Be the counterparty who shows up
This page is for the other side of the table.
Family businesses do $7.7 trillion a year in revenue in this country. And here is what the family offices in our community actually want out of that:
"What family offices want is a secure counterparty they can rely upon. That's not going to ghost them, that's going to show up. They can execute. That is real. It's nice if you have cash flow already. Family offices invest into startups and new companies often, but there's trust in things that are proven."
Not returns first. A counterparty who shows up. Returns are the second filter. The first one is whether you are real.
That is why family businesses are interesting to family office capital in a way that most pitch decks never understand. A 40 year old company with cash flow and a second generation in the seats clears the first filter before anyone opens the model.
The flow problem, and it is never capital
If you are a family office, a search fund, an independent sponsor, or a family company buying a competitor, your constraint is almost never money. It is proprietary flow that has not already been shopped to nine other people.
Renan Cortez said it on our stage better than I can: there are profitable multi-million dollar businesses with 50 to 100 employees winding down right now because the owner is retiring and there is no succession plan. Those businesses do not appear on any listing site. They wind down. The equipment gets auctioned, the customers scatter, and 40 years of goodwill evaporates because nobody was in the room two years early.
The reciprocity math most buyers get wrong
"Make sure that they're getting a really good deal for them, because then they'll bring their next nine deals to him. And if your goal is to get one over on them, they'll never bring you another deal. And they'll tell ten people that."
That is the entire game in one sentence and most buyers play it backwards.
You can win the first deal by two turns of EBITDA, or you can be the person the seller's peer group sends the next nine deals to. Those are mutually exclusive and one of them is worth roughly nine times more.
In a family business community, the seller you squeezed has lunch with four other owners in the same industry. That is not a risk, it is a certainty. The squeeze is a one-time gain against a permanent reputational cost, priced at exactly the wrong ratio.
And then actually do the work
"Always do full due diligence. Even if someone says they're a friend, or a sponsor, or has known us forever. You always walk the manufacturing floor, do the full background checks, do your full due diligence, and then more. And don't skip steps."
Walk the floor. I say that literally.
Nobody sees a real business from the outside. Not the buyer, not the lender, not the broker, and not the ranking list. The financials describe what happened. The floor tells you what is about to happen, and the two are different documents.
And the friend part matters more than the rest. The relationships that cost people the most money are almost never the strangers. Strangers get diligenced. Friends get trusted, and the trust substitutes for the work.
