Over the last three years at RKCA I’ve had the opportunity to observe many sell side transactions. I use the term “observe” for two reasons:
- My primary day-to-day role is focused on our Direct Investment Portfolio
- My route to RKCA and by extension the world of investment banking is rather circuitous, and I’ve done more armchair learning than any formal training in college
Over this period, I’ve observed one constant in sell-side transaction my colleagues are leading: the importance of a seller’s mindset. I’ll get into the topic of the seller’s mindset later in this post. However, I would be remiss not to mention the importance of having the right investment banker on your side in a transaction. Daily, I watch my expert colleagues serve as shock absorbers, therapists, and “consiglieres” on behalf of clients to advocate for them in a transaction. At the same time, I have watched poor practitioners on the other side of a transaction either a) fade into the background and not contribute or b) focus on what is in their best interest in a transaction not their clients.
But this post is about YOU, a business owner and how important your mindset is during a transaction. And if the YOU receiving this email isn’t an owner, but you know someone, feel free to forward this onto them (and encourage them subscribe to our emails using the form at the bottom of https://www.rkca.com/).
There is the window dressing in any transaction that is important (I talked about this in our RKCA Insights on Due Diligence): organizational chart, financials, operational efficiencies, revenue growth, etc. But, and it’s my opinion, that INEVITABLY there will be a point in the transaction where your mindset will be the most important factor in the transaction. Perhaps the buyer is trying to re-trade the deal, or their banker is coming back with a list of questions (again?!), or the confidentiality you had with your exec team about the deal was broken and now the organization knows, or your Board is backing away from the deal. Maybe you’re having second thoughts about selling, or there was a global pandemic, or…and so on. Keeping “your cool” about you in the transaction is critical. As Warren Buffett famously said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Mindset is also important when you are embarking on wanting to sell your business. You cannot wait for someone to take the lead and tell you when the time is right. There is no ability to wait for clarity, wait for certainty. The world can (and does) change on a dime sometimes. All the energy
you put into things you CAN’T control comes at the expense of things you CAN control.
When I meet someone new out in a social setting and they find out what I do for a living, I sometimes come against the mindset gap comment of “well of course well-run big businesses hire and can afford investment bankers, we can’t.” That is false. It’s easy to overestimate the role of resources and the role of mindset. Often, people can convince themselves that…if we ONLY had the resources, then we could be in the right mindset. When you focus on the resources and not having them you miss the leverage of the right mindset hiding right in front of you.
Your mindset gets applied to life and your business thousands of times a day in interactions and circumstances. The “I’ve seen this movie before” mindset of knowing how to handle a situation is what has made many businesses owners successful (e.g., I’ve seen this movie of an economic crisis in 2008, I have some ideas of how to handle it in 2020). How quickly and responsibly we react to adversity is far more important than the adversity itself.
But at the end of day one of starting your business, your mindset is different than at the end of a decade. Over time the discipline of knowing there are things we cannot control in our businesses, but we can control our process of thinking, is what helps, in my opinion, build a great business (and not necessarily resources, or luck events, or timing).
I have no two-by-two matrix here to share or process document for individuals to download and learn more. Rather, I have noticed over my time at RKCA and while CEO of a business prior, that a gap in your mindset as a business owner/operator creates outcome gaps that only compound. It’s my opinion, but this mindset gap gets particularly wide when selling your business. The unknowns of the process are all new to the seller, things he or she has never experienced before. You may have “seen this movie” when a supplier or large customer exits, but you may not have “seen this movie” when at the last minute a buyer wants to re-trade the terms of a deal. This is where, in my opinion, an investment banker by your side, who has the right mindset, is so critical.
If you’re interested in learning more about what the men and women at RKCA do every day to help clients’ with their mindset, email me: firstname.lastname@example.org.
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