If You Do Nothing Else When Doing a Deal, Be Sure You Do This
Someone once said that if you’ve got four hours to chop down trees, spend three hours sharpening the ax. The same holds true in doing deals regarding the amount of time invested in building rapport. After all, the foundation of getting the deal done is in the relationship you have with the business owner.
When you do a deal with an owner-managed business, it’s different from anything you might have learned about M&A strategies, particularly if you’ve considered the traditional corporate finance route or the MBA way. When you’re dealing with an owner-manager, it’s all about rapport, creating a relationship with them, and then doing a deal together that meets some common aim. It needs to be a win-win deal. You are solving a problem or issue for them, and you’re getting the business as a result of solving it.
Today, I’d like to share one of the rapport-building techniques we discuss at the Harbour Club, based around a point of basic telephone etiquette.
The One Who Calls Gets to Ask All the Questions
Regardless of how you made your initial contact with the prospective seller, you’ll want to set up a call where you can really start to establish rapport and start to get some of the details about the seller and the business.
But there is a bit of telephone etiquette that you should be aware of: “The one who calls gets to ask all of the questions.”
If they call you, they will want to ask you all sorts of questions like, “How much money do you have,” and “What sort of businesses have you invested in before?” And they start going down all these different rabbit holes, which basically means that you can’t direct the conversation as you would like to do.
Now, if they should call you first, I suggest you start by making some sort of excuse as to why you can’t speak at that moment. Doesn’t matter what it is. Then arrange a time to call them back when they’ve got fifteen minutes of uninterrupted time to go through a few things. Now the truth is, you might be on the phone with them for a couple of hours, but don’t tell them that as you’ll scare them off. So just ask for that 15-minute call. And now, because you’re calling them, you’ll get to ask all the questions.
Now, when you make that call back to them, you start by building rapport. Ask open-ended questions and really listen to what they’re saying. (Don’t spend your time planning your next question…you’ll surely miss something important!) Spend as much time as possible just building rapport. Get to understand what their journey has been, how they developed this business, what their upbringing was like.
Whenever you’re speaking to people like this, you can always find mutual ground of shared experiences. Contribute your own experiences. Get to know them as a person. Build rapport and trust, so you can start to find out some of the business particulars. It’s much easier for them to share that information with you, because the skepticism has been considerably reduced.
I often ask the question, “If you could wave a magic wand that solved all your problems, what would that look like?” You want to find out whether they understand what it takes to get away from where they are now.
Then, of course, once you’ve built some rapport by asking those open-ended questions and listening, you can start to dive into some of the trickier questions—questions about their finances, their creditors, what’s going on in the business. What’s their profit situation? What are the big challenges they’re facing? What are their liabilities, and who are the creditors that are pressing for their money? How much do they owe in taxes?
If they want an investment from you, what are they going to spend it on? How are they going to deploy the cash? Is it for fixing old problems? (You need to find out if you’re buying the losing lottery ticket.) Or do they want to invest in something new? Why do they need that investment for something new? This approach will give you a much better understanding of the business and where it is financially.
If you dive straight into the financials without building the rapport, they will clam up and not tell you anything. I’ve even had situations where people won’t say their company name (even when you know their company name) or won’t divulge basic financial information (which you can see on online public records). But once you’ve built the rapport, they’ll tell you everything you want to know and more.
Acquiring a business takes many steps. Rapport is as essential in deal-making as water is to living! Make sure that you invest time in establishing rapport in the beginning because it pays dividends over and over again.
Join me next time as I share a case study with you, the story of Harbour Club member, Jim, and the deal I mentioned in a recent blog. See how he utilizes several of these techniques to close a great deal!
Tell me, have you had an experience where having a built strong rapport with someone made all the difference in what you were trying to accomplish? I’d like to hear about it below!
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