We are not talking about romantic entanglements between individuals
- we will not even pretend we know anything about that. We
are referring to the phenomenon where business people fall head
over heels in love with the idea of a particular business
deal. It could be that dream franchise that you want to own,
it could be that special company that you want to acquire or it
could just be that special business deal that you cannot let
Business people are conditioned to look for opportunities.
This is one of the fundamental attributes that contribute to their
success. Naturally, many business people direct their focus
on the positive potentials of opportunities that they
see. They need to do this not only because they need to
execute the steps to take advantage of the opportunities but, in
many cases, they also need to champion the opportunities to get
stakeholders’ buy-in and capital investments.
The danger is that sometimes, business people end up falling in
love with the deal, and the objective of realizing the deal
overshadows the merits of the deal. Little warning signs are
summarily dismissed. Potential issues are seen as easy fixes
or turn around opportunities. Despite having no history (or
relatively limited history) of a relationship, the counterparty to
the deal becomes the deal lover’s confidant and best friend.
Before long, what once appeared to be a once in a lifetime
opportunity quickly turns into a financially devastating pitfall.
If you think that this would never happen to you, think
again. This has happened to savvy business owners of small
companies to seasoned corporate executives of multimillion-dollar
So, how can business people avoid this phenomenon? Here are 3
First, ask questions. One of the most powerful tools that you
have is the ability to ask questions. It should be of no surprise
to anyone that generally people go into business for the primary
purpose of profit. This is true whether the businesses we are
talking about are the micro-businesses of sole proprietors or the
global conglomerates of major corporations. As such, their
business activities are designed, directly or indirectly, to
achieve such benefits. Therefore, whenever you are presented
with a business deal, you need to understand the economics of the
deal for the parties with whom you are dealing. Ask questions
such as: why is the deal being offered? What are the benefits to
the other parties? How much is it going to cost you to execute your
plan? How volatile is the market? What if the things that the other
parties tell you are untrue or the promises given do not
materialize? And so on. What you are looking for is
logical, rational and objectively verifiable answers.
Second, beware of attempts by the other parties to shift your focus
from the issues of concern. If the other parties are giving
you answers that do not meet the aforementioned standard, then it
is a sign that you need to dig deeper into the issues. Don’t
trust anyone that asks you to trust them without any basis.
Don’t worry if someone tells you that your actions depart from the
norm. A common sales technique is to make you feel
uncomfortable or abnormal if you do not capitulate to the
salesperson’s demands. Be alert to any misdirection.
Instead of providing you with an answer, a party may indirectly (or
sometimes directly) question your character. For example,
instead of providing you with the necessary information, a counter
party might suggest that you are a “worry wart” or that you are not
looking at the “big picture”. Remember “synergy” without an
executable plan to achieve it, is merely a word that describes
something that is not really there.
Finally, retain accounting, legal and other advisors who understand
business transactions, and let them do their job. While you
are not required to follow their advice, they will certainly shine
an objective light on the transaction, and at the very least alert
you to some of the potential issues that you may face. You
should be aware that there are very few circumstances where any
such advisors will tell you to (or even worse, insist that you)
undertake any business transaction. The decision to proceed
is ultimately your own. You are (or your business is) the
business decision maker who will directly be subject to the
consequences of your actions.
Yes, you have to have passion for your business. But business
decisions (even if they are based on intuitions) should be
accompanied by sound rational business fundamentals.
Business transactions are seldom a zero sum scenario. By
understanding the motivations and economics of the parties involved
you will be better equipped to assess the viability of the
As the saying goes, “if it’s sounds too good to be true, it
probably is!” That is the sobering mental check that business
people should always keep in mind when entering into any business
transaction. To be clear, we are not so cynical as to suggest
that all good deals are untrue. We are merely cautioning
against being blinded by the illusion of a good deal.
© 2015 Business Lawgix, LLP