The Winning M&A Advisor [Vol. 1, Issue 3]
Welcome to the 3rd issue of the Winning M&A Advisor, the Axial publication that anonymously unpacks data, fees, and terms…
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Dealmakers and advisors for low to mid market business owners know the grim statistics:
Perhaps the most shocking aspect is the high percentage of business owners with advisors who say, “I know I should develop a succession plan, but I just haven’t gotten around to it.” We call this the “knowing-doing gap.”
In some cases, owners attempt to skip the planning stage altogether and move directly to deal execution. When this happens, dealmakers and advisors encounter owners that are often psychologically unprepared and businesses that are organizationally unprepared for the transaction process. The consequences of the knowing-doing gap and failure to adequately prepare in advance limits the ability to maximize the business value and decreases the potential for owners to achieve a life of satisfaction and significance post exit.
None of this is new information for dealmakers or advisors, who consistently provide technical expertise and information to encourage owners to close this gap. The problem is that closing the gap is not only a function of providing expertise and information. The advisor’s dilemma is that they have diagnosed the problem as a knowledge gap, but what they are dealing with in many cases is a psychological gap.
Studies have consistently demonstrated that there are five strengths common to successful business owners:
While these strengths are an asset for starting and growing a business, they can become a liability for exit, particularly if an owner exhibits certain behaviors (low self-awareness, weak work-life balance, high role-identity fusion, and weak post-exit resilience). The solution to the advisor’s dilemma rests in understanding how to work with an owner’s psychological make-up instead of against it.
There are three easy things advisors can do to begin to increase the likelihood of owners engaging in the exit process before the onset of one of the five d’s (disability, death, divorce, disaster, or disgruntled partners).
STOP giving more technical advice and START asking new types of open-ended questions:
STOP thinking about the relationship as steps in a transaction and START thinking about the owner as a person with their own style and needs. Consider four broad approaches to how people process information and make decisions:
Do your offerings and processes resonate with each of the types?
STOP taking an all or nothing approach. How do you eat an elephant? One bite at a time! START making exit planning a bite sized process.
Dealmakers and advisors who recognize that they cannot directly change the behaviors of owners are wise. But, this leaves them in a quandary. Do they wait for a trigger event to engage owners or do they figure how to change what they can control? Savvy dealmakers and advisors reject the status quo and seek out opportunities for delivering their value propositions in a manner that aligns with owners’ appetites.