First-Time Buyer Series: Psychometric Testing

Have you ever interviewed for a job with a large corporation? Have you ever sat for a career or personality assessment? If so, you have probably taken a psychometric test.These are standardized tests to assess everything from why you act certain ways to what kind of job you are best suited for, to how you respond to stress. Many years ago, when I interviewed with CIGNA and then with Merrill Lynch and Shearson Lehman Brothers, I was given a battery of these tests. The truth is, I always felt like I could answer the questions according to what I knew they wanted. “Would you rather be a forest ranger or a librarian?” Of course, the forest ranger demonstrates an active person, so a person who wanting to be in sales will be more suited to that than the sedentary librarian. With this as a frame of reference, for a long time I was not a big believer in tests, but I suppose you would say that I am an enthusiastic convert.

Certain psychometric tests are virtually impossible to “beat,” because they are not as straight forward as they used to be and there are a number of built in safeguards. One test we use sometimes, the Winslow Test, will actually cancel the results of the entire test if you are inconsistent in your answers, according to their standards. One advisor I know had to take it 3 times for this reason alone.

If these tests are utilized most often in hiring, firing, and even promotion situations, why am I suggesting they are useful in a buyer-seller relationship? The operative word here is in fact, relationships. As we have said many times in previous entries in this Series, the lion share of any transaction for a seller is emotional. This translates in most cases to the relationship between buyer and seller. Is there, or can there be, trust between the principle parties in the transaction? Psychometric testing can help you determine the type of seller who is most likely to trust you or the type of personality that will most likely mesh with your own. Sitting for the tests yourself can help you develop a baseline target to shoot at. Testing a serious seller can help you determine where the pressure points are likely to be during the process and even offer possible solutions to these pressure points.

In his book, Principles, billionaire hedge fund manager Ray Dalio, lauds psychometric testing as a good way to determine if potential employees will fit into the admittedly atypical culture at his firm, Bridgewater Associates. Likewise, it makes a great deal of sense for you to test a seller, especially one who will stay with your firm as a consultant after the sale. We routinely encourage seller-advisors to stay on for some period after the Closing to affect the transition. I can tell you from experience, including recent experience that two owners who are used to being in charge, working in the same office, can easily get on each other’s nerves, especially since there is often a 10-to-30 year age difference between seller and buyer. Lessons learned from these tests can head off these issues. Buyers and sellers are quite often on their best behavior during the courting process, but after the Letter of Intent, (Offer Letter), has been signed, and especially after the Close, the gloves tend to come off. It is not anyone’s fault. It is human nature to begin to let down your guard and become less forgiving. (If you have ever been married, this should make sense to you.) Again, it is hard to trick these tests and the results and understanding of the results can save you and the seller a great deal of trouble, not to say vastly improving the percentage of clients moving their accounts during the transition after the Close.

I am a huge fan of the Directional Insight test, ( We have used it in our work as consultants with buyers, sellers and successor candidates, and also in our own firm with potential and current employees. We have also had good luck with the Winslow Test, ( Finallylike a lot of firms, we have used with good resultsthe Kolbe Test, ( Each measure traits in a different way. I recommend you speak to the experts at the various testing firms to determine what you can expect from the test. You want to test yourself and anyone in your firm who will have continuous contact with a seller. You will want to test the seller once you have decided to create a Letter of Intent, but before you deliver it. The key to getting the most out of these tests is to work with someone who is qualified to explain the results. Reading the results is helpful, but someone qualified can help you understand better what the results mean and the relationships of different results by different people. This is why a lot of small to midsized firms will test everyone in a company to see how to improve the workflow and communication. The websites provided above are a good place to find a qualified consultant.  

I cannot begin to tell you how helpful the information revealed in these tests can be for you as a buyer. As a First-Time Buyer, you need all the advantages you can get and this one in my mind can be as important as a valuation on the book of relationships you intend to purchase. The importance of the testing results is magnified exponentially if the seller intends to continue working for any period of time. Some of these tests can cost under $200; an excellent investment if you are looking at buying revenue in the hundreds of thousands or millions of dollars. 

Casey M Corrie