We are entering preliminary talks with private equity buyers who are digging into our historical margins. How do we use the trust equation and operational vulnerability to address past performance dips without scaring off the buyer?

Question

Tyler Smith · Accepted Answer

When institutional buyers spot a historical margin dip, their default reaction is suspicion. If you try to gloss over the dip or offer defensive explanations, you spike their self-orientation alarm and destroy your credibility. Trust is built when you demonstrate high reliability and low self-orientation.

To handle this during due diligence, adopt an other-focused mindset and practice vulnerability. Address the margin dip head-on before they ask about it.

Frame the issue clearly: explain what caused the dip, what you learned from it, and the specific operational adjustments you made to ensure it does not happen again.

Show them the numbers. If the dip was caused by a bad client relationship or an unprofitable product line, explain how you used your Level 10 Meeting™ to identify the issue and implement a structural fix.

This level of openness demonstrates that you run a disciplined business with a leadership team that self-corrects. When a buyer sees that you have a repeatable system for solving issues, they gain confidence in your future cash flows.

By proactively sharing the hard truths, you build deep professional trust, which reduces their perceived risk and protects your valuation multiple.