October 16, 2025 • 34 mins
In this 35‑minute episode, the hosts break down the five most common pitfalls that founders face when they bring a private‑equity (PE) firm aboard. From overlooked deal structures to the emotional reality of an eventual exit, the conversation is packed with hard‑won lessons, humorous anecdotes, and actionable advice for entrepreneurs who are looking to or already in a PE partnership.
“A founder’s job is to build a company. A PE partner’s job is to unlock value—so you need to know the difference.” – Ed Barton
Navigating private equity is less about groundbreaking innovation and more about precision, preparation, and clarity around expectations. The best strategies collaborate by anticipating disruption, understanding the deal, and being honest with themselves and their partners.
Don’t start with a belief you’ve navigated PE. Question it. Add these notes to your cheat sheet.
🔍 Key Takeaways
1️⃣ Understanding Deal Structures
- Founders often underestimate the importance of knowing the deal structure.
- Failing to understand exit strategies can trap founders, leading to economic uncertainty post-sale.
- Financial modeling accuracy is critical; overly optimistic projections can hurt valuations and future compensation.
2️⃣ Shifting from Founder to Employee
- After a PE deal, founders must shift from CEO to employee and accept decision-making authority shifts.
- Leadership transitions can strain relationships if not communicated clearly.
3️⃣ The Trapped Money Trap
- Founders may end up with trapped equity due to unfavorable deal terms or rollover options.
- Negotiating clear payout structures upfront is non-negotiable to maximize returns.
4️⃣ Ignoring PE’s Professional Rigor
- PE firms demand granular financial governance (KPIs, scenario analysis, forecasts).
- Founders who resist these changes risk losing credibility and control.
5️⃣ Lack of Exit Strategy Awareness
- Understanding the exit timeline (ranging from 5-10 years) helps founders plan post-sale.
- Silicon Valley’s or similar PE firms do not mate for life—expect transitions.
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🎙 Podcast – Strategies, PE 101 & witty banter
📚 Book – On‑Ramp to Exit, full deal life cycle
🛠 Resources – Free templates, guides, tools
🔗 LinkedIn – Follow us for fresh PE insights
================================
Who Are We?
Three insiders. One mic. All things private equity — explained. Hi 👋 We’re Ed, Rory, and Emily — a CEO, a CFO, and a Chief of Staff — here to demystify the world of private equity. Between us, we’ve sat in the founder’s chair, run PE‑backed companies, and worked on the deal side, so we know the wins, the pitfalls, and the jargon (and we’ll explain it).
Through the Private Equity Experience Podcast, our book On‑Ramp to Exit, and a library of free tools and templates, we share real‑world stories, practical strategies, and insider insights to help you navigate every stage of the PE journey — whether you’re leading a portfolio company, joining a deal team, considering PE, or just PE‑curious.
...Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
emily-sander_1_10-01-2025_1 (00:34):
all right, here we go.
Lightning round.
rory-liebhart_1_10-01-2025_ (00:37):
my.
emily-sander_1_10-01-202 (00:37):
sports team collapse stands out as the
most epic fail in history.
rory-liebhart_1_10-01-20 (00:42):
pretty much every year of the Mariners,
but this one, after the Allstarbreak.
sweet-eddie-b_1_10-01-2025_1 (00:48):
So I will go all the way back to, I
believe it was what's called1992 when the Houston Oilers and
the Run and Shoot Offensepowered by Warren Moon.
emily-sander_1_10-01-2025_1 (01:04):
Oh,
sweet-eddie-b_1_10-01-2025_1 (01:05):
to Frank Reich and the Buffalo
Bills in a 42 point comeback inthe playoffs to put the bills in
the Super Bowl for the third orfourth time and they lost them.
So it did.
I can't,
emily-sander_1_10-01-2025_15 (01:20):
of
sweet-eddie-b_1_10-01-202 (01:20):
yeah.
But it was, that was one whereI, growing up in upstate New
York, I was a Bills fan.
And I just remember like thisgame is over and Frank Reich,
who also had one of the largestcomebacks.
NCAA college football historywas the quarterback for the
Maryland turpins when they, whenthey pulled something similar?
rory-liebhart_1_10-01-2025 (01:42):
Yep.
sweet-eddie-b_1_10-01-2025 (01:43):
Yep.
emily-sander_1_10-01-2025_150 (01:44):
I love how you know this, but I
sweet-eddie-b_1_10-01-2025_1 (01:45):
I, I am,
rory-liebhart_1_10-01-2025 (01:46):
man.
I
sweet-eddie-b_1_10-01-2025_ (01:47):
the cliff of worthless knowledge.
emily-sander_1_10-01-2025_150 (01:50):
I dunno who Cliff is, but he
sounds great and I know that.
rory-liebhart_1_10- (01:53):
generation,
emily-sander_1_10-01-2025_1 (01:56):
Um,
sweet-eddie-b_1_10-01-2025_ (01:56):
How you.
rory-liebhart_1_10-01-2025_ (01:57):
but I don't consider that useless
information.
I think that's awesome andhighly valued information.
emily-sander_1_10-01-2025_1 (02:01):
but I know that the current holder
of that record is Kurt Cousins.
'cause I love Kurt Cousins andhe has the biggest comeback.
He took that from Frank Reichand Frank Reich.
Called him to say like, now youcarry this mantle.
You use this for good in storiesand encouraging people and
things like that.
So, um, yeah.
Very cool.
Okay, next question.
(02:21):
What's the worst investment orpurchase you've ever made?
Big or small?
sweet-eddie-b_1_10-01-2025_ (02:28):
Say that one again.
'cause there's just so manychoices.
I just wanna make sure Iunderstand.
emily-sander_1_10-01 (02:32):
investment or purchase you've ever made?
Big or small?
rory-liebhart_1_10-01-202 (02:40):
Worst investment.
I have a hard time picking thatone.
I mean, I haven't had any crazybad ones, so, but it still
emily-sander_1_10-01-2025_15 (02:52):
Ed is pinching the bridge of his
nose and like,
rory-liebhart_1_10-01-2025_ (02:55):
but maybe it just doesn't mean I've
taken enough risk in my life,frankly,
emily-sander_1_10-01-2025_ (02:59):
Hmm,
sweet-eddie-b_1_10-01-2025_1 (03:00):
so many choices.
It's so difficult to choose.
I could go,
emily-sander_1_10-01-2025_1 (03:03):
not risk adverse.
Ed Barton.
sweet-eddie-b_1_10-01-2025_ (03:04):
no, I could go like, I could go
like, well it was when I boughtthe, the glass and glazing
contractor and I didn't knowanything about glass and
glazing.
That was an interesting choice.
emily-sander_1_10-01-20 (03:12):
believe your reason for that you gave to
me was like I wanted to likebreak shit up.
Like I wanted to break glass
sweet-eddie-b_1_10-01-202 (03:18):
Yeah.
Well, and the other part was Iwanted to get out of like
sitting behind a computer andstuff like that.
And I.
emily-sander_1_10-01-2025 (03:23):
Okay.
sweet-eddie-b_1_10-01-2025 (03:24):
Done construction work in the Army.
So I was like, oh, this willtranslate.
Didn't, um, blue co blue collaremployees are not soldiers, in
case you had any curiosity aboutthat.
Um, so I'd, I'd probably putthat one at number one.
I've, I've had a couple realestate investments that were not
good ones ear much earlier in mycareer.
Um, so in my twenties, um,
rory-liebhart_1_10-01-202 (03:47):
Yeah.
sweet-eddie-b_1_10-01-2025 (03:47):
unit apartment complex, that really
was not a good decision.
I'm in, uh, what I was hopingwasn't emerging, but was
actually a declining area ofSyracuse, New York.
Um, you know, so I, I've got,I've got plenty.
rory-liebhart_1_10-01-202 (04:03):
Yeah.
Yeah.
I've, I've
emily-sander_1_10-01-2025_ (04:06):
Rory is.
rory-liebhart_1_10-01-2025 (04:07):
I've probably made some dumb
decisions on like, not investingin things like I'm, you know,
so, so giving up on greatreturns because maybe I played a
little too safe in my personallife, you know?
emily-sander_1_10-01-2025_ (04:21):
Hmm.
rory-liebhart_1_10-01-202 (04:21):
more,
emily-sander_1_10-01-2025 (04:21):
Okay.
rory-liebhart_1_10-01-20 (04:22):
issue.
emily-sander_1_10-01-2025 (04:23):
Yeah, the approaches and temperament
came out clearly in that, inthat, those answers.
one here, and then we'll roll.
What's the funniest fail you'veever seen in a pitch or
presentation?
So you are receiving thepresentation.
What's the funniest fail like?
Oh wow.
rory-liebhart_1_10-01-2025_1 (04:38):
I, I mean people that fail to
describe what they're pitchingadequately and come across.
Idiotic, I guess, and I've seencountless instances of that, you
know?
sweet-eddie-b_1_10-01-2025_1 (04:54):
I, I actually can't name any, I
mean, I'm, I'm, I'm strugglingand I think I have
subconsciously just flushedevery memory of those out.
I mean, there's, I'm, and I'mtrying to think in like business
and there's just nothing comingto mind where I was like, this
is just a dumpster fire and ahalf,
rory-liebhart_1_10-01-2025_15 (05:13):
I will
sweet-eddie-b_1_10-01-2025_ (05:14):
um.
rory-liebhart_1_10-01-2 (05:14):
example of a pitch I was part of where
somebody I was with thathappened to be like an
independent advisor, so like abroker that will put you in
front of investors.
We were in New York City andthis was for a bankruptcy
business that Ed I worked for,we were pitching on basically a,
you know, private investmentfund to go buy a bunch of
(05:36):
bankruptcies.
