Do you have a deal pipeline list that is 20-30 names long (or more) but that doesn’t seem to ever shrink?
Or
Have added companies to the list six months ago, but you haven’t spoken to them since?
Companies almost always start off with the right intentions when they start creating the pipeline list – setting up a spreadsheet, setting up a monthly review meeting, debating what fields they need, getting all the data populated.
They sometimes even invest in tech that gives them analytics and metrics and charts and KPIs and reports And for the first 2-3 months, everything goes great. The tool is getting populated.
But inevitably, the pipeline starts getting stale. And then the tool stops getting used. The team is back at square one. Making a few adjustments to your approach will help fix this issue.
The goal of early commercial due diligence is to (1) disqualify and (2) learn.
Here is a suggested approach that might help:
Step 1: Set the criteria for your inorganic growth strategy and keep it fresh.
Step 2: Identify your non-negotiable criteria for deal qualification. Could be a must-have technical capability. Or presence in a key geographical market. Or a direct to consumer GTM.
Step 3: The bar can be low at first, so you don’t disqualify too easily. But set a bar and stick to it.
Step 4: Evaluate deals not only to transact but to learn. For every conversation, document not only whether you advanced the deal or passed on it but the team’s insights on why. Why, exactly, was the management team not the right cultural fit? How, specifically, did they grow at 35% annually when your business only grew by 5%?
Step 5: If a potential company is not the right fit, agree to touch base in six months or a year. But take them off your real deal “pipeline” and tell them where they stand. Tell them what would have to change to re-engage.
Step 6: Use your learnings to refine your qualification criteria.
Outcomes:
Your org will be better aligned towards what deals will work and what won’t
Your advisors will know exactly what kinds of new deals to bring you
You’ll free up the resources and the mental space to explore more opportunities as a team
You’ll build greater trust in the marketplace and even with the companies that you passed on
Over time, your deal pipeline will be actionable and real. No fluff
More actionable deals…. More deals closed