Becoming better at asking questions.
I recently left banking and joined a PE fund where I am given material responsibility compared to what I used to have in the bank. One of my feedback points is that I am too quite / passive during meetings with management teams, DD providers and advisors.
I feel like I am having a hard time finding relevant questions to ask during meetings and prefer listening to what is being said and then ask questions at the end. This is however not the approach that is preferred in my fund. They won’t me to be much more aggressive and push the various providers. I am naturally introverted and find it very challenging, but am keen to get better!
Would appreciate any advice that you might have !
Have a framework beforehand, go through the framework, and ask questions on holes that you find. My main framework is financials, market/competition, deal dynamics. For example:
- Go through the income statement, major line by line. Ask yourself obvious questions:
- Revenue, where is it coming from? Who pays them? What are the payment terms? Are they the merchant of record?
- COGS, Are they concentrated in a particular supplier? Are they able to reduce COGS? What goes into the COGS bucket, they they might be hiding in OPEX?
- Gross Margin: How do they compare to others? Is it changing YoY? What is driving that change?
- OPEX: Where are they spending money? If marketing/sales, what are the relevant metrics (e.g. LTC/CAC) and how do they compare to past years and others? If other places, why?
Obviously not comprehensive, but you get the idea--each industry will have metrics you'll become familiar with, and you should ask questions about those.
Do the same thing for market/ competitions: Where do they play? Why do they win? Who do they think their biggest competitors are? Why do they think that? Are they planning to expand, and if so, why? Who are the people that would buy them? Etc.
Deal dynamics is more for advisors/internal meetings, but the same rules apply.
It's also helpful to go through some of those consulting frameworks (SWOT, PESTEL, 4 Cs, etc.) just to have some questions to ask about the environment and the company--there are loads of examples and they'll give you some fodder to use.
The point above is spot on as well--you should have a few of these things ready to go 15-20 minutes before the meeting. Have it on your computer, and then you'll be able to naturally understand what questions to ask as the time goes on, as the conversation usually goes in one way or another.
The last thing is that you'll have to develop a habit of being internally curious and what Bain called a "nose for value." That means that if a questions comes up during a meeting, ask it, consequences be damned. You'll learn how to see what's most important and what is not by being in the fray instead of standing outside of it, listening in--it can be scary, but you can do it once you've got a few reps in.
Last thing--my VP changed my career when he sat me down to talk about the job and said, "You are a highly compensated investment professional, and you are paid to have an opinion." That means that your entire job is getting that opinion formed and formed correctly, so if it takes bumbling through a few questions to find your footing, DO IT. Otherwise you're doing the investment equivalent of deadlifting with your back rounded.