Small Business Investing – Operating With Limited Information

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    In the late 1970s, a retired teacher in Berlin, Connecticut contacted his local newspaper because he wanted to place an ad. He had finally decided to sell the home he had grown up in.

    The property was different now than it was when he was young; it had been subdivided multiple times, and he and his wife still lived in a small house next door that sat on one of those subdivisions. But it wasn’t always that way. Built in the early 1800s, the main home had been part of a beautiful estate at one point, consisting of multiple barns, several acres of land, and even a tennis court that the family children had enjoyed on long summer evenings. These thoughts no doubt flashed through his mind as he placed his call to the local newspaper and dictated his ad to the editor: For sale by owner: $35,000 or best offer.

    A week or so later, my dad, then a local police officer, noticed the ad as he sipped his morning coffee one Sunday. He had spent most of his downtime renovating the house he currently lived in, and followed the real estate section obsessively. He was looking for a new project. Something bigger and more audacious. Maybe something that his future family could live in. He convinced his wife to take a drive.

    By all accounts, my dad was smitten with the house almost immediately. How could he not be? It had so much potential to be special. Thoughts of a new barn where the old one once stood filled his head. At long last, there would be room enough for all his tools. Still, though – the house needed work. Lots of work, actually. After a long tour and several days of thought and discussion, he came back and made an offer that the owner wasn’t at all pleased with: $28,000, not a penny more.

    The owner, for his part, was incredulous. The buyer was quiet and serious. Would he and his wife make good neighbors? Could he even come up with the money? And who did this guy think he was anyway? The house was already priced to sell, and it had so much going for it: good size, quiet neighborhood, quality schools nearby. Plus, the sale proceeds had to be split with his siblings. What would they say if he sold it for 20% less than he anticipated? That wouldn’t work. He refused the offer.

    Months later, after several more visits and conversations, the transaction did finally close. My dad spent all his free time fixing up his new home, and our new neighbors became lifelong family friends.

    In hindsight, the acquisition of my childhood home was a dream scenario for both parties, but like most transactions, it just felt scary. And that’s not surprising. There’s something primal and emotional about selling an asset or a business that we’ve been around for a long time. It becomes a part of who we are. Further, we’re asked to take a chance on somebody we’ve only met a few times. It’s a leap of faith unlike any other.

    In my experience though, we’re not operating totally blindly. Our cues will come in unexpected places, like in a person’s tone of voice, their willingness to compromise on simple issues, or whether they say thank you when you satisfy a mundane request. Incredibly, these little details can be all the difference in an important transaction. And as my parents’ example shows, the outcome can be life-changing if you get it right.