When Should searchers Travel to Meet a Prospective Business Owner?

May 06, 2019

by an admin from Stanford University - Graduate School of Business in Honolulu, HI, USA

Searchfunder News

We asked our Searchfunder.com community, when should a searcher travel to meet a business owner face-to-face? Respondents were given 4 options during the life of their search: (i) during the prospecting phase; (ii) after the Indication of Interest, called an IOI; (iii) after the Letter of Intent, called an LOI; or (iv) once due diligence has started.

A plurality of respondents believe that a searcher should travel to meet a prospective business owner face-to-face during the prospecting phase -- essentially as early as possible. This choice narrowly beat out waiting to do so only after an IOI has been initiated -- 41% versus 39%. Searchers and investors tended to narrowly favor the prospecting phase, while intermediaries, such as business brokers, tended to slightly favor waiting until after the IOI. This difference in perspective is understandable as intermediaries want to present prospects to their clients that seem serious.

During our interview, ^redacted‌, President of UCIT Online Security talked about the time and effort that goes into building rapport with the business owner and walking away from deals during his search and even in looking at subsequent post-acquisition targets that didn't feel right. Putting In The Time & Effort Before thredactedeal. CEO of Efficient Forms ^redacted‌ discussed the initial meeting between his seller and him and discovering commonalities that went beyond screening metrics. In Closing the Deal, Sometimes It's Better to Be Lucky. Those touch points played a role in having the seller engage with his search fund and considering it as a credible potential buyer. President of Pro Max Fence Systems ^redacted‌ relayed how an initial 1 hour face-to-face meeting turned into a 4 hour conversation with his seller. Having Fun Learning My New Business.

Respondents ranked sitting down for the first face-to-face meeting at the LOI stage a distant 3rd in our survey at 17%. The small percentage of respondents who could wait until the due diligence phase seem to be willing to bear more risk than their counterparts.

^redacted‌ recently posted: Pack your bags: when the search fund entrepreneur should travel. He writes about the practical considerations on travel: "You’ve heard me say before that time is the searcher’s most valuable resource, and unfortunately, travel consumes that resource very quickly. Especially when air travel is required, the time spent planning, rescheduling, packing, waiting, flying, checking in, getting the car, driving… that time quickly flies out the window." He recommends developing a checklist for preliminary qualification to consider and to look at the ROI of your past trips. He concludes: "A searcher’s ability to travel and develop relationships face-to-face is indeed a valuable tool, but it’s a tool that should be used sparingly."

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Interested in seeing more? Community members can review and post survey questions by clicking on the questions link under their timeline toolbar.

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