Knowing how to prepare for and conduct an initial meeting with a business owner drastically increases your chances of having a successful first meeting. First meetings are crucial when building any business relationship. When you come into the meeting fully prepared, you’ll easily build rapport and gain the trust of the business owner. In this episode, Domenic Rinaldi provides a best practices overview on how to have a successful first meeting with an owner and why this is critically important to get a deal done. You’ll learn how to properly introduce yourself, what preparations you need to make, and what important questions you need to ask in that first meeting.

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Best Practices For A Successful First Meeting With A Business Owner 

While deals can’t be secured during your first meeting with a business owner, they can be lost sure enough. Knowing how to prepare for and conduct an initial meeting with a business owner might not seem like a big deal but in many years, I have seen many buyers blow their opportunities in these first meetings. In this episode, I’m going to provide a best practices overview on how to have a successful first meeting with an owner and why it is critically important to get a deal done. I will be discussing things like how to properly introduce yourself, the goals of an initial meeting, how to properly prepare, what’s the most important questions to get answered in that first meeting, what questions to steer clear of, and some of the challenges to first meetings in this COVID environment. You may be surprised by some of the advice, but if you follow this format, you will give yourself a leg up on any other buyers and build a reservoir of goodwill with the owner, which you may need to tap later on down the road. 

Before we get into this episode, if you want to avoid the common deal pitfalls and the risk of losing substantial dollars, you need to know how ready you are to buy a business because I believe proper preparation is critical to your deal success. We have published a catalog of free resources to help you be better prepared. You can access these resources on our website at K2Adviser.com/Resources. Being prepared is critical to ensuring that you maximize returns and minimize risks. Thank you for being here. I hope you enjoy this episode. 

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Having A Goal For First Meetings

As we talked about in the intro, having a goal for these initial meetings is critical. I have found over my many years that there were two goals that rise above everything else for this initial meeting. First, you want to understand and determine a go-no-go decision at the end of this meeting. It doesn’t mean whether or not you’re going to make an offer on the business. Go-no-go means, do you want to take the next step? Do you want to further the conversation? Whatever that is with the owner of this business. Is this a business you see yourself running? Can you sit in the chair of that owner and see yourself running this business for the next 5, 10, 15, 20 years? If you’re an existing business owner and looking to grow, is this business the one that could fit nicely and tuck into your existing business or give you a leg up in the marketplace? That’s what you should determine in this first meeting. Is there a reason to go to the next step?  

The second goal which is of equal importance is to build rapport. This may seem like a simple thing but it’s not. It can be tricky for people because you’re in an interview. The environment where you’re trying to dive into somebody’s business could be somewhat intrusive for a business owner. You have to pay a lot of attention to building rapport. How do you do this? You do it by complimenting the owner. You do it by not putting the owner on the defensive. Throughout this first meeting, you want to do everything you can to make that owner comfortable, make them feel like they can trust you because this will come back to pay you dividends later on if you decide this is a deal that you want to move forward with. These should be the overarching goals of any first meeting. One, determine if you want to go to the next step or not, and then two, do everything you can at every step throughout the process in this first meeting to build as much rapport and goodwill as possible. 

You’re going to have challenges during this COVID environment. Many of these meetings are not happening in person. Maybe that’s going to free up a bit as we all get vaccinated and we get to herd immunity. A lot of these meetings are happening over phone calls and Zoom. What I would tell you is you want to do everything you can. If you can’t meet in person safely, you need to do at least some Zoom or video call. Conference calls don’t get you the ability to build the rapport that you need. At a minimum, do a Zoom call or a similar type of video call. Do all that you can to make that environment as conducive as possible to building rapport. It’s going to be a big challenge. For a lot of people, some things will get lost in translation. You’re going to have to work harder than normal compared to meeting in person. If you can safely meet in person, you need to do that for a first meeting if possible. 

Do Your Research

Let’s get to meeting prep. First off, if the business is represented by an advisor, you should be getting something called a CIM or a Confidential Information Memorandum, or a business overview. It is sometimes called the book. You should be pouring through CIM a tremendous amount of detail. Not all CIMs were created equal. Some are going to be very short on details. Others will be detailed, but you want to go through this document as closely as you can and try to understand where the business is at and where it has come from. If the business isn’t represented by an advisor, then you’re going to have to do your homework. 