Anyway, this independent, uh,advisor shall not be named.
Uh, older gentleman, uh,certainly very, um, advanced in
age.
We were in Manhattan, probably,I don't know, whatever, 60 plus
floors up.
And we were in this, office.
Uh, but of that, you could tellthere were, you know, they had a
(05:59):
lot of LPs, uh, big office, youknow, very high end.
Anyway, a lot of glass.
So we were invited to join thepotential investors for our
pitch.
This poor gentleman walksthrough basically a glass wall
or walks into a glass wall,
sweet-eddie-b_1_10-01-2025_1 (06:16):
Oh my God.
rory-liebhart_1_10-01-2025_ (06:17):
his fricking head on the glass, and
it leaves like a, know how likeif you get a, a window ding like
on your windshield, like it kindof spiders out like that
happened?
In this
emily-sander_1_10-01-2025_15 (06:27):
Oh no.
rory-liebhart_1_10-0 (06:28):
Manhattan, glass must have been an inch
fricking thick and this guy'shead smashed it and he, I don't
know how he stood on his feet,and I'm not sure he did so well
after that, but it was prettydamn funny because that's not a
failure out the gate, um, justlet generally, I don't know what
is, but um.
Needless to say, we did not getinvestment from this group.
(06:49):
And uh, yeah, this
emily-sander_1_10-01-2025_1 (06:51):
And one man walked out, concussed.
rory-liebhart_1_10-01-202 (06:53):
might have had a cracked cranium, but
when we, that was crazy though.
Insane
emily-sander_1_10-01-202 (06:59):
right, go.
The top five things foundersneed to know about how to not
woo the top five things foundersneed to know and how to not make
mistakes in partnering with pe.
What are the fails to avoid ifyou are partnering with PE?
Only five.
rory-liebhart_1_10-01-2025 (07:18):
I'll start as a founder, not knowing
what you're getting into, with acertain type of deal structure,
or I should say someone shouldknow completely what kind of
deal they're getting into andwhat does that mean for them?
What does it mean for thecompany?
emily-sander_1_10-01-2025_15 (07:36):
So like you, like as a F, you
should know the fricking dealstructure.
That seems basic.
Are people not doing this?
rory-liebhart_1_10-01-2025_ (07:41):
but it's not, uh, I, there's,
there's many, many stories of,of folks selling their company,
um, to, whether it's privateequity or pr, you know, another
party you know, thinking thatthey can, there's smarter than.
The other side, so to speak, andthat maybe they don't need
advisement from, all manner of,uh, professionals like lawyers,
(08:05):
accountants, others, and theyjust move ahead with a deal.
And the next thing they know,compensation that was coming
their way on the business couldhave been.
Structured in a way where theydon't see a dime upfront and,
and or, and, or they see cash upfront, but they don't have
what's, you know, kind of calledrollover equity or getting a
sec, second bite at the appledown the road, which is where
(08:26):
most people probably make moreof their money, is if you, you
know, sell your business.
You stay part of it, you help itgrow.
You have a big incentive to dothat.
But basically what I'm saying iswithout knowing.
What the structure is, what doesit truly mean for you and your
family?
What does it mean to youremployees?
What does it mean for thebusiness?
you could get screwed.
(08:46):
You might think you're getting agood deal, but you could, could
get screwed, you
emily-sander_1_10-01-2025_15 (08:50):
So people get all excited'cause
they have a deal, they have adeal with pe.
They picked me, I'm gonna make ashit ton of money.
And they don't look at thedetails and don't think about
the ramifications and they'relike, oh
rory-liebhart_1_10-01-202 (08:59):
yeah.
emily-sander_1_10-01-2025_1 (09:01):
um, now I'm in it.
rory-liebhart_1_10-01-2025_ (09:01):
And I mean, I'd
sweet-eddie-b_1_10-01-2025_ (09:02):
Uh, and not only are they in it, but
the structure is such thatthey're in it behind a preferred
return and an accruing preferreddividend.
And, you know, so they're,they're in it.
They've rolled money over.
You know, like Rory said, thedeal structure's critical and
folks go into it going, well, Icashed out for$30 million and
you probably could have cashedout a lot more and or your
(09:25):
rollover, which they'veconvinced you to put a bunch of
that 30 million back in,
rory-liebhart_1_10-01-20 (09:28):
Right.
sweet-eddie-b_1_10-01-2025_1 (09:29):
is now like trapped behind, behind
a bunch of stuff that you knowyou don't control.
rory-liebhart_1_10-01-202 (09:34):
Yeah.
emily-sander_1_10-01-2025_15 (09:35):
So that is fail number one, having
rory-liebhart_1_10-01-2025 (09:37):
It's a big one.
A
emily-sander_1_10-01-2025_ (09:38):
left money on the table
rory-liebhart_1_10-01-202 (09:39):
Yeah.
emily-sander_1_10-01-202 (09:39):
having your money trapped.
That sounds horrible.
Okay.
What is.
sweet-eddie-b_1_10-01-20 (09:44):
Number two.
Number two is not knowing thatyou're about to be an employee
working for someone else.
emily-sander_1_10-01-2025_1 (09:52):
Oh.
rory-liebhart_1_10-01-202 (09:53):
Yeah.
No matter what type of sweettalking you heard over the
closing dinner or even beforethat in the process, yeah, that
can be a rude awakening.
sweet-eddie-b_1_10-01-202 (10:02):
Yeah.
That's where I've seen, I mean,I have built a career.
On cleaning up after privateequity, after founders have sold
to private equity and thatthey've been exited,
rory-liebhart_1_10-01-2025 (10:13):
Yep.
sweet-eddie-b_1_10-01-2025_1 (10:14):
or in some cases now reentered.
But that's exactly, that, thatfail is the one that, where the,
the first one that we talkedabout is largely economic and,
rory-liebhart_1_10-01-2025 (10:25):
Yes.
sweet-eddie-b_1_10-01-2025_ (10:26):
and there's a, you know, you could,
that's gonna hurt thepocketbook.
The second one hurts the ego.
rory-liebhart_1_10-01-2 (10:33):
Mm-hmm.
sweet-eddie-b_1_10-01-20 (10:34):
you've built this business, you, it's
your baby, you know, you've heldonto it, you know, all that good
stuff, and then boom, you're,you're not working for some dude
that's like half your age, thatis running your business with a
spreadsheet and is telling youexactly what you need to do and
what you're reporting needs tobe and when you need to call
(10:54):
them and that blah, blah, blah,blah, blah.
And there's a lot of foundersjust that ain't their DNA.
emily-sander_1_10-01-2025 (10:59):
fold, man.
They, I mean, they're used tobeing the king of the castle.
They're used to calling theshots.
When I walk in a room, everyoneperks up and then they get
thrown these$12 words by a dudebehind a computer and they just,
I've seen'em fold, man.
Like they just get kicked in thenads.
rory-liebhart_1_10-01-202 (11:16):
Yeah.
And then
sweet-eddie-b_1_10-01-202 (11:16):
Well.
rory-liebhart_1_10-01-202 (11:16):
turns acrimonious.
I mean, then it becomes, it hasa potential of getting very
toxic in an environment and, youknow, the employees are not
emily-sander_1_10-01-2025 (11:22):
Yeah.
rory-liebhart_1_10-01-20 (11:23):
seeing all that and feeling all that.
Yeah.
It's, uh,
emily-sander_1_10-01-2025 (11:25):
Yeah.
rory-liebhart_1_10-01-20 (11:26):
that's where you can get a failure to
launch on a deal, you know, fromboth sides.
You know, like the, the buyer,let's say PE in this
emily-sander_1_10-01-2025 (11:32):
Yeah,
rory-liebhart_1_10-01-2025_ (11:33):
You know, they, they, they think
they have a collaborator ontheir hands potentially, and
maybe that's not the case.
That then just becomes adistraction from moving forward
on what the overall purpose ofthe partnership was, you know?
emily-sander_1_10-01-2025_15 (11:45):
so fail number two is not
understanding that are not thecaptain anymore.
As soon as you sign thatagreement, you are working for
someone else.
rory-liebhart_1_10-01-2025_ (11:54):
Or, or maybe you understand it, but
you have denial about what
sweet-eddie-b_1_10-01-2025_15 (11:58):
I was gonna say, you don't under,
you don't understand it.
rory-liebhart_1_10-01-20 (12:00):
again, again, you, you, you believe
that.
These guys don't know Jack.
I will figure this out.
I, you know, the employeessupport me.
You know, all this stuff.
Like, you're telling yourselfthese stories and you know, I'm
not saying it's never beenpulled off before, but I've,
I've personally been party tomore deals where it has not,
than I have, way more than Ihave.
(12:21):
And
emily-sander_1_10-01-2025 (12:21):
Okay.
rory-liebhart_1_10-01-2025_ (12:22):
you know, like that's, that's more
of an issue of like.
Being real with, with yourselfin a way, and also being very
candid before the deal is evenclose to being done with.
How is this gonna work?
You know, like, uh, with, withthe private equity group or the,
or the buyer in that case.
emily-sander_1_10-01-2025 (12:39):
Yeah, and this might lead us into,
this might be a number threehere.
We've talked about this before,but oh, they can't run the
business without me.
sweet-eddie-b_1_10-01-2025_1 (12:49):
Oh
rory-liebhart_1_10-01-2025_ (12:50):
my,
sweet-eddie-b_1_10-01-202 (12:51):
yeah,
rory-liebhart_1_10-01-2 (12:51):
hubris.
sweet-eddie-b_1_10-01-2025_1 (12:52):
I, I was gonna say that.
I don't know if that's as muchYeah, that's a fail.
