Thread by @SteveWiesnerSMB

Hey #SMBtwit,

Have you ever thought about HOW you ask questions during diligence? I mean, really thought about it? Because how you ask questions matters, a lot...

🧵👇

You're all smart people. You're acquiring a business, so you know what information you need to look for. How you unearth the info you need is very important. You need to be strategic w/ your questions. 2/13

Let's talk about 'Walking the Stairs'. @ProfAWBrooks from @HarvardHBS does a wonderful job on this topic so hopefully, if I butcher this, she can offer some corrections... 3/13

There are two types of conversations - collaborative and competitive. Collaborative conversations are focused on relationship-building. Competitive convos are more zero-sum and transactional in terms of info exchange. 4/13

In collaborative convos, you should 'walk up the stairs' with your questions. Start w/ easy ones, escalating to more difficult as you build rapport, trust, and engagement during the discussion. Open-ended questions work well in this context – people are willing to share. 5/13

In competitive conversations, and diligence meetings often qualify, both parties are anticipating difficult and pointed questions. If you start w/ the easy ones, it may actually increase anxiety and frustration since everyone knows what's coming. 6/13

In this case, starting with the hardest questions and 'walking down the stairs' is often a better strategy. There's another reason this can be a more productive strategy in competitive circumstances. And it relates to something called the Recency Bias. 7/13

Recency Bias gives "greater importance to the most recent event" - it's why closing arguments in a legal case are so important. If you start with the most difficult questions and end with softballs, you can imagine the following conversation after the meeting... 8/13

"Wow, that got off to a rough start when Jessica dove right into the weak Q4 numbers. But you know, once we got past that, things got a lot better. The wrap up was great and I feel like we're in a good spot with this deal." 9/13

Despite the potentially contentious questioning at the beginning, finishing on a lighter, more positive note takes the edge off and leaves the impression of a good conversation. That's recency bias at work. 10/13

Now, asking tough questions ALWAYS carries risk, whether it's a collaborative or a competitive conversation. Use your EQ and behave accordingly. Also, as a buyer of an #SMB, any given meeting may be both competitive AND collaborative in nature. 11/13

After all, the buyer will often need to work closely with the seller during a transition and/or beyond, so yes, it's a negotiation, but it's also relationship building. Use your judgment about what style of questioning you want to employ. 12/13

To wrap up, it may be comfortable but don't assume starting with easy Q's and walking up the stairs to the harder ones is always the best strategy. In some cases, particularly competitive conversations, getting the tough questions out of the way can lead to better outcomes. 13/13

What do some of you #SMB hitters think about this? @ClintFiore @SMB_Attorney @girdley @SMBQuest @GoodsCapital @WilsonCompanies @RandBusiness @petelehrman @MatthewGHinson

If you found this valuable, I could use the followers! Please like and retweet! 🙏

https://twitter.com/SteveWiesnerSMB/status/1535438694378680320?s=20&t=5_lpDc5vdMMvPSIt_S7Nag