Going Main Street - Thoughts on How to Be Less Sophisticated

searcher profile

May 15, 2020

by a searcher from Northwestern University - Kellogg School of Management in Los Gatos, CA, USA

I've spoken with many smart, credentialed, and sophisticated self-funded searchers out there over the last few years. Some struggle to get in the door. Others struggle to get their offers seriously considered. One thing I often point out to them is that those exact characteristics that got them to where they are might not be serving them in their current pursuit of finding and buying a small company in the messy world of main street business. For example, read your last non-binding LOI. Does it look like a lawyer wrote it? You might want to think more about how it's landing with the seller before you hit send.

Appearing sophisticated is often not in your best interest. Your job is not to impress them, it's to earn the trust necessary to go on a journey together. With many people, "impressing" them with an aura of status, prestige, and sophistication may be counterproductive to trust. Moreover, when it comes to communicating a serious offer, there's not a whole lot of benefit to having "lawyered" it when it's entirely non-binding anyway. Most business owners who've been around for a while will know that there's a general expectation that if you bring your lawyer, then I have to bring mine. People not used to engaging lawyers generally don't want to until they feel they must. It's scary. It's expensive. It's a major leap of commitment. If you bring a lawyer first, you might be pushing the deal too far too fast for them. Or, you might be asking them to just pick a different buyer. Oops.

We consider this dynamic in our strategy for both acquisitions and routine commercial contracts. Usually, we make our agreements as plainly non-legal as possible to avoid the legal department whenever possible. Plain language agreements are every bit as binding, albeit usually not as thorough or precise. When we do "go legal", we try to use fair and neutrally written templates, and share the source of the template with the counter-party. That act alone can help build trust, and can also greatly speed up transactions, and reduce legal expenses on both sides.

Of course this strategy can open up some liabilities you perhaps could have lopped off. Your agreements may not cover every imaginable situation like one written by an attorney with Big Law likely would have. You have to be willing to live with that. You might not win every fight. You might even lose some fights you could have won.

But, I'd posit that if you're kind, fair minded, and reasonable, things will work out just fine.

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Connect to me here on Searchfunder if you want to chat about your self-funded search or email me at redactedredacted You can also check out our self-funded search partner site at cubinvestments.com/searchers/. I appreciate hearing from people doing unique and thoughtful work in ETA. Please add any thoughts or examples in the comments if you have them!

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commentor profile
Reply by an intermediary
from Wake Forest University in Winston-Salem, NC, USA
Great points ^redacted‌. And to your point, you need to set the right tone well before the LOI. The owner of a main street business is less likely to be concerned about the specifics of your degree and how many MBA buzz words can be worked into a one hour conversation, and more concerned about how you are going to take care of the company's people and the legacy that they have built. ^redacted‌, to you point, the proliferation of searchers, and many who don't have backing or their own financial wherewithal to complete a transaction, has caused those of us representing sellers to want to know how "real", as you put i,t a potential buyer actually is. For this audience, your more traditional PE messaging/experience/backing is dead on as that separates you from the ones less likely to be able to close.
commentor profile
Reply by a searcher
from Claremont McKenna College in Los Angeles, CA, USA
Very interesting point. I think this boils down to "know your audience". Agreed all LOIs and IOIs should be written by you and have very little to no legal counsel intervention. I actually want to go back now and simplify our IOI/LOI language even more to make the seller's life
easier. However, recently I've experienced some business brokers wanting to test how "real" we are so in those instances my partner and I tend to fall back to our more traditional PE messaging so they feel comfortable that we have successfully navigated several processes and closed meaningful size deals in our prior lives. Essentially, mitigating the certainty of close concern.
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