That's like a fail between,between the ears
rory-liebhart_1_10-01-202 (12:59):
True.
emily-sander_1_10-01-2025_ (13:01):
They can't get rid of me.
sweet-eddie-b_1_10-01-2025 (13:02):
they wouldn't, they wouldn't have
bought the business if theythought they couldn't have run
it without you.
rory-liebhart_1_10-01 (13:06):
diligence and don't have contingency
plans?
A bbc, we talk about it in ourbook.
I, know, and by the way, our,our audio book's out, it came
out this week.
Little plug there.
But
emily-sander_1_10-01-2025 (13:16):
ding, ding.
rory-liebhart_1_10-01-202 (13:16):
ding,
emily-sander_1_10-01-2025_15 (13:17):
If
rory-liebhart_1_10-01-2025_ (13:17):
But yeah.
emily-sander_1_10-01-2025_1 (13:18):
you wanna hear these voices on a
audio book, then check it out inthe show notes below.
sweet-eddie-b_1_10-01-2025_ (13:22):
The Dult tones.
rory-liebhart_1_10-01-202 (13:24):
Yeah.
sweet-eddie-b_1_10-01-2025_ (13:24):
the dult tones.
rory-liebhart_1_10-01-2025_ (13:26):
but yeah, I, I think, um, yeah,
it's, it's, it's really, yeah.
You can't, you can't avoidthose, those conflicts in a lot
of cases.
You know, you just can't,
sweet-eddie-b_1_10-01-2025_ (13:38):
No.
And it, and it goes, it, it tiesinto a little bit about what you
were saying, Emily, where whenyou were the founder, you were
used to having, like, everybody,everybody bow down and, and kind
of, you, you are the, the centerof attention and the challenge
that some founders run into istheir team still treats them
(14:00):
that way, right.
rory-liebhart_1_10-01-202 (14:01):
Yeah.
Well said.
sweet-eddie-b_1_10-01-2 (14:03):
They're being pushed down as the
employee from the sponsor, andthey just don't, they really
just don't know how to handlethat.
I mean, that's a, just like,it's a, it's a, and they don't
want to show to their team.
They're not in charge.
And it's tough to go, well, youknow, I can't do it because the
private equity guy says, Ican't,
emily-sander_1_10-01-202 (14:23):
there, so, okay.
I think we've all seen this.
There's.
The PE guys play nice as long asthey can.
'cause they don't want trouble.
If they
sweet-eddie-b_1_10-01-202 (14:29):
Nope.
emily-sander_1_10-01-2025_ (14:30):
have a CEO or founder stay in there
and be fine, that's great.
Some founders make thetransition, they like, they get
on board.
But there comes a point ameeting where the rubber meets
the road and it's basically likeyou are not in charge or that's
not your call.
And it just dawns on the founderwhere it's like,
sweet-eddie-b_1_10-01-2025 (14:47):
The, that's not your call.
Yeah.
That your, that's not your call.
I've, I've been in those boardmeetings
emily-sander_1_10-01-2025_15 (14:53):
So
sweet-eddie-b_1_10-01-2025_ (14:53):
and that.
Yep.
rory-liebhart_1_10-01-202 (14:54):
We've been
emily-sander_1_10-01-2025 (14:54):
makes grown men.
puddles
rory-liebhart_1_10-01-202 (14:57):
We've been in, we've all three, been
in the same meeting.
Yeah.
Um,
emily-sander_1_10-01-2025_1 (15:03):
men turn to puddles.
Yes.
rory-liebhart_1_10-01-2025_ (15:05):
you know, at the end of the day, you
know, if you may have once ownedthe entire pie, but you now own
a minority share, and it mightbe a small minority share, so
just by nature you don't havethe, you can't call the shots,
you know, unless you have somesort of a.
Some provisions we've talkedabout again, but like preserving
your voting rights and thingslike that.
(15:26):
You know, you are, you are, youare a lesser, lesser player From
the ownership standpoint, that'swhere the
emily-sander_1_10-01-2025_1 (15:32):
Not a lesser person, just a lesser
player.
So
rory-liebhart_1_10-01-2025_ (15:34):
no.
Sometimes a lesser person, but,you
emily-sander_1_10-01-2025_ (15:36):
well sometimes lesser person.
But I think to avoid that fail.
So the fail is not fullyknowing, recognizing,
internalizing, like
rory-liebhart_1_10-01-2025 (15:45):
That
emily-sander_1_10-01-2025_15 (15:45):
is the
rory-liebhart_1_10-01-2025_15 (15:46):
I think
emily-sander_1_10-01-2025 (15:46):
gonna happen.
rory-liebhart_1_10-01-2025 (15:47):
just being, being realistic, you
know,
emily-sander_1_10-01-2025 (15:50):
Okay, that's, that's fail number
three.
All right.
rory-liebhart_1_10-01-202 (15:52):
yeah, yeah.
I think it kind of comes hand inhand and Ed talked about it is
like it's gonna be a differentkind of company when you're
owned by a bigger company or aprofessional investment company,
PE you're gonna have things thatyou might not be used to doing.
You know, reporting, uh, certainlevels of budgeting, KPI,
(16:15):
tracking, name it, you know, um,professionalizing your firm.
So you may have gotten your,your firm just your brilliance
and charisma, charisma.
To a certain point, but youknow, you could only take it so
far.
Obviously otherwise you wouldn'thave needed on additional
capital.
You would've just bootstrappedin and may may still run on
business that you had up untilthat point.
(16:36):
But
emily-sander_1_10-01-2025_ (16:37):
The, the.
rory-liebhart_1_10-01-2025_ (16:38):
fun probably for, uh, a founder in a
lot of cases.
And I, I'm only saying that I'mnot sort of like making light of
it, but it's true, like theorganizational structure of
PE-backed company is verydifferent than.
Founder run, I call the shots.
You know, we do what I want todo with product, customers,
pricing, all that stuff.
Now all of a sudden you now havepeople who've got material
(17:00):
investment.
You have, know, the deviation toyour financial performance could
be very problematic becauseyou've likely taken on a bunch
more debt that you have toservice.
you know, you have to maintainmanaging the business to the
numbers.
KPIs again, you know, data,data,
emily-sander_1_10-01-2025 (17:17):
Well, I think Rory, in, in all of what
you're saying is like you haveto answer for your decisions and
the answer can't be because Iwanted to
rory-liebhart_1_10-01-2025_15 (17:24):
a
emily-sander_1_10-01-2025 (17:24):
like, as I said, so
sweet-eddie-b_1_10-01-2025 (17:25):
Yep.
rory-liebhart_1_10-01-2025_ (17:26):
put it.
Precisely
emily-sander_1_10-01-2025_1 (17:27):
and you, and you could get away with
that before.
That was a perfectly validanswer'cause I said so.
Okay, sounds good.
Sounds.
rory-liebhart_1_10-01-2025 (17:32):
I'll say it in truth, I think maybe
some of that still plays, likeyou can get away with a lot
until you, you don't starthitting the numbers that you put
in front of and your
sweet-eddie-b_1_10-01-2025 (17:41):
That was, that was my number.
That was my number four.
rory-liebhart_1_10-01-2025_ (17:43):
let you take it
emily-sander_1_10-01-202 (17:44):
Number four.
sweet-eddie-b_1_10-01-202 (17:44):
Yeah.
Number four is you put out aforecast that you can't hit.
rory-liebhart_1_10-01-202 (17:50):
Yeah.
Yeah,
emily-sander_1_10-01-2025 (17:52):
don't do that.
sweet-eddie-b_1_10-01-2025_ (17:54):
And you know, we as we as uh, chief
executives have a tendency towanna set, especially with our
sales teams, you know,optimistic.
Aggressive stretch goals, andwe're used to putting those in
place.
We're used to driving toward,you know, how can we drive
faster, harder, faster, harder?
(18:15):
And you put that in front of theprivate equity guys and you
don't.
Aren't collaborative around,here's my assumptions.
This is, here's a base case,here's a stretch case and here's
a worst case.
And kind of do your scenarioanalysis and show the inputs.
And I've seen enough privateequity guy or or founders going
(18:36):
into private equitytransactions.
They close the transaction, thattransaction's closed on their
projections going into thetransaction, which were probably
rosy and aggressive.
And then they don't have anhonest discussion with the
private equity sponsor.
During diligence or postdiligence around the rosy and
aggressive, they start to missand then they don't have the
(18:58):
conversation'cause they justhope it'll disappear and go
away.
rory-liebhart_1_10-01-202 (19:01):
sure.
emily-sander_1_10-01-2025_1 (19:02):
the thing.
They, they somehow, I've seenthis, they, somehow think the PE
guys will forget the numbers youtold them.
sweet-eddie-b_1_10-01-2025_15 (19:09):
P guys don't forget numbers.
rory-liebhart_1_10-01-2025_1 (19:11):
uh
emily-sander_1_10-01-2025_ (19:11):
It's like, what?
No, they're gonna like the the,no, we can, I can talk'em off.
I can talk'em off, Emily.
No, you can't.
You don't think they're gonna belike on March 30th of this year,
you said dah, dah, dah, dah.
sweet-eddie-b_1_10-01-2025_15 (19:23):
I know one, I know one PE guy who,
you know every, every number yousaid went and Evernote
rory-liebhart_1_10-01-202 (19:29):
Yeah.
sweet-eddie-b_1_10-01-2025 (19:29):
and, and then it would be searched
and it would come out and theywould reference that to you
rory-liebhart_1_10-01-202 (19:35):
Yeah, I,
sweet-eddie-b_1_10-01-202 (19:35):
time.
rory-liebhart_1_10-01-2025_1 (19:36):
I,
sweet-eddie-b_1_10-01-2025_ (19:36):
Now they might, they'll forget their
mom's birthday before theyforget a number.
