Deal sourcing isn’t easy—and that’s putting it mildly. If you’re working to grow your pipeline and secure more appointments, you’re going to face obstacles. Let’s dive into these challenges and explore how to overcome them.
The Competitive Reality
The biggest challenge in deal sourcing is the intense competition. There’s no way around it: you’re operating in a highly saturated market. Deals are happening everywhere, with firms competing globally for opportunities. This means you can’t afford to do the bare minimum and expect results. You need to stand out.
Here’s the hard truth: put 100 bankers in a room and ask them about their firm’s value proposition, and they’ll all sound remarkably similar. This means you need to find ways to differentiate yourself and, most importantly, connect with the right people at the right time.
The Timing Challenge
One of the most difficult aspects of deal sourcing is being in the right place at the right time. Since you can’t predict when that “right time” will be, you need to be present consistently. This is where modern technology has become a game-changer.
The Technology Advantage
Consider this: In the pre-internet era, if you were based in New York, you were pretty much limited to your local network. Today, technology allows you to:
- Build relationships globally
- Maintain connections without physical presence
- Leverage various communication tools (phone calls, video meetings, webinars)
- Share market research and valuable information consistently
The Long-Term Relationship Challenge
Perhaps the most daunting deal sourcing challenge is maintaining relationships over years. Think about this scenario: you meet someone who plans to sell their company in five years. That means you need to:
- Maintain meaningful contact for five years
- Provide value throughout the relationship
- Stay top-of-mind despite competitors
- Build genuine professional connections
This isn’t about sending random spam—it’s about creating a system for proactive, valuable engagement. You need to consistently demonstrate value while competing against others who might just happen to be “there at the right moment.”
Regulatory and Compliance Considerations
While not usually deal-breakers, you need to consider:
- State-specific licenses
- Regulatory requirements
- Compliance issues
- FINRA regulations
Most of these aren’t major hurdles, but they need to be addressed properly. And here’s a universal piece of advice: never make promises you can’t keep.
The Pitch and Engagement Challenge
Even when you’ve done everything right, you’ll face obstacles during the final pitch and engagement phase. These might include:
- Legal complications
- Competing proposals
- Last-minute concerns
- Relationship dynamics
However, these challenges are often easier to handle than securing the lead in the first place.
Creating an Effective Plan
The key to success is having a plan to address each of these obstacles. Start with a basic approach and be ready to adjust:
- If you’re reaching out six times a year, evaluate if that’s enough
- If monthly contact seems too much, scale back to quarterly
- Avoid assumptions about what others think
- Regular evaluate and address any bias in your decision-making process
The Knowledge Transfer Challenge
Remember that most people only seek knowledge when they realize they need it. Your job is to provide that knowledge before they know they need it. This means:
- Consistent education
- Regular reinforcement of key concepts
- Clear timeline communication
- Proactive planning discussions
The Time Management Strategy
Using the five-year sale example:
- Don’t wait until year five to start serious discussions
- Consider starting consultation processes at year three
- Plan preliminary deep dives into books at year four
- Schedule regular market analysis updates
Why? Because if you wait until the planned sale date to engage deeply, you risk losing the deal to someone who was more proactive between years three and four.
The Competitive Edge
Here’s the upside to all these deal sourcing challenges: if you’re even 20% better at handling them than your competition, you’ll see significantly more traction. If you’re 100% better? The potential for lead generation becomes enormous.
The key is to view these obstacles not as roadblocks but as opportunities to differentiate yourself. By developing systematic solutions to each challenge, you can significantly improve your deal sourcing success rate and build a robust pipeline of opportunities.
Read more Deal Sourcing: Key Strategies for Investment Banking Success