You’re going to have to rely on research, researching through Google and potentially going to your library. Libraries are a tremendous source of research platforms. Many libraries will give you access to research platforms that would normally cost thousands or tens of thousands of dollars. If you’re a member, you can get access to these research platforms. For example, Capital IQ is one such research platform that if you try to buy into it, it would cost you tens of thousands of dollars. Many libraries have access to that for free, but not all. 

Trying to do as much research as you can upfront on that industry is going to be important. You’ll get to understand, is this an industry that fits you? It’ll help inform you and develop better questions to ask the owner during that initial interview. You should also be combing all of the business for sale websites to see if there are any similar types of businesses that are on the market. If there are, gather as much information as you can about those businesses that are on the market and compare it to the business that you’re looking at. What are the similarities? What are the differences? Look for gross profit margins, the bottom line. Where are the percentages in those businesses versus the one that you’re looking at? 

The other one that I’ll point to and so important nowadays is, what is the web presence of that company? Not just their website and how well it’s done, but do they appear in Google searches? Do they have a Twitter presence? Are they on Instagram? Are they on LinkedIn? What are they doing from a social media and web perspective to get their business out there? Don’t be alarmed if they haven’t done a lot because that might be a tremendous opportunity for you to come in and build the business up without having to spend a lot of money and reap some pretty significant rewards quickly. That could be some low-hanging fruit that is an opportunity for you to quickly grow the business. Not all works on a business or things that they are not doing are reasons to leave a deal. They could be tremendous opportunities for you. You do your homework and understand what their web presence is. Maybe you can develop some questions from that that you’re going to ask the owner about why they have or have not done certain things from an email marketing and web presence perspective.  

Prepare For Competitors

The next thing to prepare around is competitors. I would simply do some Google searches. I would look in the local area. If you can get ahold of some trade organizations or associations that might have competitors listed, I would go to all of those websites and compare how your target company is to the other businesses that are in the local market, if it is a local market business. If it’s a national business, I will do be doing more of a national search to see what the national competitive landscape looks like. What kind of products and services are they offering compared to the products and services that your company is offering? Sometimes companies will list businesses that are their clients. You can compare what types of client lists they have. Sometimes they’ll list employees. You can see what the employee bases might look like. There are lots of information that you can gather as you do this research, and you should be because it will help you develop better questions for when you do have that first meeting. 

Introduce Yourself Properly

You’ve done all your research. You’ve pulled together a preliminary list of questions, at least as it relates to the industry and the market. Now, you are on the day of the meeting. The first place to start here is you want to introduce yourself properly. I would tell you that you want to go first. The reason you want to go first rather than have the seller talk about their business is you want the opportunity to set the tone for this meeting. Setting the tone for the meeting and putting the owner in a relaxed position. There might be stress levels. You don’t know what’s going on with the owner. They might be feeling mixed emotions about selling their business. They might be anxious. They may not be good with interview questions. This is a great opportunity for you to grab the reins. Go first in a polite way, but set the tone for the entire meeting.  

The first place to start is to provide a background around yourself. If you own a business and this is an opportunity for you to grow your business, what your business does, potentially why this is a good fit in your business. I would rehearse this background. You want this to be succinct. You don’t want to ramble. You don’t want to go on. You want to be thorough, but you want it to be clear, crisp and not drag on for 5 to 10 minutes. You should be able to do this easily in under five minutes. You want to talk about next the reasons why you want to buy a business. If it’s your first acquisition, why is this so important?  

Successful First Meeting: If the business is represented by an advisor, you should be getting a Confidential Information Memorandum or a business overview.

Maybe you come from a family of entrepreneurs, or you’ve always wanted to own your own business, or you own a business and you’re looking to grow through acquisition, and you’re looking for a diversification player for this business. Whatever the reasons are, you want to get them out on the table so the owner understands where you’re coming from. Why specifically that owner’s business is of interest to you? You may not know a ton about the business at this point, but you know enough probably that you can say why on the surface the owner’s business is of interest to you. Maybe it’s an industry you’ve been looking at for a long time, or it’s an industry you have a lot of experience in, whatever it is. Why does that business, in particular, interest you? 