You told them on a projection
rory-liebhart_1_10-01-202 (19:42):
yeah.
sweet-eddie-b_1_10-01-202 (19:43):
ain't no lie.
That's reality.
rory-liebhart_1_10-01-2025_15 (19:45):
I mean,
emily-sander_1_10-01-2025 (19:45):
Yeah.
rory-liebhart_1_10-01-2025_15 (19:46):
I can honestly say with a straight
face, I've never, I've nevercomprised bs, you know, in a
proforma that we've put put outthere for suitors to, but.
emily-sander_1_10-01-2025_150 (19:54):
I like how you just said comprised
bs.
This is like, these are Rorysthat are now appearing.
rory-liebhart_1_10-01-202 (19:59):
Yeah, so, but what I will say is this,
you put out a forecast, behonest here.
The other side has a differentfor forecast on their side.
They've got a, they've gotbasically a compression
forecast, which is to say.
Based on the key drivers of thisbusiness and stuff goes haywire.
Here's what it looks like.
They wouldn't buy the businessif they didn't look at all those
(20:21):
things.
So, you know, but to what Edsaid and what you said, also,
Emily, I have had conversationstwo years after a sale, not just
with PE, but also strategicbuyers, where they point to
something that, you know, I hadmodeled out and they said, this
is what you said this was gonnado.
And it may be three years sinceI put that together.
(20:43):
like.
True.
But a lot has changed and so,you know, anyway, point being is
you think these things mightjust be like glazed over and,
and just like not paid attentionto or, you know, given a cursory
review.
But no, that's not the case atall.
They're very thoroughlyreviewed, scenario analyzed to
(21:05):
the, you know, nth degree.
But they're always gonna comeback and kind of you to what you
committed to, whether or notthey actually believe it's
achievable or not.
And it's just how it goes.
And so, so don't take my, ourpoint here is don't take
anything lightly.
I mean, be very serious aboutwhat you're presenting as far as
the view on your business anddefensible.
(21:26):
Um, you know, Rosie is good insome cases if you think there's
a high probability of it beingmet.
You know, sandbagging is.
By necessity.
Pretty dumb because then they'llbasically point to that and give
you a valuation based on whatyou're showing them.
And you can't really say, no,well, I'm, I'd sandbag that.
That's not you.
You should pay me more.
If they're gonna be like, no Fyou anyway.
(21:47):
So it's gotta have that sort ofGoldilocks.
It can't be too bullshit.
Can't be, can't be bullshit atall.
It has to be credible.
But you also, you don't serveyourself well.
By sandbagging it artificiallyeither just with
emily-sander_1_10-01-2025_15 (22:00):
I.
rory-liebhart_1_10- (22:00):
information you have put out, the best view
you have, you know?
emily-sander_1_10-01-2025 (22:04):
Yeah, and and founders sometimes
aren't used to that.
'cause given what we just said,like I call the shots, I make up
the numbers, we don't even havea forecast.
Two, you now need contingency A,B, and C.
And all of those need to bebacked up by numbers and data
and assumptions.
You can, you can explain, thenas any salesperson knows, first
number you throw out there,you're anchoring them to that
(22:25):
number.
rory-liebhart_1_10-01-2025_ (22:26):
why
emily-sander_1_10-01-2025_1 (22:26):
And then you have to do reverse
psychology to them.
rory-liebhart_1_10-01-202 (22:28):
yeah.
emily-sander_1_10-01-2025_1 (22:30):
It.
I mean, maybe we can just toucha little bit on, kind of an art
form of here's what's realisticand reasonable, but we know we
wanna be aggressive and we knowaggressive and achievable you
can do at the same time.
So how do you, is that ajudgment call?
Is that
sweet-eddie-b_1_10-01-20 (22:46):
That's a conver, that's the
conversation.
So that's, that is where I,where I will stress it.
Like, look, you don't, you haveto be.
You have to truly feel likeyou're in partnership with your
private equity sponsor and youhave to go look.
Here's my, here's my scenarios,and this is largely the CFO,
kinda to your point, Emily.
There's you normally, in aprivate equity investment, you
(23:08):
normally have like these threelevels of connection.
You've got your managingdirector, senior person that's
interacting with the chiefexecutive.
You generally will have a.
The director, vice president,principal level, that's
interacting with your chieffinancial officer.
rory-liebhart_1_10-01-202 (23:24):
Yeah.
sweet-eddie-b_1_10-01-2025 (23:24):
then you're gonna have some analysts
interacting with analysts,essentially kinda doing a lot of
the data, data work at, at thislevel where the CFO is working,
they should be work.
Any projections you're doingneeds to be one communicated by
the CFO up to the CEO.
So COO doesn't get over his skisor her skis.
rory-liebhart_1_10-01-2025 (23:44):
I've seen
sweet-eddie-b_1_10-01-2025 (23:44):
Give numbers.
Yep.
Give numbers that don't, thataren't real.
And then the second piece isthese, this development of what
the future is supposed to looklike, needs to be collaborative
at that CFO to principal, CFO,to vice president, CFO, to
director level, so that they'rewalking into the board meeting,
(24:05):
presenting.
A consensus forecast or aconsensus plan that management
has bought off on and that theprivate equity guys have worked
through.
And, and a lot of that beatingback and forth has happened in a
collaborative way and a trustingway at those lower levels, so
that that way when you get tothe board meeting and you've got
(24:26):
your senior person at the.
PE firm and your senior personat the company are not dis are
discussing it for maybe thefirst time the work has all been
done.
And if you surprise, it's whenyou surprise that's that's where
the problem occurs.
emily-sander_1_10-01-2025_15 (24:43):
Is that, is that a methodology or a
principle type of thing?
Like for instance, you know, youcome to partnership with the PE
group, like we are gonnaforecast aggressively.
Like that's just, we're gonnalean in really hard and whatever
you're gonna see from us isgonna be aggressive.
rory-liebhart_1_10-01-202 (24:57):
know.
I
emily-sander_1_10-01-2025_15 (24:57):
Or is it.
rory-liebhart_1_10-01-2025_ (24:58):
and true method of, of basically
preventing presenting things isyou, you always have a base
case.
You always have a stress case,and you always have an upside
case.
You're anchoring around the basecase, generally speaking, but
you need to communicate, youknow, what, what, what the
potential is both ways.
And so I think that's themechanical piece.
I think what, what, ed, reallyimportant that Ed alluded to, or
(25:21):
just that explicitly was like,have the conversation in a
genuine way, like collaborative,like, like you, you're sitting
at the same table.
From the same direction.
Looking at it as if you'realready partnered and say, this
is what we're gonna do, theseare the ways we can outperform
this.
It's gonna require more capital,it's gonna require
(25:41):
infrastructure, whatever,whatever that might be, type of
business.
Or like here's the exposure wehave.
Maybe you're in a consumerlending business and like the
macroeconomic drivers based on,you know, um.
Whatever elements of, you know,household income and all those
things like unemployment, likehere's what could go haywire,
(26:02):
you know, but we don't believethat's gonna happen for these
reasons.
I mean, so you're not trying tosell against yourself, but
sooner or later they're gonnaform their own opinions.
You'd rather have them formtheir own opinions based on
reality.
And, and really in a lot ofcases, the reality is what the
executive team.
Knows about the business.
Maybe they, they don't knoweverything they should, you
(26:23):
know, so informed.
Just, just, the point is don't,you're not serving yourself in
any way.
If you obfuscate informationyou, you
sweet-eddie-b_1_10-01-2025_ (26:32):
No.
rory-liebhart_1_10-01-2025 (26:33):
make stuff up or you justify things.
'cause very, these areprofessionals and they've seen
it all already, so,
emily-sander_1_10-01-2025_1 (26:40):
And I'm also thinking once you
partner with PE and you have theongoing forecast exercises you
do, is it kind of finding thatmind meld where like, okay,
here's how we do forecastingand, and that's simpatico with
rory-liebhart_1_10-01-202 (26:52):
Yeah,
emily-sander_1_10-01-2025_15 (26:52):
PE group's mindset around doing
forecasting.
Like I know for instance,there's a decision
rory-liebhart_1_10-01-2025_ (26:58):
way street on how that's dictated.
I'll say that.
It's like they have their way oflooking at things and you could
form your process to
sweet-eddie-b_1_10-01-2025_ (27:04):
and you're gonna have their way of
looking at things.
rory-liebhart_1_10- (27:06):
Absolutely.
emily-sander_1_10-01-2025 (27:07):
Rory, what is, what is the compression
you mentioned earlier?
Like the,
rory-liebhart_1_10-01-20 (27:12):
that's more of a stress case.
emily-sander_1_10-01-2025 (27:15):
okay.
rory-liebhart_1_10-01-2025 (27:15):
It's simply saying, Hey, this is the
downside potential based
emily-sander_1_10-01-2025 (27:19):
Okay.
rory-liebhart_1_10-01-2 (27:20):
factors In these scenarios, you could do
something really extreme or youcould just do something that
says, oh, you know, seasonalityin your earnings, or, you know,
maybe, maybe a, a, a negativedim view on the.
Economy influences your businessdepending on what it's, maybe
you've got like a manufacturingbusiness, the possibility of
tariffs going from like 20 to ahundred percent is like real,
you know, like of my formerclients is in that exact space
(27:45):
manufacturing.
They're like, yeah, we have toproject for the fact that
tariffs are gonna crush us.
So those are real conversations.
emily-sander_1_10-01-2025_1 (27:53):
All right.
The fifth and final fail for afounder when they're partnering
with private equity.
rory-liebhart_1_10-01-202 (27:59):
Well, I'll throw one out.
I don't know if it's the fifthor the final, so, it's like,
it's one that I think a founderin particular and, you know,
employees as well of a, of afounder purchased company.
