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​Michael Ligon Managing Partner of The Ligon Group, investing in real estate, business acquisitions, special situations and private capital.

gettyBusiness leaders and investors are trained to look for opportunity. We study growing markets, new products, acquisitions, capital needs and competitive advantages. But some of the most valuable opportunities I have encountered did not arrive looking attractive. They arrived as problems.

​A company may be profitable but too dependent on its founder. A piece of real estate may have underlying value but be burdened by deferred maintenance, difficult ownership or an operating issue. A growing business may appear to need more capital when the real problem is how the company is structured.

In each case, the visible problem can distract from the value underneath it.

​That does not mean every difficult situation is an opportunity. Some problems are simply expensive, risky or outside anyone’s reasonable control. The more useful skill for leaders and investors is learning to distinguish between a problem that destroys value and one that can be solved in a way that creates it.

Problems often reveal more than they hide.​When something is not working, the first instinct is usually to address the symptom. Sales are down, so increase marketing. Margins are shrinking, so reduce expenses. A property is underperforming, so lower the price. A business cannot attract a buyer, so assume the valuation is too high.

​Sometimes those answers are correct. Other times, the symptom is pointing to something deeper. For example, declining sales could be the result of customer concentration, weak positioning or an outdated offering. A business that is difficult to sell may have less of a valuation problem than an owner-dependence or succession problem.

This distinction matters because solving the wrong problem can consume time and capital without improving the underlying situation. ​I have found that a better starting question is often not “What should we do?” but “What is actually creating the friction?”​​

​Diagnosis should come before action.​Business culture tends to reward fast answers. Executives are expected to make decisions, entrepreneurs are encouraged to move quickly and investors are expected to recognize value before everyone else does. Speed matters, but speed applied to a bad diagnosis can become expensive.

​Before committing capital or deciding on a solution, I want to understand what is actually happening, who is involved, what has already been tried and what outcome really matters. Those questions can completely change the direction of a decision.​

​Once the real problem becomes clear, the number of possible solutions usually increases.

Complexity could create opportunity.​Clean opportunities attract competition. For instance, a well-run company with strong management, organized financials and predictable growth is easy for buyers to understand. A stabilized property with good tenants and clear records is easy for investors to value.

Complicated situations tend to attract fewer participants because they require more time, judgment and work. That can create opportunity, but complexity alone is not a reason to invest. The real question is whether the obstacle can be identified, whether it can realistically be solved and whether solving it creates enough value to justify the effort and risk.

​A founder-dependent company, for example, may become substantially stronger once management systems are built around the business rather than one person. An underperforming asset may improve when its operating model changes. Two assets that have historically been bundled together may prove more valuable when evaluated separately.

​The opportunity is not the problem itself. The opportunity is the gap between the current situation and what the asset or business could become if the right problem is solved.

For example, we once evaluated a property that had become very difficult to sell because the owner had built an addition without permits. That created a significant problem for resale. A conventional retail buyer was unlikely to finance it as-is, and most investors viewed the options as either tearing the addition down or opening walls and going through a potentially expensive permitting process.

Instead of treating the unpermitted addition as the problem we had to solve, we looked more closely at the property and the surrounding area. We noticed that several nearby parcels had been rezoned for multifamily use, so we explored whether the property could support a different strategy altogether. We were able to get the parcel rezoned, remove the unpermitted structure and use the site in a way that actually benefited from the teardown. What began as a problematic single-family property ultimately became a three-unit opportunity.

That experience reinforced something I have seen many times since: The best question is not always “How do we fix the problem in front of us?” Sometimes it is “What are we actually working with, and is there a better use or a better path that makes the original problem irrelevant?”​​

​Not every problem is worth solving.​This is where discipline becomes important. Some problems depend on circumstances outside your control. Others require more capital than the potential upside can justify. Still others involve legal, operational or cultural risks that cannot be solved simply through better execution.

​I generally think about three questions:

1. Can the root problem actually be identified?

2. Do I have meaningful influence over the solution?

3. Is the value created by solving the problem greater than the cost and risk required to solve it?

​If the answer to those questions is unclear, walking away can be just as important as recognizing the opportunity. Problem-solving is valuable only when it is paired with judgment.

​Conclusion: Look beyond the obvious opportunity.​The business world naturally gravitates toward what already looks successful. Strong companies, attractive assets and obvious growth stories are easier to understand and easier to explain.

​The problem is that obvious opportunities rarely remain overlooked for long. Sometimes the greater advantage comes from looking at a difficult situation long enough to understand what others have dismissed too quickly. The issue could be operational, financial, structural or human. It could involve a company, a property, a partnership or an entire organization.

​The principle remains the same for both leaders and investors: Do not confuse the visible problem with the underlying value. Understand what is creating the friction. Determine whether it can realistically be changed. Decide what solving it is worth.

​Some of the best opportunities do not begin with an obvious opportunity at all. They begin with a problem someone is willing and able to solve.​​

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