First Meeting Battle Prep
(I Mean, Rapport Building)
Picture this in your mind’s eye—
Gandalf and Aragorn gather outside the gates of Mordor, before Sauron’s army, hoping to buy time for Frodo and Samwise. Aragorn prances back and forth in front of the Army of the West on his gallant steed.
“Sons of Gondor! Of Rohan! My brothers,” he shouts. “I see in your eyes the same fear that would take the heart of me. A day may come when the courage of men fails, when we forsake our friends and break all bonds of fellowship, but it is not this day. An hour of wolves and shattered shields when the age of men comes crashing down, but it is not this day! This day we fight!”
I love a good battle scene, especially the moments right before the big attack. I’m a huge Lord of the Rings fan and I love Aragorn, too! But your first meeting with the business seller is NOT this. You’re not going into battle, and you’re not preparing for an inquisition.
You’re going to a sales meeting. Yes, you are selling yourself to the current owner. You want to come across as the best pair of hands to turn their business baby over to. It’s not a sparring match or a contest of wills. It’s a rapport building session. A time to make a new friend, even a business partner, because you will certainly be working closely together over the next few weeks, if not the next few months or even years. This isn’t the time to nitpick, scrutinize, or tear apart another person’s business and livelihood.
You may even end up asking the seller for a loan, since most deals involve at least some component of seller financing. Are you going to present yourself as the type of person one would want to loan money to? Are you likeable? Are you trustworthy? Do you display a certain amount of humility and kindness? You’re not on Shark Tank and you’re no Mark Cuban, so don’t act like God’s gift to entrepreneurship.
Find common ground. Be sympathetic. Do more listening than speaking.
First, a list of DON’Ts.
This first meeting is not the time or place to negotiate on price or terms. Don’t get into too many details about the financials. And don’t drag this out all day. This should be a 60-minute meeting, maybe an hour and a half, but no more.
DO NOT make these mistakes at your first seller meeting:
1. Don’t ask how add backs were calculated.
2. Don’t try to go through the financials line by line.
3. Don’t talk to the employees.
4. Don’t walk in taking pictures.
5. Don’t be cocky or condescending.
6. Don’t negotiate the price.
7. Don’t criticize the business or owner.
8. Don’t ask for confidential information.
9. Don’t ask for details on specific customers.
Remember the goals for this first meeting. Building rapport. Getting a feel for the company, the culture. Deciding if this business meets the criteria of your investment thesis. It’s not to punch holes in the target co.
Here are 34 questions to ask your new BFF, aka the seller, at the first face to face meeting.
1. Tell me about how you got started in this business.
2. What have been your favorite parts of running this business?
3. Tell me about some of the changes you’ve made over the years.
4. What have been some of your biggest challenges?
5. What do you think this business can look like in 5 years?
6. What has been your experience dealing with the relevant regulatory agencies, such as OSHA, FDA, the Board of Health, etc?
7. If you could wave a magic wand over your business, what two things would you change today?
8. What do you plan to do after the sale?
9. Would you like to continue with some level of involvement in the company?
10. How long has the manager been in place?
11. What are the manager’s top strengths and weaknesses?
12. Does your staff know of the sale?
13. What bookkeeping software do you use?
14. Who does the day-to-day entries?
15. Who does your payroll?
16. Who prepares your payroll tax returns?
17. How did Covid impact your business?
18. Did you receive PPP money?
19. Was the PPP money forgiven?
20. Why are you selling the business?
21. How did you arrive at your asking price?
22. When has cash flow been a problem?
23. Are there any business assets that are excluded from the sale?
24. Who is your biggest competitor?
25. What differentiates you from your biggest competitor?
26. What are the biggest complaints you’ve gotten from your customers?
27. What is the future of this industry?
28. What permits or licenses are required to run this business?
29. What has your staff turnover been like?
30. How hard has it been to find and keep good staff?
31. What kind of google reviews does the company have?
32. How many hours a week is the owner working and what roles are they filling?
33. What does the business’s tech stack look like?
34. What are your customer demographics, such as age, wealth, job status?
You probably won't be able to cover all of these in one meeting, and that's okay. This is a great list to work from.
Keep your swords sheathed. Leave your shields at home.
But be prepared to answer some questions yourself. The buyer is being interviewed here as well. Bonus points for starting off the conversation by introducing yourself with a little background and why you are considering buying a business/this business--without giving away your strategies and plans for the business being acquired.
You’ve got this!