Like what's the exit strategyhere?
Like what's the end game here?
Private equity does not mate forlife.
We know that.
(28:20):
So what is the end game?
You know, you may not havespecific timelines, but like,
are the types of discussions youhave before you cut a deal.
Like, it's like we're looking athow do we make one plus one
equal three here?
So what is the plan and whatare, what are we gonna be
expected to execute as amanagement team?
I should say like they're gonnawant to.
(28:40):
How you expect to make it go,one plus one equals three, and
how they can maybe support that.
But yeah, what is the exitstrategy?
Very simply.
emily-sander_1_10-01-2025_15 (28:50):
So going in with the end in mind,
understanding your risk premium,
rory-liebhart_1_10-01-2025_ (28:53):
I'd want
emily-sander_1_10-01-2025_1 (28:53):
all of those good things.
rory-liebhart_1_10-01-2025_1 (28:54):
am I gonna get paid out again?
Like, how am I gonna, likewhat's, what's my next bite at
the envelope?
If they, specifically to whatEd's saying is like if you roll
your equity, which means you'retaking less upfront, that's
maybe like a requirement.
You know, maybe not evennegotiable, but like, okay, if
I'm like deferring mycompensation or my, my proceeds.
(29:17):
Am I gonna be expected to notsee liquidity for 10 years or
are we talking like two or threeyears, like basic stuff?
Like that's kind of important.
sweet-eddie-b_1_10-01-202 (29:27):
Yeah, I think the, the.
Key is knowing you willtransact.
rory-liebhart_1_10-01-202 (29:33):
Yeah,
sweet-eddie-b_1_10-01-2025_ (29:33):
And so the other side of it is
rory-liebhart_1_10-01-2025_15 (29:36):
I
sweet-eddie-b_1_10-01-202 (29:36):
don't get too comfortable.
rory-liebhart_1_10-01-202 (29:38):
true.
sweet-eddie-b_1_10-01-2025_ (29:38):
And if you're performing well,
you're gonna transact faster,most likely.
And so as a result, the betteryou do, the more likely it is
you're gonna be disrupted with aokay.
We're gonna transact yourbusiness and so therefore we're
gonna disrupt your apple cart.
And I think some CEOs, the, theCEOs who are most successful
have kind of avoided one throughfour, and then they get to five
(30:03):
and they go and.
I'm, I'm, I've figured this outand now you're telling me I'm
getting sold to a strategic andI'm about to lose my job and my
folks are gonna get laid off.
Not that that ever happened.
Um, but yeah.
Yeah.
So I'm gonna get sold to astrategic, I'm gonna, yeah.
I'm gonna get my second bite ofthe apple and all that other
good stuff.
But I, I'm out of a job.
I, my folks are getting laidoff.
(30:24):
I, you know, again, the baby I,the baby I made, now I figured
out how to work with you guys,and this has gone well.
Now it's gonna be like, well.
No, it's, we're done.
Thanks.
Thanks for playing.
You know, time time's up and youknow, we're gonna flip this
business.
And so recognizing that thatbusiness will transact and
(30:44):
maintaining a healthy emotional.
State with respect to thebusiness, knowing that one, it's
not yours anymore, and two, itwill go away
rory-liebhart_1_10-01-2 (30:54):
Mm-hmm.
sweet-eddie-b_1_10-01-2025_ (30:55):
you and the business will get split
normally after.
Again, going through anotherexercise of transaction that you
went through the last time, um,is just something to keep in
mind and it's gonna bedisruptive.
You're gonna be expected toactually, you know, you may be
asked to do window dressinggoing into it.
So you may be asked to do somenon hires, preliminary layoffs,
(31:19):
you know, kind of do some stuffsix months in advance.
It's gonna make it much harderfor you to hit your numbers and
you'll be under more pressure tohit your numbers because you're
trying to, they're trying to getit ready for sale.
And so all that is just a longway of saying.
You will transact, it will bedisruptive, and you might've
figured out one through four andavoided those four, and you're
(31:41):
still gonna get whacked withnumber five because you're
probably gonna be comfortable atthat point and feel like you got
this thing mastered.
And that's exactly when they'regonna come in and go, okay, time
to sell.
I.
rory-liebhart_1_10-01-20 (31:51):
right.
Yeah.
And actually adjacent to that,I'll, I'll, I'll lump it under
this one, but it could actuallyhave gone through another, gone
under a couple of the others islike, what does doing this deal
lock you up from doing?
In other words,
emily-sander_1_10-0 (32:05):
Opportunity costs.
rory-liebhart_1_10-01-2025_15 (32:07):
I mean, if you are brilliant in
this space you all of a suddenget six months into that deal,
post-sale, post all your thingsyou signed and you're like, I
hate this.
I'll just go freaking do thismyself again.
No, you might not.
sweet-eddie-b_1_10-01-202 (32:22):
Yeah, you.
rory-liebhart_1_10-01-2025_1 (32:23):
be locking yourself out of that
and, and in, in exchange forthe, the compensation you took
on the deal.
So, know, that's another elementof to, to be.
Again, I'm honest with yourselfabout is like, is this, is this
possible?
Are you possibly content whereyou're no longer gonna be able
to be an entrepreneur in thisparticular space
emily-sander_1_10-01-2025 (32:44):
Well, well, there's,
rory-liebhart_1_10-01-2025_1 (32:45):
or something?
Who knows?
You know?
emily-sander_1_10-01-2025_ (32:46):
well there's like elements of like
control and ego we've talkedabout, but it's also about like
what is important to you rightnow?
what is important to you rightnow?
By the way, the answer to thatquestion changes as you go
through life.
rory-liebhart_1_10-01-202 (32:58):
true.
emily-sander_1_10-01-202 (32:59):
check, check in with your.
rory-liebhart_1_10-01-20 (33:00):
Alert.
emily-sander_1_10-01-20 (33:01):
Spoiler alert.
Yeah.
Um, but, and what you think isimportant might not be what's
actually important when youactually go through it.
So,
rory-liebhart_1_1 (33:09):
circumstances might inform that.
You know what I mean?
So
emily-sander_1_10-01-2025_1 (33:12):
but we were all just talking about
that before we jumped on airtoday.
Like what's important andthat's, that's changed or is
changing for each one of
sweet-eddie-b_1_10-01-2 (33:18):
Mm-hmm.
emily-sander_1_10-01-2025 (33:19):
just, it's life.
It's life.
But okay.
rory-liebhart_1_10-01-2025_1 (33:24):
is
emily-sander_1_10-01-2025 (33:24):
were, those were five, not the only
five.
I shouldn't have said FinalFive, but we could have done, we
could do part two.
rory-liebhart_1_10-01-2 (33:30):
through 10
emily-sander_1_10-01-2025_1 (33:30):
We,
rory-liebhart_1_10-01-2025_ (33:30):
uh, next, you know, down the road.
emily-sander_1_10-01-2025_15 (33:33):
we can do mistakes that PE firms
have made.
'cause they, they're
sweet-eddie-b_1_10-01-2025_1 (33:36):
Oh boy.
emily-sander_1_10-01-20 (33:36):
either.
So, I mean, this is just tip ofthe iceberg, but just heading
off like the major ones thatpeople listening like, please,
please avoid these, if you canreally think through them.
Make sure you know what you'regetting into.
rory-liebhart_1_10-01 (33:48):
Listeners like, comment, subscribe, and if
you have questions, hit us up.
You know?
Absolutely.
love
emily-sander_1_10-01-2025_15 (33:53):
We are here to help.
rory-liebhart_1_10-01-2 (33:54):
there's only so much we can cover in 35,
40 minutes, you know.
emily-sander_1_10-01-2025 (33:58):
we've got some great comments and
questions, clarifying questionsin the comments, so drop'em the
comments and you can alwaysreach out to us with our contact
info in the show notes.
But thanks, ed.
Thanks Rory.
rory-liebhart_1_10-01-2025 (34:08):
you.
all right, here we go.
Lightning round.
rory-liebhart_1_10-01-2025_ (00:37):
my.
emily-sander_1_10-01-202 (00:37):
sports team collapse stands out as the
most epic fail in history.
rory-liebhart_1_10-01-20 (00:42):
pretty much every year of the Mariners,
but this one, after the Allstarbreak.
sweet-eddie-b_1_10-01-2025_1 (00:48):
So I will go all the way back to, I
believe it was what's called1992 when the Houston Oilers and
the Run and Shoot Offensepowered by Warren Moon.
emily-sander_1_10-01-2025_1 (01:04):
Oh,
sweet-eddie-b_1_10-01-2025_1 (01:05):
to Frank Reich and the Buffalo
Bills in a 42 point comeback inthe playoffs to put the bills in
the Super Bowl for the third orfourth time and they lost them.
So it did.
I can't,
emily-sander_1_10-01-2025_15 (01:20):
of
sweet-eddie-b_1_10-01-202 (01:20):
yeah.
But it was, that was one whereI, growing up in upstate New
York, I was a Bills fan.
And I just remember like thisgame is over and Frank Reich,
who also had one of the largestcomebacks.
NCAA college football historywas the quarterback for the
Maryland turpins when they, whenthey pulled something similar?
rory-liebhart_1_10-01-2025 (01:42):
Yep.
sweet-eddie-b_1_10-01-2025 (01:43):
Yep.
emily-sander_1_10-01-2025_150 (01:44):
I love how you know this, but I
sweet-eddie-b_1_10-01-2025_1 (01:45):
I, I am,
rory-liebhart_1_10-01-2025 (01:46):
man.
