I learned a lot about prospecting and persistence in my process of finding a business to buy. ÿ
Following the now popular HBS ÿ”zip” code theory of career location, I drew a 50-mile radius around my home in the Boston area for a geographic search.ÿ After purchasing a directory of companies in that area, I narrowed down the prospects to businesses that I had some familiarity with from earlier in my career. These 600 prospects became the “campaign” and I pursued them all. ÿI qualified the contact name by calling each company to verify the current owner or president.ÿ Many were out of business, had changed control or the owners had died! ÿI set a target quantity to contact each week, and since the qualification process took about a half hour, it was a slow process. ÿI learned that I had to do a little of this prospecting each week because it was easy to get distracted during the “deal” process that sometimes could lead nowhere.
I crafted a carefully written letter that I personalized for each contact; after all, everyone likes to see their name in the salutation and address of letters they get. ÿI tried hard to make sure it was not tossed out as junk mail. ÿI used pre-printed white stationery and envelopes, a mail merge program to print them, signed them with a green pen and used a yellow highlighter to bring their attention to 3 or 4 important points in the letter. ÿFirst off, I reminded them that I was not a broker or private equity firm, but an individual who wanted to purchase their business. ÿI further emphasized confidentiality and asked them to contact me if they were interested. Once, I got one nice note back declining interest on my request, with a hand-written comment on my original letter saying “send this jerk our standard go-away letter” – oops!ÿ
It took me a while to stop making follow-up calls. ÿGetting through the switchboard was always hard, not having a company name complicated things and when I did finally reach a prospect, 98% of the time I heard “no”. So, instead I just resent the letters again, every 60 days or so. ÿ
Perhaps on the first reading, business was great, and they had no interest. ÿA few months later, their situation may have changed – lost a customer, did not make a profit, worried about their future, a family illness, and they would call me! ÿ”No” did not mean no, it just meant no for now! ÿI worried about how the follow-up letters would be perceived – “this guy Sharpe must be a loser to keep sending the same letter.” ÿTurns out, this was more in my own head, not in the readers of those letters; they had many more things on their minds than wondering why the letters kept coming!
When I did get a phone call response, I was ecstatic. ÿMy first question was always, “Why do you want to sell?” and I continued to ask it over time to be sure I was hearing the same response. ÿI would explain the process of making an offer and request financial history. ÿGenerally, this was not forthcoming until an on-site visit to the business. ÿFinally, the process of building trust had begun, and I could focus on making an offer and learning about their business. ÿThe process was all about rejection; out of the 600, 540 showed no interest. No one was beating a path to my door; finding frogs to kiss was a challenge.
Other methods beyond this direct solicitation of prospects were much less successful. ÿInitial networking to my contacts yielded initial results that needed immediate follow-up, but repeat solicitations were not successful. ÿLawyers and accountants seemed to have an inflated opinion about any business of which they knew. ÿBankers, under penalty of breaching confidentiality, were reluctant to offer their accounts in financial trouble or in need of a turnaround. ÿMany business brokers seemed incompetent but were the only way to reach the seller; I swallowed my pride and met the requirements to proceed to a first meeting. ÿ
A similar prospecting works for a job search, which came in handy when I was fired from my job earlier in my career – a topic for another lesson learned!
If you have comments…website or letters to editor. The Harbus and Jim would love to hear from you at firstname.lastname@example.org, or comment online at www.harbus.org.
Jim Sharpe (MBA `76) is one of theÿHBS Entrepreneurs-in-Residence for the 2009-2010 academic year, who ran an aluminum manufacturing business for 21 years while working with his wife, Debby Stein Sharpe (MBA `81) after both left careers at GE and large companies and sold the business in late 2008. Jim can be reached at: email@example.com, 310 Rock Center, 617-496-6285 or sign up on his wiki for office hours or Brown Bag lunches at //wiki.hbs.edu/confluence/display?Sharpe/Home.