here at the Business Radio X Family saying we’ll see you next time on Buy a Business near me.