Lesson 41: Kindness
Deciding which business to acquire is not difficult when you know what you are looking for: 1) Excellent reputation, 2) No competitors, 3) Low cost/high value for customers, and 4) “Sticky” (meaning it would be difficult for the customer to switch to a competitor). Richard Ruback and Royce Yudkoff’s HBR Guide to Buying A Small Business lists these criteria for buying an enduringly profitable small business. If you go to an investor’s website, you will find some version of most (if not all) of these criteria in their approach to investing. If every buyer is looking for the same thing, then what makes the difference? Kindness.
Over Thanksgiving break, I met an old friend for coffee. Cornelius and I joined Boy Scouts of America when we were in middle school, and we reminisced on memories of camping and volunteering to earn the rank of Eagle Scout. “I now see what it means to be a scout,” Cornelius said. Like carefully laid bricks, the 12 principles in the Scout Law lay the foundation of our character. Kindness is one of those principles.
Adhering to kindness is critical for my character, just as adhering to Ruback and Yudkoff’s criteria for an acquisition target is critical for my search. At first glance, a small business might seem like a “good” investment, but do your research. Excellent reputation: Interview customers and vendors to learn about their reputation. No competitors: Find out who offers the same good or service in the same geography to determine their level of competition. Low cost/high value: Uncover how expensive/valuable the product is to customers by asking why the expense is worthwhile. “Sticky”: Show caution when you check the financial performance during the pandemic or the Global Financial Crisis and customers walked away from the business in those periods. It seems clear how and what to look for in an enduringly profitable small business, but how does a searcher demonstrate kindness to successfully close a deal?
My values are to act with love, humility, and wisdom. The diligence process is more than checking these criteria; it is demonstrating kindness to all the key players. Managing relationships is all about kindness. Show humility when asking to have a call, and show flexibility if they need to reschedule. Bring a pen and paper to write notes and actively listen to what they are sharing - not just on the business but also details on their hometown, family, and hobbies. Letting kindness slip from your process is like pulling a brick out of your foundation. Sellers, bankers, attorneys, and brokers all have one thing in common: they are people. When dealing with people, you must slow down and be kind.
Kindness is Lesson 41. Next week, I will share Lesson 42: Diversity.
