We Hated PE. So We Became the Buyer.

Speaker A: Two guys hated private equity so much, they built the thing that hunts you. I got on a call with one of them this week, and about 10 minutes in, he said something that completely rearranged how I think about founders, fear and money. I've been chewing on it ever since. So that's today. Welcome back, my friends, to the Weeks Weekly. I'm Ed Weeks, junior. This is the show for Gen X operators, the people who actually built something real and are now thinking about how to grow it, how to fund it, or how to get out of it on their own terms. If that's you, guess what? You're home. Quick favor before we start. If this episode lands, send it to. To one operator who needs to hear it. That's the whole marketing plan. All right, let's dive in, get into it, get after it. Here we go. So let's get back to that call. This guy starts a, uh, managed it company in 2010. He's not a finance guy. He's an operator. He builds it the slow way, customer by customer, tech by tech. Gets to about 75 people and $12 million a year. And somewhere along the way, his phone starts ringing once a month like clockwork. And it always is the same call. Some firm he's never heard of wanting to buy what he built so they can, and I'm using their word here, optimize it. And if you could see me, I put optimize in the old air quotes. Now, I want you to sit in his chair for just a second, because if you own a business, you're either gonna get this call or you've already gotten it. You spent 15 years building something. The people who work for you, some of them have been there almost the whole ride. Your customers know your voice, and. And a stranger calls and tells you, essentially, we'd like to buy your life's work and run it through a process. You know what he told me? And this, my friends, is verbatim. We don't like PE Actually, we hate private equity. We hate all those people trying to buy our business and tear apart exactly what we built. Hate. Not concerned, not skepticism. True hate. And here's why I'm starting there. Because that's an emotion, not a strategy. And what makes this guy worth a whole episode is what he did with that emotion. Most owners do one of two things with that fear. They ignore it. And the calls, they simply keep coming. And the dread just lives in the background like a low humor m. Sorry. Or eventually they cave. They get tired. The number gets big enough, and they say, Hell, I'm signing. This guy picked a third door I didn't even know was there. He stopped being the prey and he became the predator. Respectfully, he found another founder, same boat, running a 25 million dollar shop, getting the same calls, feeling the same dread. And instead of waiting around to get bought, they started buying their own money. No fun behind them. Two operators buying companies run by people exactly like themselves. And their whole thesis fit on a napkin. Buy good companies, leave them alone. Everything the customer touches stays put. Merge only the back office. One accounting system, one hr. Nobody walks in with a clipboard. Today they're north of 80 million a year. 300 plus people, 10 acquisitions. The thing they were terrified of becoming, they actually became, except on their terms. And it turns out that distinction on, um, their terms is this entire episode. So let's get deeper into it because here's the twist. After years of doing this with their own money, they took outside capital. And guess where it came from? Private equity. The thing they hate. The H word guy took private equity money. Now when he told me that, my first reaction was, wait a minute man, hold on. You just spent 20 minutes telling me you hate these people. I mean, hate these people. And then he told me what the capital partner said before any paperwork moved. The PE partner said this. We don't understand. Understand your space. We'll give you the capital, you keep running it the way you run it. Pause on that. They admitted we don't understand your space. When was the last time you heard a money guy lead with what he doesn't know? Because I'll tell you what I usually hear. I usually hear a guy who spent six weeks on industry reports tell a 30 year operator how his own business works. And I'm an MBA guy so I can say it. And that's when it clicked for me. These guys never hated private equities money. Money's money man. It's green, it's pension, it doesn't have opinions. They hated private equities control. They hated the playbook, they hated the 28 year old MBA with a spreadsheet and a mandate to find efficiencies in a business he couldn't run for a single day. And those are two different products. They come bundled but you're allowed to buy them separately. Almost nobody knows. They are allowed to ask. Take the money, keep the controls. If you remember one sentence from today, that's the one. Take the money, keep the controls. Now I want to give you something practical because this show isn't a book club. Out of that Conversation. I built a little test. I call it the humility test. And I'd run it on any buyer or any capital partner who sits across from you. You can run it from. With me. It costs you nothing. Ask them one question. What don't you understand about my business? And then be quiet. Don't help them. Shut up. Just listen. The partner who says, honestly, we don't know your space. That's why we want you running it. That partner just told you the controls stay on your side of the table. The partner who slides a value creation playbook across the table, who has a the thesis about your industry and a plan for your company before they've met your people. They just told you where you fit in their plan. Your job. And their plan is to not get in the way of