I
sweet-eddie-b_1_10-01-2025_ (01:47):
the cliff of worthless knowledge.
emily-sander_1_10-01-2025_150 (01:50):
I dunno who Cliff is, but he
sounds great and I know that.
rory-liebhart_1_10- (01:53):
generation,
emily-sander_1_10-01-2025_1 (01:56):
Um,
sweet-eddie-b_1_10-01-2025_ (01:56):
How you.
rory-liebhart_1_10-01-2025_ (01:57):
but I don't consider that useless
information.
I think that's awesome andhighly valued information.
emily-sander_1_10-01-2025_1 (02:01):
but I know that the current holder
of that record is Kurt Cousins.
'cause I love Kurt Cousins andhe has the biggest comeback.
He took that from Frank Reichand Frank Reich.
Called him to say like, now youcarry this mantle.
You use this for good in storiesand encouraging people and
things like that.
So, um, yeah.
Very cool.
Okay, next question.
(02:21):
What's the worst investment orpurchase you've ever made?
Big or small?
sweet-eddie-b_1_10-01-2025_ (02:28):
Say that one again.
'cause there's just so manychoices.
I just wanna make sure Iunderstand.
emily-sander_1_10-01 (02:32):
investment or purchase you've ever made?
Big or small?
rory-liebhart_1_10-01-202 (02:40):
Worst investment.
I have a hard time picking thatone.
I mean, I haven't had any crazybad ones, so, but it still
emily-sander_1_10-01-2025_15 (02:52):
Ed is pinching the bridge of his
nose and like,
rory-liebhart_1_10-01-2025_ (02:55):
but maybe it just doesn't mean I've
taken enough risk in my life,frankly,
emily-sander_1_10-01-2025_ (02:59):
Hmm,
sweet-eddie-b_1_10-01-2025_1 (03:00):
so many choices.
It's so difficult to choose.
I could go,
emily-sander_1_10-01-2025_1 (03:03):
not risk adverse.
Ed Barton.
sweet-eddie-b_1_10-01-2025_ (03:04):
no, I could go like, I could go
like, well it was when I boughtthe, the glass and glazing
contractor and I didn't knowanything about glass and
glazing.
That was an interesting choice.
emily-sander_1_10-01-20 (03:12):
believe your reason for that you gave to
me was like I wanted to likebreak shit up.
Like I wanted to break glass
sweet-eddie-b_1_10-01-202 (03:18):
Yeah.
Well, and the other part was Iwanted to get out of like
sitting behind a computer andstuff like that.
And I.
emily-sander_1_10-01-2025 (03:23):
Okay.
sweet-eddie-b_1_10-01-2025 (03:24):
Done construction work in the Army.
So I was like, oh, this willtranslate.
Didn't, um, blue co blue collaremployees are not soldiers, in
case you had any curiosity aboutthat.
Um, so I'd, I'd probably putthat one at number one.
I've, I've had a couple realestate investments that were not
good ones ear much earlier in mycareer.
Um, so in my twenties, um,
rory-liebhart_1_10-01-202 (03:47):
Yeah.
sweet-eddie-b_1_10-01-2025 (03:47):
unit apartment complex, that really
was not a good decision.
I'm in, uh, what I was hopingwasn't emerging, but was
actually a declining area ofSyracuse, New York.
Um, you know, so I, I've got,I've got plenty.
rory-liebhart_1_10-01-202 (04:03):
Yeah.
Yeah.
I've, I've
emily-sander_1_10-01-2025_ (04:06):
Rory is.
rory-liebhart_1_10-01-2025 (04:07):
I've probably made some dumb
decisions on like, not investingin things like I'm, you know,
so, so giving up on greatreturns because maybe I played a
little too safe in my personallife, you know?
emily-sander_1_10-01-2025_ (04:21):
Hmm.
rory-liebhart_1_10-01-202 (04:21):
more,
emily-sander_1_10-01-2025 (04:21):
Okay.
rory-liebhart_1_10-01-20 (04:22):
issue.
emily-sander_1_10-01-2025 (04:23):
Yeah, the approaches and temperament
came out clearly in that, inthat, those answers.
one here, and then we'll roll.
What's the funniest fail you'veever seen in a pitch or
presentation?
So you are receiving thepresentation.
What's the funniest fail like?
Oh wow.
rory-liebhart_1_10-01-2025_1 (04:38):
I, I mean people that fail to
describe what they're pitchingadequately and come across.
Idiotic, I guess, and I've seencountless instances of that, you
know?
sweet-eddie-b_1_10-01-2025_1 (04:54):
I, I actually can't name any, I
mean, I'm, I'm, I'm strugglingand I think I have
subconsciously just flushedevery memory of those out.
I mean, there's, I'm, and I'mtrying to think in like business
and there's just nothing comingto mind where I was like, this
is just a dumpster fire and ahalf,
rory-liebhart_1_10-01-2025_15 (05:13):
I will
sweet-eddie-b_1_10-01-2025_ (05:14):
um.
rory-liebhart_1_10-01-2 (05:14):
example of a pitch I was part of where
somebody I was with thathappened to be like an
independent advisor, so like abroker that will put you in
front of investors.
We were in New York City andthis was for a bankruptcy
business that Ed I worked for,we were pitching on basically a,
you know, private investmentfund to go buy a bunch of
(05:36):
bankruptcies.
Anyway, this independent, uh,advisor shall not be named.
Uh, older gentleman, uh,certainly very, um, advanced in
age.
We were in Manhattan, probably,I don't know, whatever, 60 plus
floors up.
And we were in this, office.
Uh, but of that, you could tellthere were, you know, they had a
(05:59):
lot of LPs, uh, big office, youknow, very high end.
Anyway, a lot of glass.
So we were invited to join thepotential investors for our
pitch.
This poor gentleman walksthrough basically a glass wall
or walks into a glass wall,
sweet-eddie-b_1_10-01-2025_1 (06:16):
Oh my God.
rory-liebhart_1_10-01-2025_ (06:17):
his fricking head on the glass, and
it leaves like a, know how likeif you get a, a window ding like
on your windshield, like it kindof spiders out like that
happened?
In this
emily-sander_1_10-01-2025_15 (06:27):
Oh no.
rory-liebhart_1_10-0 (06:28):
Manhattan, glass must have been an inch
fricking thick and this guy'shead smashed it and he, I don't
know how he stood on his feet,and I'm not sure he did so well
after that, but it was prettydamn funny because that's not a
failure out the gate, um, justlet generally, I don't know what
is, but um.
Needless to say, we did not getinvestment from this group.
(06:49):
And uh, yeah, this
emily-sander_1_10-01-2025_1 (06:51):
And one man walked out, concussed.
rory-liebhart_1_10-01-202 (06:53):
might have had a cracked cranium, but
when we, that was crazy though.
Insane
emily-sander_1_10-01-202 (06:59):
right, go.
The top five things foundersneed to know about how to not
woo the top five things foundersneed to know and how to not make
mistakes in partnering with pe.
What are the fails to avoid ifyou are partnering with PE?
Only five.
rory-liebhart_1_10-01-2025 (07:18):
I'll start as a founder, not knowing
what you're getting into, with acertain type of deal structure,
or I should say someone shouldknow completely what kind of
deal they're getting into andwhat does that mean for them?
What does it mean for thecompany?
emily-sander_1_10-01-2025_15 (07:36):
So like you, like as a F, you
should know the fricking dealstructure.
That seems basic.
Are people not doing this?
rory-liebhart_1_10-01-2025_ (07:41):
but it's not, uh, I, there's,
there's many, many stories of,of folks selling their company,
um, to, whether it's privateequity or pr, you know, another
party you know, thinking thatthey can, there's smarter than.
The other side, so to speak, andthat maybe they don't need
advisement from, all manner of,uh, professionals like lawyers,
(08:05):
accountants, others, and theyjust move ahead with a deal.
And the next thing they know,compensation that was coming
their way on the business couldhave been.
Structured in a way where theydon't see a dime upfront and,
and or, and, or they see cash upfront, but they don't have
what's, you know, kind of calledrollover equity or getting a
sec, second bite at the appledown the road, which is where
(08:26):
most people probably make moreof their money, is if you, you
know, sell your business.
You stay part of it, you help itgrow.
You have a big incentive to dothat.
But basically what I'm saying iswithout knowing.
What the structure is, what doesit truly mean for you and your
family?
What does it mean to youremployees?
What does it mean for thebusiness?
you could get screwed.
(08:46):
You might think you're getting agood deal, but you could, could
get screwed, you
emily-sander_1_10-01-2025_15 (08:50):
So people get all excited'cause
they have a deal, they have adeal with pe.
They picked me, I'm gonna make ashit ton of money.
And they don't look at thedetails and don't think about
the ramifications and they'relike, oh
rory-liebhart_1_10-01-202 (08:59):
yeah.
emily-sander_1_10-01-2025_1 (09:01):
um, now I'm in it.
rory-liebhart_1_10-01-2025_ (09:01):
And I mean, I'd
sweet-eddie-b_1_10-01-2025_ (09:02):
Uh, and not only are they in it, but
the structure is such thatthey're in it behind a preferred
return and an accruing preferreddividend.
And, you know, so they're,they're in it.
They've rolled money over.
You know, like Rory said, thedeal structure's critical and
folks go into it going, well, Icashed out for$30 million and
you probably could have cashedout a lot more and or your
(09:25):
rollover, which they'veconvinced you to put a bunch of
that 30 million back in,
rory-liebhart_1_10-01-20 (09:28):
Right.
sweet-eddie-b_1_10-01-2025_1 (09:29):
is now like trapped behind, behind
a bunch of stuff that you knowyou don't control.
rory-liebhart_1_10-01-202 (09:34):
Yeah.
emily-sander_1_10-01-2025_15 (09:35):
So that is fail number one, having
rory-liebhart_1_10-01-2025 (09:37):
It's a big one.
