Face It—There’s Nothing Like Face-to-Face
Doing deals is a little bit like dating. If you skip seemingly simple, but important, steps, you could blow it. Recently, we discussed the importance of understanding seller motivation and establishing rapport with the potential seller. These are seemingly simple yet key to the future of doing the deal.
The next step to doing the deal is the face-to-face meeting. I’ve done deals over the phone or Zoom, but, particularly when you’re starting out, nothing beats a face-to-face. Even now, after all the deals I’ve done, nothing beats it.
Arrange the face-to-face meeting, ideally at the potential seller’s place of business. Go in and actually see the business. Sometimes they’re reluctant to let people into the building in case the staff gets wind of what’s going on, but I can’t believe that any business never has visitors, so it would be sheer paranoia on their part to have you meet somewhere else. I have had the occasional situation where I have had to meet them after everyone’s gone home in the evening, or at a café around the corner, but, ideally, meet at the business premises.
At this first meeting, even though you established rapport on the telephone, you now need to build face-to-face rapport. You have to start again, go back through everything, listen to them repeat themselves, and tell you all the same stories they told you on the phone. You have to grin and bear it and go back through that process of building rapport.
Once you’ve drilled down into understanding what their needs and issues are, you can present a solution to their problems there and then. Present them with a deal structure that will solve the biggest problem they have in their life right at that moment.
Then you close. You present your deal structure, and you say, “I’m ready to go ahead. We can do this right now.” You’re basically saying, “The only thing holding up fixing the biggest problem you have in your life is you, because I’m giving you the solution, and I’m ready to go.”
Now, shut up.
You need to let the idea percolate through their brains, and for them to understand the gravity of what you’ve just said, because they’re probably going through a Groundhog Day thing. They’ve probably met with people who’ve talked about investing in their business or talked about doing something to solve the problem. Everyone’s nodding and laughing, but then the person goes away, and nothing happens. That’s the typical outcome of these meetings, and they’ve been doing them again and again, getting more desperate as they go along.
You’ve massively interrupted the mental pattern they have for these kinds of meetings. They have a framework that their brains are following, of how these meetings are supposed to go. They’re not supposed to go in a way where the solution to their problem is presented in the meeting, right there and then. So, it may take them a little while before they say something.
There’s an old sales saying, “The one who talks first loses.” You need to keep your mouth shut, wait for them, and let one of them be the first person to speak.
They will probably say something like, “Well, don’t you need to do some due diligence?” or, “I need to discuss it with my lawyer,” or “I need to discuss it with my partner, or the guy down at the pub.” There’s always an objection. Let them voice the objection first. Don’t try and put words in their mouth.
The Most Powerful Thing You Can Say
If the objection is due diligence with a distressed company, say:
“Look, I don’t think we’ve got time to do a full due diligence because by the time we finish that: A) there may no longer be a business, and B) we know this business has problems. We need to get in as quickly as possible and find out what’s going on, and I think if we mess around doing due diligence, we won’t be able to do that. I’m going to look you in the eye and just trust you, and shake hands and get on with this thing, because otherwise, I don’t think there’s going to be anything left for us to fix.”
That’s a hugely powerful statement because you’re saying, “I trust you implicitly, and I want to help.” Of course, you are buying a limited liability company with another limited liability company, and any trouble that it is in, or any trading that’s happened while it’s been insolvent, has all been on their watch. So, you are in a pretty strong position.
You might be thinking, “Well, do I need to do due diligence?” Yes, but do the due diligence when you’re already in there, and you’re the owner. Get the staff to go through the full due diligence process. You’ll need all this information when it comes to selling the business anyway. Plus, this is an opportunity to take a deep dive into the business to get a clear understanding of everything that goes on.
There are a number of advantages to this. For starters, you already have the business, so there’s no “them and us” when it comes to communication with the team. You don’t have to pay a third-party to come in and do it. You’re doing it internally, so effectively, it doesn’t cost you anything, and it saves a bucketload of time.
It also saves the seller a lot of embarrassment. They know the business is in trouble. They don’t need somebody to come in and poke around for four or five weeks and then tell them what they already know. It doesn’t help the situation, and it’s certainly not good for rapport.
We say that we’re going to trust them and we’re going to get on with the deal.
They Want to Think About It
The primary objection that normally comes out in these situations is, “I want to think about it.” They might need to speak to somebody else, or they genuinely need to think about it. It’s rare that businesses do the deal on the same day of the meeting.
When they say they want to think about it, it’s tempting to say “Okay” and run out the door. This is where you really need to hold onto your nerve and say:
“Okay, but let me at least leave you with something to think about. Let’s draw up a basic term sheet, a simple letter of intent between us that we’ve both contributed to that sets out exactly what this deal is. So when you’re thinking about it, or when you’re discussing it with your partner, at least we’ve clearly written down exactly what’s going to happen. Otherwise, when you’re trying to articulate it, you might not recall the nitty-gritty of what’s being agreed upon.”
Then we do something different: instead of leaving and emailing an agreement, we drag our chair to their side of the desk. This literally and figuratively shows you’re on their side. Position yourself shoulder to shoulder with them, trying to solve the problem that’s in front of you both.
It’s important that they have input into the agreement as well as you. You start by asking, “So, what’s the worst that could happen? What’s the thing you’re most scared about doing this deal?” Then, try to encompass some balance to that fear in the agreement so that you’re addressing whatever it is they’re scared of, and they feel comfortable that that’s not going to happen.
The draft agreement is normally a one- to two-page letter. That’s all it takes to get all the clauses and understandings of everything that you’re agreeing to in order to do this deal. Once that agreement is done, and you’ve explained every line of it, and they’ve contributed to it and understand it, you leave it with them.
The next step can be challenging—waiting for their response. In my next blog, we’ll talk more about how to move things along to get the deal done.
In the meantime, tell me…how good are you at keeping your mouth shut and waiting for the other person to speak? Do you see any challenges for yourself in doing that? What are your thoughts on it?
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