I’m reading a book that we all know the story’s outcome. It’s “Munich 1938” and is the story of the Chamberlin and Hitler agreement for, as Chamberlin called it, “Peace for our time.” Of course it didn’t take too much time before Hitler violated the agreement and we had World War II.
You see, Chamberlin was optimistic not pragmatic. He felt he could trust somebody who had already taken war like actions, set up thug groups, established concentration camps and more. I see the same optimism with business buyers. While they are by nature skeptical they are also optimistic. Especially when they see things in the target company they feel they can improve or fix right away.
Sometimes it’s turning a website from a brochure into a productive tool that saves labor. Or perhaps it’s raising prices to market levels, knowing that just by working more than the seller who is part-time or having a sales strategy and implementing it.
It’s when the optimism is simply, “I’m good so I’ll do better” that it gets buyers in trouble. It’s one reason I recommend buyers go to banks sooner rather than later to see what a banker thinks about their deal. While buyers have that entrepreneurial spirit, bankers’ look at things from the perspective of, “How will we get paid back if we make a loan on this business acquisition.”
Controlled optimism, vs. unrealistic optimism, is what a buyer or owner needs to have. In other words, they have an idea of why they are optimistic. Especially in today’s economy where very few people have any idea of what might happen and those who do get the future right probably don’t really know why they got it right.