A closed deal is the commonly understood objective for owners selling or buying a business. Yet advisors report owners consistently experience a high failure rate. Axial recently published a very useful article using data from their members which identified key reasons deals failed in 2022. Kaitlinn Thatcher writes, “The main event was an all too familiar mix of seller financial under-preparedness, unsuccessful renegotiations post-diligence, and seller cold feet. Cold feet happen and are hard to remedy. Financial under-preparedness is more avoidable.”
“Cold Feet” is an Inadequate Explanation for Failed Transactions
“The owner got cold feet” is a colloquialism used to explain a phenomenon that appears irrational. Advisors and owners seem to consider this a sufficient explanation and rapidly move on to what is “concrete” and “measurable” such as financial preparedness that can be viewed in spreadsheets. In so doing, the root cause of many hundreds of millions of dollars of failed deals is left in the “cold feet” graveyard.
Resorting to a common colloquialism used to describe the psychological phenomenon is not the only option. It is in fact a completely inadequate response and one that puts the burden on owners. In fact, “cold feet” may well come from an advisor’s approach with the owner. In these cases, “cold feet” is avoidable, if advisors are willing to adapt their natural style to meet the needs of the owner. Owners that understand what is happening and why are better prepared to maximize their transaction, save significant cost, avoid heartache, and position themselves to remain in control of the process to achieve more satisfying outcomes.
Bottom line: Conquering the “cold feet” phenomenon is more than possible but it requires informed owners and a team of advisors that are willing to adapt to meet the owner’s needs.
Psychometrics are now widely used throughout corporate America. The annual market for these tools is now estimated at $12BN (USD) globally with the U.S. Corporate sector being the largest consumer. From hiring to team building to corporate coaching, the value of using scientifically designed psychometrics is well established. The best practices business reason for this investment is that the greater awareness an individual has about their “life below the surface” or “inner world”, the better able they are to self-regulate an emotional journey, navigate complex relationships, persist in the face of adversity, and achieve goals. The corporate rationale is that assessments are a relatively low investment with returns that increase profit through improved alignment of talent with culture, teambuilding, employee retention, and a host of other benefits derived through increased awareness.
Carl Jung said, “Until you make the unconscious conscious it will drive your life and you will call it fate.” Selling a business is an emotional journey for all owners – even the most logical – and our complex emotions reside at the unconscious level of awareness. Emotion will happen, and we cannot control that experience, but we can control the feelings we respond with. Until now there has not been a way to measure the psychological attributes that can help owners recognize what is happening below the surface and why it happens during their transaction journey. Likewise, the owner’s advisors have been missing essential insights about how best to work with an owner’s individual needs to avoid triggering “cold feet”.
A Better Way
Orange Kiwi established Clear Water Insights to offer the Owner Transition Profile for just such a purpose. It is a scientifically validated instrument that measures entrepreneurial role identity fusion (ERIF), openness to change, and communication styles. These variables are indicators of how an owner is going to experience the sale process and what they need from their advisors to increase the likelihood of success. With this essential reporting in hand, owners gain:
Clarity for what they are likely to experience at the unconscious level, why it is happening, and how to navigate the journey.
Understanding for how advisors can avoid being the cause of triggering “cold feet”.
Increased psychological control over their decision-making.
Confidence as they are more prepared to determine if, when, and how to proceed with the sale of their business and avoid joining the “cold feet” graveyard.
If you are an owner thinking about taking on growth capital, selling altogether, or engaging in family succession and want to avoid “cold feet” (or maybe you are already feeling the first chills and you want them to go away), start a conversation with us today. Take the first step to move from colloquial excuses to gaining clarity, confidence, and control for the journey!