it. One question more predictive than anything in the data room. Um. Now, this test is a screen. It's not a contract. The contract version of this. The actual seven terms buried past page 20, where founders lose control. Uh, without realizing it, I wrote that whole playbook up in this week's paid issue of the newsletter. That one's for subscribers. Links will be in the show notes. The test, though the test is free. I'm going to tell you right now, it works. Okay, now, the part of the story that cost these guys real money, which means you get to learn it at a discount. The original plan. Buy and leave alone. Guess what? That actually broke for this guy. Not because it was a bad plan. Because of something. Something sorry, nobody warned you about. The day a founder sells, they start checking out. Even the ones who swear they're staying even. And I want to be fair to everybody here, even the ones who completely mean it when they say it. He told me the exact moment he figured this out, one of his acquired owners comes to him, proud, beaming, and says, I think I'm taking a two week vacation. I've never taken a vacation since I started this business and I deserve one. And like. And look, most of us hear that and think, good for him. The man earned it. Sixteen years without a beach. Go. Enjoy. You know what the buyer heard? You worked your whole life to get this thing here, and now you're done. And the numbers proved him right. He watched performance slide after moments exactly like that one. Not because the seller was lazy or dishonest, because the fire that built the thing doesn't survive the wire transfer. It does. It just doesn't. So they stopped pretending it would. They built a real integration team. And. And now they plan for the checkout instead of getting blindsided by it. Here's what I want you to do with that. Depending on which chair you're sitting in, if you're ever selling, flip it around and use it as a filter. The buyer who plans for you to disengage is the honest one. The buyer whose whole model needs you fired up for five more years to make their numbers work. That buyer is selling you a fantasy. And when you cool off and you will, you become the problem in your own earn out. The most dangerous person in your deal is the version of you they're pretending will still exist in year three. And if you're buying them like I am, like my clients are, the lesson is even simpler. Underwrite the business, not the founder's enthusiasm. The enthusiasm is leaving in the truck with them. Let me put my own cards on the table for a minute because I'm not a neutral observer over here. I work the buy side, lower middle market. My job is finding businesses for buyers. And the reason this episode story grabbed me is that it confirms something I see every week. The best deals don't go to the highest bidder. They go to the most believable owner. Which brings me to the booth. Big industry conference. The exhibit hall where every acquirer in the space sets up a table. My guy is standing at this. A seller walks up, doesn't want a brochure, asks him straight, why should I sell to you instead of all these other guys? And his answer might be my favorite thing anyone said to me all year. Everybody you've talked to in this room was hired to stand here and pitch you. I'm one of the owners. I started one of these companies, just like you. You want to talk about which antivirus you're running, I'll sit down and have a beer and talk antivirus with you. Nobody else here is going to do that. A peer versus a process, an operator versus a rep. Every seller eventually figures out which one they're talking to. The expensive mistake is figuring it out after closing. One more thing before I let you go. Because it's the part of selling that gets the least attention and might matter the most. The money after the money. A lot of this guy's sellers. Oh, uh, I'm sorry. A lot of these guys, this guy sellers, don't cash out at a hundred percent. They roll a piece of their own equity into the combined company. And when the bigger company sells down the road, they get paid again. The infamous second bite. And here's the line he gave me. Sometimes that second bite is better than the first, think about what that means. The check at closing, the one everybody negotiates and celebrates and tells their golf buddies about. That might not be the biggest check in the deal. The quiet fortune is in the rollover, riding with the right operators to the next level and to the next sale. Which means the most important diligence as a seller isn't on the price, it's on the people. Because if you're rolling equity, you're not exiting. You're investing in them. So let me land this. The fork most owners think they're facing. Sell to PE or work forever. It's a fake fork. The real question, the only question is, is who holds the controls the day after you sign? The two operators in this story answered it by becoming the buyer. You don't have to go that far. You just have to stop negotiating the number one page and start reading what's on page 20. Your homework. And it takes 10 minutes. Make a list of every likely buyer for your business. Next to each name one word operator or checkbook. That column will teach you more than a year of waiting for the phone to ring. If this one landed, do me a favor. Send it to one operator who needs it. The full essay is in weeks weekly free. And the Contract Terms playbook is in the pages. Both linked in. The show notes. Next week, the Vacation Tell. The one sentence a seller says that tells a smart buyer they're already checked out. You heard a preview of it today. There's a lot more. Ahmed Weeks Jr. I thank you so much for listening. And I ask you to fight. Bow it. Press on. Peace.