A
emily-sander_1_10-01-2025_ (09:38):
left money on the table
rory-liebhart_1_10-01-202 (09:39):
Yeah.
emily-sander_1_10-01-202 (09:39):
having your money trapped.
That sounds horrible.
Okay.
What is.
sweet-eddie-b_1_10-01-20 (09:44):
Number two.
Number two is not knowing thatyou're about to be an employee
working for someone else.
emily-sander_1_10-01-2025_1 (09:52):
Oh.
rory-liebhart_1_10-01-202 (09:53):
Yeah.
No matter what type of sweettalking you heard over the
closing dinner or even beforethat in the process, yeah, that
can be a rude awakening.
sweet-eddie-b_1_10-01-202 (10:02):
Yeah.
That's where I've seen, I mean,I have built a career.
On cleaning up after privateequity, after founders have sold
to private equity and thatthey've been exited,
rory-liebhart_1_10-01-2025 (10:13):
Yep.
sweet-eddie-b_1_10-01-2025_1 (10:14):
or in some cases now reentered.
But that's exactly, that, thatfail is the one that, where the,
the first one that we talkedabout is largely economic and,
rory-liebhart_1_10-01-2025 (10:25):
Yes.
sweet-eddie-b_1_10-01-2025_ (10:26):
and there's a, you know, you could,
that's gonna hurt thepocketbook.
The second one hurts the ego.
rory-liebhart_1_10-01-2 (10:33):
Mm-hmm.
sweet-eddie-b_1_10-01-20 (10:34):
you've built this business, you, it's
your baby, you know, you've heldonto it, you know, all that good
stuff, and then boom, you're,you're not working for some dude
that's like half your age, thatis running your business with a
spreadsheet and is telling youexactly what you need to do and
what you're reporting needs tobe and when you need to call
(10:54):
them and that blah, blah, blah,blah, blah.
And there's a lot of foundersjust that ain't their DNA.
emily-sander_1_10-01-2025 (10:59):
fold, man.
They, I mean, they're used tobeing the king of the castle.
They're used to calling theshots.
When I walk in a room, everyoneperks up and then they get
thrown these$12 words by a dudebehind a computer and they just,
I've seen'em fold, man.
Like they just get kicked in thenads.
rory-liebhart_1_10-01-202 (11:16):
Yeah.
And then
sweet-eddie-b_1_10-01-202 (11:16):
Well.
rory-liebhart_1_10-01-202 (11:16):
turns acrimonious.
I mean, then it becomes, it hasa potential of getting very
toxic in an environment and, youknow, the employees are not
emily-sander_1_10-01-2025 (11:22):
Yeah.
rory-liebhart_1_10-01-20 (11:23):
seeing all that and feeling all that.
Yeah.
It's, uh,
emily-sander_1_10-01-2025 (11:25):
Yeah.
rory-liebhart_1_10-01-20 (11:26):
that's where you can get a failure to
launch on a deal, you know, fromboth sides.
You know, like the, the buyer,let's say PE in this
emily-sander_1_10-01-2025 (11:32):
Yeah,
rory-liebhart_1_10-01-2025_ (11:33):
You know, they, they, they think
they have a collaborator ontheir hands potentially, and
maybe that's not the case.
That then just becomes adistraction from moving forward
on what the overall purpose ofthe partnership was, you know?
emily-sander_1_10-01-2025_15 (11:45):
so fail number two is not
understanding that are not thecaptain anymore.
As soon as you sign thatagreement, you are working for
someone else.
rory-liebhart_1_10-01-2025_ (11:54):
Or, or maybe you understand it, but
you have denial about what
sweet-eddie-b_1_10-01-2025_15 (11:58):
I was gonna say, you don't under,
you don't understand it.
rory-liebhart_1_10-01-20 (12:00):
again, again, you, you, you believe
that.
These guys don't know Jack.
I will figure this out.
I, you know, the employeessupport me.
You know, all this stuff.
Like, you're telling yourselfthese stories and you know, I'm
not saying it's never beenpulled off before, but I've,
I've personally been party tomore deals where it has not,
than I have, way more than Ihave.
(12:21):
And
emily-sander_1_10-01-2025 (12:21):
Okay.
rory-liebhart_1_10-01-2025_ (12:22):
you know, like that's, that's more
of an issue of like.
Being real with, with yourselfin a way, and also being very
candid before the deal is evenclose to being done with.
How is this gonna work?
You know, like, uh, with, withthe private equity group or the,
or the buyer in that case.
emily-sander_1_10-01-2025 (12:39):
Yeah, and this might lead us into,
this might be a number threehere.
We've talked about this before,but oh, they can't run the
business without me.
sweet-eddie-b_1_10-01-2025_1 (12:49):
Oh
rory-liebhart_1_10-01-2025_ (12:50):
my,
sweet-eddie-b_1_10-01-202 (12:51):
yeah,
rory-liebhart_1_10-01-2 (12:51):
hubris.
sweet-eddie-b_1_10-01-2025_1 (12:52):
I, I was gonna say that.
I don't know if that's as muchYeah, that's a fail.
That's like a fail between,between the ears
rory-liebhart_1_10-01-202 (12:59):
True.
emily-sander_1_10-01-2025_ (13:01):
They can't get rid of me.
sweet-eddie-b_1_10-01-2025 (13:02):
they wouldn't, they wouldn't have
bought the business if theythought they couldn't have run
it without you.
rory-liebhart_1_10-01 (13:06):
diligence and don't have contingency
plans?
A bbc, we talk about it in ourbook.
I, know, and by the way, our,our audio book's out, it came
out this week.
Little plug there.
But
emily-sander_1_10-01-2025 (13:16):
ding, ding.
rory-liebhart_1_10-01-202 (13:16):
ding,
emily-sander_1_10-01-2025_15 (13:17):
If
rory-liebhart_1_10-01-2025_ (13:17):
But yeah.
emily-sander_1_10-01-2025_1 (13:18):
you wanna hear these voices on a
audio book, then check it out inthe show notes below.
sweet-eddie-b_1_10-01-2025_ (13:22):
The Dult tones.
rory-liebhart_1_10-01-202 (13:24):
Yeah.
sweet-eddie-b_1_10-01-2025_ (13:24):
the dult tones.
rory-liebhart_1_10-01-2025_ (13:26):
but yeah, I, I think, um, yeah,
it's, it's, it's really, yeah.
You can't, you can't avoidthose, those conflicts in a lot
of cases.
You know, you just can't,
sweet-eddie-b_1_10-01-2025_ (13:38):
No.
And it, and it goes, it, it tiesinto a little bit about what you
were saying, Emily, where whenyou were the founder, you were
used to having, like, everybody,everybody bow down and, and kind
of, you, you are the, the centerof attention and the challenge
that some founders run into istheir team still treats them
(14:00):
that way, right.
rory-liebhart_1_10-01-202 (14:01):
Yeah.
Well said.
sweet-eddie-b_1_10-01-2 (14:03):
They're being pushed down as the
employee from the sponsor, andthey just don't, they really
just don't know how to handlethat.
I mean, that's a, just like,it's a, it's a, and they don't
want to show to their team.
They're not in charge.
And it's tough to go, well, youknow, I can't do it because the
private equity guy says, Ican't,
emily-sander_1_10-01-202 (14:23):
there, so, okay.
I think we've all seen this.
There's.
The PE guys play nice as long asthey can.
'cause they don't want trouble.
If they
sweet-eddie-b_1_10-01-202 (14:29):
Nope.
emily-sander_1_10-01-2025_ (14:30):
have a CEO or founder stay in there
and be fine, that's great.
Some founders make thetransition, they like, they get
on board.
But there comes a point ameeting where the rubber meets
the road and it's basically likeyou are not in charge or that's
not your call.
And it just dawns on the founderwhere it's like,
sweet-eddie-b_1_10-01-2025 (14:47):
The, that's not your call.
Yeah.
That your, that's not your call.
I've, I've been in those boardmeetings
emily-sander_1_10-01-2025_15 (14:53):
So
sweet-eddie-b_1_10-01-2025_ (14:53):
and that.
Yep.
rory-liebhart_1_10-01-202 (14:54):
We've been
emily-sander_1_10-01-2025 (14:54):
makes grown men.
puddles
rory-liebhart_1_10-01-202 (14:57):
We've been in, we've all three, been
in the same meeting.
Yeah.
Um,
emily-sander_1_10-01-2025_1 (15:03):
men turn to puddles.
Yes.
rory-liebhart_1_10-01-2025_ (15:05):
you know, at the end of the day, you
know, if you may have once ownedthe entire pie, but you now own
a minority share, and it mightbe a small minority share, so
just by nature you don't havethe, you can't call the shots,
you know, unless you have somesort of a.
Some provisions we've talkedabout again, but like preserving
your voting rights and thingslike that.
(15:26):
You know, you are, you are, youare a lesser, lesser player From
the ownership standpoint, that'swhere the
emily-sander_1_10-01-2025_1 (15:32):
Not a lesser person, just a lesser
player.
So
rory-liebhart_1_10-01-2025_ (15:34):
no.
Sometimes a lesser person, but,you
emily-sander_1_10-01-2025_ (15:36):
well sometimes lesser person.
But I think to avoid that fail.
So the fail is not fullyknowing, recognizing,
internalizing, like
rory-liebhart_1_10-01-2025 (15:45):
That
emily-sander_1_10-01-2025_15 (15:45):
is the
rory-liebhart_1_10-01-2025_15 (15:46):
I think
emily-sander_1_10-01-2025 (15:46):
gonna happen.
rory-liebhart_1_10-01-2025 (15:47):
just being, being realistic, you
know,
emily-sander_1_10-01-2025 (15:50):
Okay, that's, that's fail number
three.
