The Middle Market Review Insights on the Middle Market.

Subscribe Subscribe

Subscribe Today

I want to receive:

Thanks for subscribing!

Eliminating Tire Kickers from your Deal Process

No one likes a tire kicker. After spending significant time and effort building your buyer list, few things can be more frustrating than having a disingenuous buyer waste your valuable time and resources.

However, tire kickers can pose much more long-lasting risks to your deal process than simply wasted time. If you spend too much time entertaining insincere buyers, you slow down the entire process, lose legitimate buyers, and could ultimately settle for a lower selling price.

Although it may be difficult to ever guarantee elimination of tire kickers from your process, here are three techniques that you can employ to deter these nuisances, and spend more time in quality conversations with the right buyers.

1) Build a Quality Teaser:

As we have previously seen, one of the most important steps to eliminate tire kickers from your process is to build high-quality investment teasers. Traditionally, a strong teaser is defined as straightforward and informative. More sophisticated and discerning capital providers are wary of sensationalist and promotional material, and will often discount valuable deals if they are advertised excessively. If you build your buyer list with your ideal buyer in mind, it is more likely to appeal to the right party.

To ensure your teasers are high-quality, you should avoid:

  • Overcapitalization – ARE YOU SHOUTING IN YOUR TEASER? No? Then why would you need all caps? Headlines or summaries written in all caps are usually not well-received by the investment community. Even if you have a fantastic opportunity, excessive and overdone capitalization can discourage most investors from even reading past the headline.
  • Excessive punctuation!?!?!?! – Like overcapitalization, excessive punctuation can immediately discourage qualified investors. Overusing punctuation to highlight certain aspects of your company, or grab an acquirers’ attention, almost always does more harm than good. Examples of excessive punctuation include: ****, !!!!!, and $$$. Don’t overshadow the deal through exclamation marks and dollar signs.
  • Sensationalized headline language – If your deal is truly a ‘hot deal’ or ‘once in a lifetime opportunity,’ let the deal speak for itself. There is no need to use terms such as “***HOT DEAL***” and “MUST GO TODAY!!!”. The salesy and showy text evokes images of used car salesmen and are typically met with hesitation from capital providers. Burying your deal with excessive accolades can make it difficult for buyers to discern what makes your client truly unique.

2) Keep Notes on Relevant Buyers:

One of the best ways to prevent tire kickers from slowing your deal is to prevent them from ever learning about your deal. If you mass distribute or broadly auction your deal, the likelihood of attracting a number of half-interested buyers is significantly higher.

To proactively reduce the prevalence of tire kickers, it is important to focus on the quality of your contacts, not the quantity. While having a large network may seem impressive, it is pointless if you do not know how to segment it, engage with it – or know most of your contacts’ names. As Charles Compo recently told us, “It is very important to have relationships with the investors and to understand their behaviors and interests.”

Keeping track of the interests of your network and possible buyers requires detailed notes on all of your connections. We learned from Brian Meyer — one of the most respected ‘superconnectors’ in the deal business — that “there is no point in having meetings if you don’t take notes; there is no point in taking notes if you just have a stack of notebooks and a database; and there’s no point in having a database if you don’t use it systematically.” Axial helps its Members maintain their connections by organizing both new and existing contacts all within a single location on the platform, ensuring you reach out to the right contacts on each deal.

3) Prepare:

No matter how well you write your teaser or keep notes on buyers, some tire kickers are always likely to appear in your process. The best ways to limit their impact is to remove them from conversations as early as possible, which is best accomplished through proactive preparation. While early-stage preparation and planning may seem lengthy and unnecessary at the time, it can save you tremendous time later in the game.

One preparation method is building a list of qualifying questions to ask interested buyers. The questions allow you to ensure that conversations are focused and productive. If initial meetings are unsubstantive and the buyer seems half-hearted in their intent, chances are they may be a tire kicker. In addition to question lists, documents such as in-depth financials, marketing materials, and overall business metrics allow you to quickly determine the strength of buyers’ interest level and weed out unqualified acquirers.

Since a specific NDA must be produced at some point, starting with one saves time further down the road and attracts the right buyers early on. Tire kickers will often indicate interest only to later back out when learning the specifics of the deal. If you have included enough quality information in your teaser, signing an NDA is the logical next step. Some investors will request a quick conversation (giving you the opportunity to ask the questions you’ve prepared) before feeling comfortable signing the NDA or will have minor edits to your NDA. These early-stage negotiations not only increase your chances of closing the specific deal, they build long-term goodwill with quality investors.

By following these three overarching guidelines, you will ultimately be able to increase your deal speed, close more deals, and execute faster.

Thanks to Victory of the People for the photo. 

Learn More About Joining Axial

Request Information

Subscribe to Middle Market Review

Subscribe to Middle Market Review

Subscribe Today

I want to receive:

Thanks for subscribing!