40% of acquisitions are dumpster fires. Here's why.

I was at the Four Seasons in Vegas a few weeks ago for an event I was speaking at, and a few small things stuck with me.

I left for lunch. When I came back to my room, my sunglasses — which I hadn't brought with me — were sitting on the counter on a Four Seasons lens cloth. They'd cleaned my glasses and left them there.

Walked into the bedroom and my charging cords were neatly wrapped up in a branded Four Seasons cord tie.

There were these cool sculptures lit up throughout the room. Little details everywhere.

None of it was earth-shattering. But each one made me feel like I was somewhere worth being.

Now, if someone wanted to come in and cut costs at the Four Seasons, every one of those things would be easy to justify eliminating. You could probably save six or seven figures a year by ditching the lens cloths, the cord ties, and the little touches nobody "expects."

And no one would complain — because if you've never experienced it, you don't know what you're missing.

But those details are the Four Seasons experience. Remove them and you've got a nice hotel. Keep them and you've got a brand people pay a premium for and never forget.

There's actually a name for the mistake of stripping those things away.

The Doorman's Fallacy is the mistake of eliminating something because you can't quantify its value — only to discover later what it was actually doing.

The classic example: a building cuts the doorman to save $50K a year. Seems like a no-brainer — the guy opens doors. That's something you can easily replace with an automatic door opener. Or you could let people open their own doors.

Then packages start going missing. Random people are sitting in the lobby. Tenants don't feel safe. They wander around looking for the check-in desk when they arrive. The premium feel of the building dissipates.

Turns out the doorman wasn't just opening doors. He was handling packages, keeping out people who didn't belong, and making tenants feel like their building was worth paying for. Each of those things is hard to measure on its own. But collectively? They were the experience.

I've worked in private equity and been around enough M&A to know this is one of the most common ways acquisitions go sideways.

A company gets acquired. The acquirer sees the value — that's why they bought it. But then they start making decisions without understanding what anything actually does.

They look at spreadsheets and cut anything they can't directly tie to a number. Client events? Gone. Support roles that seem like overkill? Scaled back. The culture that drove retention and the client experience? Can't quantify it, so it has no value to them.

I was talking to a friend in Vegas who's done 62 M&A transactions in his career. I asked him how many turned out truly great.

Ten percent.

How many were absolute dumpster fires?

Forty percent.

The Doorman's Fallacy is a big reason why. When you only value what shows up on a spreadsheet, you miss the invisible stuff that made the business worth buying — the institutional knowledge, the relationships, the trust, the culture, the small things that made the brand what it was.

By the time you figure out what you lost, it's too late to get it back.

Look at your own business. Are there things you've thought about cutting because the ROI isn't obvious?

Team events. Extra touches in your service delivery. Roles that don't fit neatly into a job description. The "intangibles" that keep your clients around and your people engaged.

Before you cut them, ask yourself: Am I looking at a doorman, or am I looking at the experience?

On the flip side, audit your current client experiences, like onboarding, quarterly business reviews, even sales calls. Is there an opportunity to add a special touch that creates a unique experience?

They say, “measure what matters.” And there’s a lot of truth to that.

But the best operators I know protect the things that are hard to measure — because those are very often the things that matter most.

Hope it helps,

Ray

PS — Have comments or questions on this one? Drop them here and I’ll respond ASAP.