The next thing I would do is I would quickly cover up what you’ve done to prepare to do a transaction. I’m going to make an analogy here as much as I don’t like to make this analogy because buying a business and buying a home are not the same thing. They’re not even close, but much like when you go to buy a home and you get pre-qualified for a loan. When you’re looking to buy a business, you should be doing some of the same things. What do I mean by that? You should have a team assembled. You should have an M&A advisor, M&A accountant, M&A attorney, a lender or lenders identified. You should have your team pretty much pulled together. You don’t need to share names and who they are, but you want to communicate with the owner that you’ve done this preparation so that if this is the right deal, you’re prepared to move quickly.  

Why is that important to an owner? An owner doesn’t want to know or think that their business is going to sit on the market for a long period of time. They want to know that once they find the right buyer, that buyer can move quickly through the process. The quicker that a deal can get done, the better for everybody. Stressing this point and communicating this will be music to the owner’s ears. As I mentioned earlier, you want to compliment the seller. This is a great opportunity while you’re in your intro to compliment the owner. If they’ve run a business for 20, 30 years, it’s a great opportunity to tell them that you think that’s an unbelievable accomplishment. Believe me, it is. Most businesses fail within five years. If you’ve been able to run a business for 20 or 30 years, you’ve weathered your fair number of storms. You’ve done a lot to keep that business going and thriving. It’s a big deal. You don’t have to repeat yourself, but the more of those types of compliments that you pay to the owner shows both respects for what they’ve done and the fact that you’d be a good steward potentially of what they’ve built.  

Lastly, during this intro, I’d invite the owner to ask you any questions that they may have about anything you’ve talked about or your background. It’s another great opportunity to bring the level of anxiety potentially of that owner down. Maybe they’ll have some great questions that’ll be a great opportunity for the two of you to bond about who knows? Maybe sports teams come up or families or vacation. It’s amazing what sorts of things can come up in that initial questioning that could give you an opportunity to each bond. After you provide the intro, you should be looking for the owner to provide you with an overview of their business. How they started it or if they bought it, when they bought it, and what they’ve done with the business from the time they started it or bought it until now? How they generally operate it?  

It’s probably going to be a high-level overview. They’re probably not going to go into a ton of details. Although some owners, once they have the opportunity to start talking about this, they’re off to the races. It might drag on for a while, but that’s okay. The more information that you can get at this stage, the better. Show up with a pad, paper, pen and write notes. Let the owner know that you’re going to write notes so you can reference back later on because you’re going to get a lot of information, and you can’t be expected to remember all of it. Take some good notes about the high-level important stuff that you can reference back later on.  

Key Questions To Ask

Once the owner is done providing an overview, now it’s your opportunity to ask questions about the owner’s business. There are some key questions that you should be asking here. Let me first start with what you should not be asking and where you should not go with this conversation because what you do ask is as important as what you don’t ask. One thing you don’t want to do is to be asking any sorts of questions that would put the owner on the defensive. There’s plenty of time during due diligence to dive deeper and ask deeper diving questions if you suspect around some items or issues or financial, but now is not the time to do that. You want to keep this high level. You’re trying to determine, is this a go-no-go to the next stage?  

Keeping the owner off the defensive is of primary importance here. Don’t be asking anything that’s going to cause the owner to get defensive, shut down and not answer your questions completely. The other thing you never want to do in this initial meeting is to negotiate in any way, shape or form. You shouldn’t be asking about the purchase price and how they arrived at it. Would they take a note? Would they take an earn-out? This is not the time for that. I want to go back to your two major goals. You want to determine go-no-go and you want it in the next stage. Not that you’re even going to make an offer and you want to build rapport. Negotiating in this first meeting will set you back with this owner. It’ll put them on the defensive and there’s no reason to do it at this point. Stay away from anything that’s defensive and anything that would even equate to some negotiation or questioning the terms or the price that they’re asking for. Stay clear of that stuff. 

