A few weeks ago, Carl and I were on our weekly partner call – a 90-minute session we host to coach, teach and work with people who have partnered with us to do deals through our outside private equity firm, PROX Capital Group.
I shared an incredible story – with a valuable lesson.
I’ll share it with you in a minute.
But first, let me ask you…
Would you ever consider marrying someone the day you met them?
Probably not. Unless you’re drunk in Vegas.
(I think they made a movie about that. Ashton Kutcher – I’m looking at you, bud.)
But day after day – deal after deal – I see people making the same mistake… Essentially, marrying the seller on the first date.
Look, I get it – it’s so easy to fall into the dealmaker’s love trap.
But buying a business is like dating. You’ve got to cultivate the relationship and give it time to grow.
If you do, deep connections are possible.
Like dating, dealing with the seller can sometimes be stressful. Remembering deadlines (curfews)… negotiating terms (disagreements)… working with the seller’s advisers (parents)…
Take Carl’s business, Ninja Acquisitions, which I bought last year. I’ve since partnered with him to turn it into Dealmaker Wealth Society.
Just two dealmakers making a deal over a nice meal… all in about five minutes.
But I failed miserably. I didn’t do the due diligence I needed to do to get the deal done. The legal folks found problems at every turn. It was nearly six months after our handshake when we finally closed the deal.
Thank goodness we both really wanted to be in business together!
It was frustrating but ultimately worth the wait.
Most of the time, though, your seller won’t be as committed – especially if there are other parties involved. Brokers and other deal intermediaries, for example…
Too often, Carl and I bump into dealmakers who are struggling to get deals across the line, with brokers who are playing “hard to get” and ignoring their inquiries on companies for sale.
I’ve also seen these dealmakers send emails like the following (name changed for privacy)…
Hello, my name is [Daniel].
I am a buyer.
My main focus is all things related to residential/commercial construction (contractors, electricians, concrete, etc.).
But I am not limited to construction and open to all types of businesses (because I am in advertising and can market any type of business.)
I saw some of your listings on BizBuySell and your website.
Would it be possible for me to get other listings of the businesses for sale as well?
Look at that thing. Terrible.
Would that letter make you want to pick up the phone and talk with Daniel if you were a buyer? Or would you think Daniel is another one of hundreds of tire-kickers and not a serious buyer?
I’m going to assume the latter. I wouldn’t blame you.
This email is WAY too transactional. There is no relationship building – no rapport – between Daniel and the broker.
No research… no mention of commonalities… nothing to indicate Daniel’s credibility and whether he is a legitimate business buyer.
Relationships take time. And they’re built on trust.
Focus on that and you’ll be in the driver’s seat.
One of our partners has done a great job of this. So much so that the broker is holding up the entire sale process with the seller until we can get up to speed and make an offer.
We’re up to a one-full-month delay at this point.
And he already has ONE offer from someone else.
Think about that. The broker – who could be making as much as 10% of the purchase price on a company likely worth about $4 million or so – is likely sitting on $400,000 of compensation.
He has a bird in the hand, so to speak.
However, he believes WE are the better fit and buyer for the company – all because of the rapport building our partner has done.
Knowing relationships are the key to successful dealmaking, his value for the bond we’ve built is high enough to want to ensure we get a fair crack at the business.
Carl talks about this all the time…
Buying a small business isn’t a pure numbers game – it’s about psychology.
So when you’re talking with sellers, brokers or anyone else involved in a deal…
Date them. Build that relationship.
You might never marry them… but you can set yourself up for a lasting commitment – and close deals you never thought possible.
You’re only one deal away,
Co-founder and publisher, Dealmaker Wealth Society
P.S. It’s equally important to build out your network and cultivate relationships with other contacts – in addition to potential sellers.
These folks can help you originate deals… offer suggestions and advice… maybe even partner with you to close a deal!
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