heart v head business decisions

We look at hundreds of potential business investments every year. And we say “no” to 99% of them.

Every now and then, we find a deal that we WANT to do. It excites us. It energises us. We can visualise very easily what the business could look like in two or three years time.

There’s just one small problem.

The numbers don’t stack up.

It’s actually a lousy investment right now. The current business owner might have optimised the business to run as a really nice lifestyle business – there could be quite a lot of revenue not going through the books for example.

Or they might have taken some shortcuts with regards to health and safety.

But more often than not, the biggest problem is that they’re still doing everything themselves. They’re still putting in 80 hours a week, and only drawing £12k a year to save tax.

Then they value the business based on that.

I do normally offer to pay their asking price, but only on the proviso that they can first source me a manager with similar levels of experience who is also willing to work 80 hours a week for £12k a year.

And they look at me like *I’m* living in a fantasy world…

So we walk away.

But then, like Al Pacino in the Godfather, just when I thought I was out, they pull me back in.

And by “they”, I mean my heartstrings.

You see, my heart REALLY wants to do this deal.

My head KNOWS it’s a stupid idea, with too little upside, and far too much downside.

It’s in a sector I know nothing about.

It belongs on the “too hard” pile.

But my heart can picture me owning the business. And WHAT a business it could be. A proper “legacy” business. A big name, with loads of prestige.

“Shut up heart, I’m in charge here,” says the brain.

“I don’t think so…”

And so the battle rages on. One day I’m out. I’ve told the business owner that I can’t make the numbers work, and so we won’t be investing.

The very next day, I get a PM from a contact who says we should have a coffee and a chat about it.. boom, I’m back in!

As humans, we make emotional decisions first, and then try to rationalise them with facts after the event. As an investor I have to try and do it the other way around.

I have to ignore my emotions, and ensure I have an airtight logical case FIRST. Then I can let the heart have his say.

Because the heart’s answer is the same as Richard Branson’s – “Screw it, let’s do it!”.

But the entrepreneurial graveyard is full of business owners who decided to just screw it and do it.

So shut the hell up heart, and let head make the decisions around here, alright?

Sure thing.

Then again, it would be an amazing business…