Let’s get back to the questions that you do want to get answered. It may not be the first question you ask but number one on my list is, why is the owner selling now? What has compelled them at this point in time to either put the business on the market or engage in a conversation with you if you happen to find them and they weren’t on the market for sale? The answer to this question is critically important. I have a friend who calls it the sailboat test. The sailboat test is simply, does that owner has something that’s pulling them away from the business? A sailboat, a ranch, grandkids. You’re looking for what is the motivation for that owner to be stepping away. If they don’t have a clear motivation, you want to take note of that. At the end of the day, this might not be a truly motivated owner. 

You don’t want to dive deep here. You don’t have to get into more details at this point, but understanding whether or not there is something that is pulling them away from the business is of critical importance. If not, what may happen is you could have seller’s remorse somewhere down the road. It could come early in the deal or it could come the day of closing when they pull out of the deal. That is after you’ve spent a lot of time, money and energy. You don’t want that to happen. This question is important. 

The next question that I love to get answered from owners is, what are their top three growth strategies? They may not have three. They might have one or two. I always ask, “What are your top three growth strategies?” The way I frame this is, “If you were to wind back the clock 10 or 15 years when you were younger and you still had all the energy you wanted to run this business, what are the top three things you would pursue to grow the business, to double it or triple it?” It’s important to understand what the owner would do. If they say they’ll develop a new product, you might want to dive in a little bit deeper and ask, what products? What would they be doing? It’s high-level. This is not the time to dig in deep and get down to granular strategies, but you do want to understand at a high level what they do to grow the business.  

The next area that I want to understand is, what are the major risks in the business from their perspective? Sometimes the way I’ll frame this question is, what keeps them up at night? Are they worried about something that could happen to the business in the future whether or not outside of their control? What are the major risk factors from their perspective? I will warn you, owners don’t have a great answer to this question. You could decide if you want to ask it in a different way, another time to see if you can tease out something. If they don’t offer anything up, I’d take note of it. It may be something you need to come back to later on, but at least you’ve gotten the question out there. It may give them an opportunity to think about it further so that if you do make a decision to go further, you can come back and ask this question again maybe in a slightly different way. Attack it in a different way to understand what may worry them about the business. 

The next area that you want to get into is the owner themselves. What is their day-to-day involvement in the business? What do they do? What parts of the business are they involved in? Can they take long vacations? Do they need to be there day in, day out? How entrenched are they in the business? You’ve heard me talk about this in other episodes about the more the owner is in the business day-to-day, the lower the value. It means that there are risks in transitioning the business from them to you. There’s a risk that if they have client relationships, those clients could leave, key employees come to rely on them. This is not something that you need to terminate discussions around, but it’s important to understand and then understand how you would mitigate the risk if you decided to move forward. 

Understand who their key people are. They may be reluctant to name them by name, but you should at least understand who do they rely on most from a position perspective in their organization. There might be a whole host of operational questions that you want to understand. How do they operate the business? How do they get new clients? What’s their acquisition strategy? How do they maintain clients and keep them? What does customer service look like? All operational questions that give you a sense of how the overall business operates day in and day out. 

I keep this at a high level, but go through it and understand. If you refer back to the confidential information memorandum, if there was one, hopefully, you’ve been able to develop some questions from that around their operations. You can reference the CIM and say, “I saw this in the CIM. Can you speak more to this?” You might want to talk about margins. Anything operational is on the table for discussion. It’s a great opportunity to ask them about their competition. If you’ve done your homework, you might even want to ask them about specific competitors, what they think of those competitors and do they lose deals to those competitors? See what their perspective is on the competition.  

Lastly is their view of the industry and their outlook on the industry. They’ve probably been in the industry for a long time. They may have been involved at the association level if there is an industry association. They’re going to have some perspectives, and you’re going to want to hear what their perspectives are. Hopefully, that’s going to take you a good 45 minutes to 1 hour to get through all of that. This could be lengthy. You want to make sure that anything you’re asking, you’re asking them in a very polite manner. Compliment along the way if you can if they answer some questions where it’s clear that they’ve done an outstanding job.  

