How Focused Due Diligence Helps You Win Better Deal Terms
Leveraging Due Diligence to Scale Your Balance Sheet - Episode 5
Angel investors, private investors, investment club members and due diligence staff who want to see better deals by focusing on a niche.
The short version
Richard C. Wilson closes his due diligence miniseries with one idea. Investors who focus on a few niches and build real expertise there tend to see deals first, see them exclusively and get better valuations. He frames this with three buckets: a defensive bucket, real estate held with low debt, and a third bucket where he plays offense to grow net worth fastest.
He backs the idea with examples. A med spa deal gained an operator who took half the deal and agreed to weekly coaching calls with the CEO. A medical and dental asset priced at $3 million was bought for under $500,000. A Canadian company gave 2.5% in advisory board shares on a 5% stake. He also covers anchor investors and the Blackstone fundraising story.
Five points worth keeping
- Build expertise where you play offense. Richard suggests investing in three to five real estate areas but becoming a world class expert in the one where you play the most offense. Experts see deals first and often exclusively.
- Strategic value earns better terms. Unless you are widely known, generalists often struggle to get the best terms. Case studies, references and a track record in your niche can help.
- Bring in niche experts as partners. In the med spa deal, an investor who runs four med spas took half the deal and joined weekly coaching calls with the CEO. Richard describes him as earning better terms for that added value.
- Start with an anchor investor. A mentor taught Richard to start a raise with someone whose credibility makes others follow. He cites Steve's Blackstone story, where nine months of shopping a billion dollar fund went nowhere until Japanese investors committed.
- Deeper diligence can cut the price. Understanding why a seller valued a medical and dental asset at $3 million let Richard's group carve out the part they wanted and buy it for under $500,000.
In their words
"People want to do business with those they trust, who are good human beings, who are enthusiastic, who are passionate, who are focused, who add the most value."
"You start with an anchor investor. You start with somebody who has such big credibility that others will follow them into the deal."
"Knowing your three buckets and doing more thorough due diligence, it protects your money, it protects your time, and it allows you to invest in deals first, exclusively and at better valuations."
From the source
- A medical and dental asset priced at $3 million was bought for under $500,000 after due diligence on the seller's valuation.
- A Canadian company gave 5% ownership with only 2.5% paid for, the rest as advisory board shares.
- Richard says he put a decade and a half of work into building expertise before partners offered stakes like 33% and 20% of their companies.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Leveraging Due Diligence to Scale Your Balance Sheet - Episode 5. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around advisory board share grants, equity stake structuring and partner deal terms. Do not use AI to write your own legal agreements.
Related questions
- How do I close a funding round?I close a funding round by focusing on investors who fit the opportunity and moving each interested prospect through clear, consistent follow-up.
- What documents do investors request during due diligence?Prepare a clear, organized package covering your operations, investments, compensation, team, and track record.
- How do I raise capital for my business?I raise capital by building a repeatable system for attracting the right investors, establishing credibility, and developing relationships before asking for money.
Questions about this video
What are the three buckets Richard describes?
The first is a defensive bucket of public markets. The second is real estate, which plays offense and defense with cash flowing hard assets. The third is where you play offense to grow net worth fastest.
What if you like a deal outside your niche?
Richard suggests finding the niche expert and paying for their time. If that person asks to join the deal, it is a good sign. You can also invite an industry expert to invest alongside you so you vet it together.
How did Richard get an advisory board stake at a lower price?
A Canadian company let his group buy 5% but charge for only 2.5%. The other 2.5% came as advisory board shares, which Richard describes as effectively cutting the valuation in half. Terms like these vary by deal.
Put this into practice with the data room checklist. See all due diligence resources.
