How do you know it is a good deal if you have only seen four?
There is a question I ask people who bring me an opportunity they are excited about, and it is not about the opportunity.
How many did you look at before this one?
Most of the time the answer is three or four. Sometimes it is one, and the one found them.
"If you're not seeing a thousand deals or 500 deals, how do you know the deal you're seeing is one out of 500 or one out of a thousand? If you have four apples in front of you, the best one might not be nearly as good as looking at 100 apples from 19 different grocery stores in town."
That is the whole problem with how most families invest after a liquidity event, and it has nothing to do with intelligence or discipline. It is a denominator problem.
You can run a rigorous process on four opportunities and pick the best of the four with real skill. The best of four is still just the best of four. You cannot analyze your way out of a small sample, and no amount of diligence on the wrong four fixes it.
Why this hits family business owners specifically
When you were operating, your deal flow was your industry. You saw every competitor, every supplier, every piece of equipment, every hire. You had a denominator in the hundreds without ever thinking about it, and that is most of why your judgment was good.
Then you sell, or you step back, and the flow stops. Now the opportunities that reach you are the ones that went looking for you, which is a completely different population. You still have your judgment. You lost your sample.
And the deals that come find you are, on average, the ones that could not find better money first.
What actually widens the denominator
Pick a narrow box before you look at anything. Wide criteria produce a lot of flow and none of it is comparable. Industry, size, geography, structure. Four sentences. If you cannot say no in ten seconds, the box is too wide.
Get into the rooms where things are discussed before they are packaged. By the time something has a deck and a data room, you are in a process, and a process means you are competing on price against people who do this full time.
Find the 5 connectors. In any niche there are about five people who see nearly everything. They are usually not brokers. They are the attorney, the CPA, the equipment dealer, the guy who has been in the trade association for 20 years, and one competitor who is respected by everybody. Most buyers know none of them and never think to try.
Say no out loud and give the reason. People bring you more when they know what you want. Vague interest produces vague flow.
And then look at the person, not just the numbers
Once you have real flow, the filter shifts from the deal to the operator. Here is the specific thing I watch for:
"You need to see how a CEO actually acts in their leadership skills. If somebody's back is against the wall, what do they do? Do they fold? Do they melt down? Do they work harder? Do they get more creative? Do they get more focused? Do they spin out? Do they ghost everyone and not reply to emails anymore?"
Everybody looks good in the first meeting. Nobody is at their worst when they are raising money.
So the useful information is historical. Ask what the worst 12 months looked like and who was there. Then call that person. What you are listening for is not whether things went wrong, because things always went wrong. You are listening for what they did in the third month of it going wrong.