At this point in time, the first meeting is coming to a close. During the meeting, you’ve probably got an impression of whether or not you want to take the next step or not. If you don’t want to take the next step and you’re certain of that, I would be very polite and tell the owner at that point in time that you appreciate their time but for whatever reasons, it isn’t a fit for you. You don’t think you can be successful. You’re not certain that this is the right fit for you. It’s better to let the owner know at that point in time if you have no intention of taking the next step.  

If you do have an intention of taking the next step, I’d simply state that. I’d say, “I like what I’ve heard. I think I’d like to take the next step. I don’t know maybe exactly what that is at the moment. I want to go through my notes and digest everything that we’ve talked about. I enjoyed meeting you and getting to know more about your business. Congratulations on running it for however long it is. If you give me a few days, I’ll be back to you and maybe we could talk about the next steps.” At least they know that you like the business. You want to take the next step. You’re just not clear about what that is. That gives everybody a clear idea about what’s going to happen. What you do next will depend on a whole host of things. It’s outside of the scope of this episode. Suggest maybe what those are. If there is going to be the next step if you are interested, it’s important to make sure that the owner knows that. 

Keep The Good Vibes Going

Let me cap this off with some comments about how to keep good vibes going. If you’ve taken one thing away from this episode, it’s that on this first meeting, you want to do all you can to build goodwill with the owner of the business and build rapport. You want to keep those good vibes going. I’m going to make some suggestions here. One, hire a third party to do the heavy lifting and the dirty work because there is going to be heavy lifting and dirty work. If you wind up doing that yourself, you’re going to wind up chipping away at your goodwill and the rapport that you’ve built. You don’t want to do that. 

You’d rather have a third party to do that, whether it’s an M&A advisor or your attorney. You’re going to want a third party that can deal with the owner or their representatives and do a lot of that so that you can maintain your relationship with the seller throughout the process. It’s important because I guarantee you, there are going to be speed bumps along the way. I’m doing this for a long time. There are no deals that don’t have speed bumps, whether it’s something that pops up in the financials or operationally, or it’s hard to get the bank loan because of the way the owner has maintained their finances. Whatever it is, I promise you, there are going to be speed bumps. Training and transition. It’ll come at you from all different angles, but there will be speed bumps.  

The only question when there’s a speed bump is, is it material enough to cause you to walk away from the business and terminate your interest? If not, you need someone else who can help you get over the speed bumps and those difficulties so that you can maintain rapport. Why this is important is if the owner continues to know, like and trust you throughout the process, the odds are that you’re going to get past those speed bumps and those issues. There may come a time where you do have to pick up the phone. You’ve gotten to the eleventh hour in the deal, and there are a couple of speed bumps, and advisors haven’t been able to get past them, but you’ve got all that reservoir of goodwill.  

Now, you can pick up the phone. The owner knows that they can trust you because you’ve been professional throughout the process. Now you can pick up the phone and have a one-on-one discussion with the owner and hopefully get past whatever those issues are. I promise you, if you’ve built up goodwill, you’ve got a great shot at getting past those issues. If you haven’t built up goodwill or you eroded that during the diligence phase and the negotiation phase, it is going to be much harder for you to ask for things from the owner when the deal gets down to the closing table. 

Successful First Meeting: Do as much research as you can to help inform you and help you develop better questions to ask the owner during the initial interview.

I know this may sound to some like a trivial point, but I’ve seen owners walk away from deals because there wasn’t enough goodwill maintained throughout the deal. The owner knew they had a good business and they could easily go find another buyer. That’s exactly what they did. They terminated the transaction and left the buyer with nothing but a lot of legal bills and a lot of effort that went nowhere. Maintain goodwill, maintain your rapport, then if you have to dip into the reservoir dip in the very tail end of the process when you know that it’s a go-no-go to get the deal close, that you need to pick up the phone and talk to the owner specifically. 

Hopefully, this information helps you to have much more productive first meetings with owners and increase your odds of getting a deal done when you decide it’s the deal you want to do. I hope you enjoyed this episode. If you enjoy our content, please remember to subscribe and review our show. I look forward to seeing you again on the next episode. Until then, please remember that scaling, acquiring or selling a business takes time, preparation and the proper knowledge. 

Important links:

• K2Adviser.com/Resources 
• Capital IQ 

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