All right.
rory-liebhart_1_10-01-202 (15:52):
yeah, yeah.
I think it kind of comes hand inhand and Ed talked about it is
like it's gonna be a differentkind of company when you're
owned by a bigger company or aprofessional investment company,
PE you're gonna have things thatyou might not be used to doing.
You know, reporting, uh, certainlevels of budgeting, KPI,
(16:15):
tracking, name it, you know, um,professionalizing your firm.
So you may have gotten your,your firm just your brilliance
and charisma, charisma.
To a certain point, but youknow, you could only take it so
far.
Obviously otherwise you wouldn'thave needed on additional
capital.
You would've just bootstrappedin and may may still run on
business that you had up untilthat point.
(16:36):
But
emily-sander_1_10-01-2025_ (16:37):
The, the.
rory-liebhart_1_10-01-2025_ (16:38):
fun probably for, uh, a founder in a
lot of cases.
And I, I'm only saying that I'mnot sort of like making light of
it, but it's true, like theorganizational structure of
PE-backed company is verydifferent than.
Founder run, I call the shots.
You know, we do what I want todo with product, customers,
pricing, all that stuff.
Now all of a sudden you now havepeople who've got material
(17:00):
investment.
You have, know, the deviation toyour financial performance could
be very problematic becauseyou've likely taken on a bunch
more debt that you have toservice.
you know, you have to maintainmanaging the business to the
numbers.
KPIs again, you know, data,data,
emily-sander_1_10-01-2025 (17:17):
Well, I think Rory, in, in all of what
you're saying is like you haveto answer for your decisions and
the answer can't be because Iwanted to
rory-liebhart_1_10-01-2025_15 (17:24):
a
emily-sander_1_10-01-2025 (17:24):
like, as I said, so
sweet-eddie-b_1_10-01-2025 (17:25):
Yep.
rory-liebhart_1_10-01-2025_ (17:26):
put it.
Precisely
emily-sander_1_10-01-2025_1 (17:27):
and you, and you could get away with
that before.
That was a perfectly validanswer'cause I said so.
Okay, sounds good.
Sounds.
rory-liebhart_1_10-01-2025 (17:32):
I'll say it in truth, I think maybe
some of that still plays, likeyou can get away with a lot
until you, you don't starthitting the numbers that you put
in front of and your
sweet-eddie-b_1_10-01-2025 (17:41):
That was, that was my number.
That was my number four.
rory-liebhart_1_10-01-2025_ (17:43):
let you take it
emily-sander_1_10-01-202 (17:44):
Number four.
sweet-eddie-b_1_10-01-202 (17:44):
Yeah.
Number four is you put out aforecast that you can't hit.
rory-liebhart_1_10-01-202 (17:50):
Yeah.
Yeah,
emily-sander_1_10-01-2025 (17:52):
don't do that.
sweet-eddie-b_1_10-01-2025_ (17:54):
And you know, we as we as uh, chief
executives have a tendency towanna set, especially with our
sales teams, you know,optimistic.
Aggressive stretch goals, andwe're used to putting those in
place.
We're used to driving toward,you know, how can we drive
faster, harder, faster, harder?
(18:15):
And you put that in front of theprivate equity guys and you
don't.
Aren't collaborative around,here's my assumptions.
This is, here's a base case,here's a stretch case and here's
a worst case.
And kind of do your scenarioanalysis and show the inputs.
And I've seen enough privateequity guy or or founders going
(18:36):
into private equitytransactions.
They close the transaction, thattransaction's closed on their
projections going into thetransaction, which were probably
rosy and aggressive.
And then they don't have anhonest discussion with the
private equity sponsor.
During diligence or postdiligence around the rosy and
aggressive, they start to missand then they don't have the
(18:58):
conversation'cause they justhope it'll disappear and go
away.
rory-liebhart_1_10-01-202 (19:01):
sure.
emily-sander_1_10-01-2025_1 (19:02):
the thing.
They, they somehow, I've seenthis, they, somehow think the PE
guys will forget the numbers youtold them.
sweet-eddie-b_1_10-01-2025_15 (19:09):
P guys don't forget numbers.
rory-liebhart_1_10-01-2025_1 (19:11):
uh
emily-sander_1_10-01-2025_ (19:11):
It's like, what?
No, they're gonna like the the,no, we can, I can talk'em off.
I can talk'em off, Emily.
No, you can't.
You don't think they're gonna belike on March 30th of this year,
you said dah, dah, dah, dah.
sweet-eddie-b_1_10-01-2025_15 (19:23):
I know one, I know one PE guy who,
you know every, every number yousaid went and Evernote
rory-liebhart_1_10-01-202 (19:29):
Yeah.
sweet-eddie-b_1_10-01-2025 (19:29):
and, and then it would be searched
and it would come out and theywould reference that to you
rory-liebhart_1_10-01-202 (19:35):
Yeah, I,
sweet-eddie-b_1_10-01-202 (19:35):
time.
rory-liebhart_1_10-01-2025_1 (19:36):
I,
sweet-eddie-b_1_10-01-2025_ (19:36):
Now they might, they'll forget their
mom's birthday before theyforget a number.
You told them on a projection
rory-liebhart_1_10-01-202 (19:42):
yeah.
sweet-eddie-b_1_10-01-202 (19:43):
ain't no lie.
That's reality.
rory-liebhart_1_10-01-2025_15 (19:45):
I mean,
emily-sander_1_10-01-2025 (19:45):
Yeah.
rory-liebhart_1_10-01-2025_15 (19:46):
I can honestly say with a straight
face, I've never, I've nevercomprised bs, you know, in a
proforma that we've put put outthere for suitors to, but.
emily-sander_1_10-01-2025_150 (19:54):
I like how you just said comprised
bs.
This is like, these are Rorysthat are now appearing.
rory-liebhart_1_10-01-202 (19:59):
Yeah, so, but what I will say is this,
you put out a forecast, behonest here.
The other side has a differentfor forecast on their side.
They've got a, they've gotbasically a compression
forecast, which is to say.
Based on the key drivers of thisbusiness and stuff goes haywire.
Here's what it looks like.
They wouldn't buy the businessif they didn't look at all those
(20:21):
things.
So, you know, but to what Edsaid and what you said, also,
Emily, I have had conversationstwo years after a sale, not just
with PE, but also strategicbuyers, where they point to
something that, you know, I hadmodeled out and they said, this
is what you said this was gonnado.
And it may be three years sinceI put that together.
(20:43):
like.
True.
But a lot has changed and so,you know, anyway, point being is
you think these things mightjust be like glazed over and,
and just like not paid attentionto or, you know, given a cursory
review.
But no, that's not the case atall.
They're very thoroughlyreviewed, scenario analyzed to
(21:05):
the, you know, nth degree.
But they're always gonna comeback and kind of you to what you
committed to, whether or notthey actually believe it's
achievable or not.
And it's just how it goes.
And so, so don't take my, ourpoint here is don't take
anything lightly.
I mean, be very serious aboutwhat you're presenting as far as
the view on your business anddefensible.
(21:26):
Um, you know, Rosie is good insome cases if you think there's
a high probability of it beingmet.
You know, sandbagging is.
By necessity.
Pretty dumb because then they'llbasically point to that and give
you a valuation based on whatyou're showing them.
And you can't really say, no,well, I'm, I'd sandbag that.
That's not you.
You should pay me more.
If they're gonna be like, no Fyou anyway.
(21:47):
So it's gotta have that sort ofGoldilocks.
It can't be too bullshit.
Can't be, can't be bullshit atall.
It has to be credible.
But you also, you don't serveyourself well.
By sandbagging it artificiallyeither just with
emily-sander_1_10-01-2025_15 (22:00):
I.
rory-liebhart_1_10- (22:00):
information you have put out, the best view
you have, you know?
emily-sander_1_10-01-2025 (22:04):
Yeah, and and founders sometimes
aren't used to that.
'cause given what we just said,like I call the shots, I make up
the numbers, we don't even havea forecast.
Two, you now need contingency A,B, and C.
And all of those need to bebacked up by numbers and data
and assumptions.
You can, you can explain, thenas any salesperson knows, first
number you throw out there,you're anchoring them to that
(22:25):
number.
rory-liebhart_1_10-01-2025_ (22:26):
why
emily-sander_1_10-01-2025_1 (22:26):
And then you have to do reverse
psychology to them.
rory-liebhart_1_10-01-202 (22:28):
yeah.
emily-sander_1_10-01-2025_1 (22:30):
It.
I mean, maybe we can just toucha little bit on, kind of an art
form of here's what's realisticand reasonable, but we know we
wanna be aggressive and we knowaggressive and achievable you
can do at the same time.
So how do you, is that ajudgment call?
Is that
sweet-eddie-b_1_10-01-20 (22:46):
That's a conver, that's the
conversation.
So that's, that is where I,where I will stress it.
Like, look, you don't, you haveto be.
You have to truly feel likeyou're in partnership with your
private equity sponsor and youhave to go look.
Here's my, here's my scenarios,and this is largely the CFO,
kinda to your point, Emily.
There's you normally, in aprivate equity investment, you
(23:08):
normally have like these threelevels of connection.
You've got your managingdirector, senior person that's
interacting with the chiefexecutive.
You generally will have a.
The director, vice president,principal level, that's
interacting with your chieffinancial officer.
rory-liebhart_1_10-01-202 (23:24):
Yeah.
sweet-eddie-b_1_10-01-2025 (23:24):
then you're gonna have some analysts
interacting with analysts,essentially kinda doing a lot of
the data, data work at, at thislevel where the CFO is working,
they should be work.
Any projections you're doingneeds to be one communicated by
the CFO up to the CEO.
So COO doesn't get over his skisor her skis.
rory-liebhart_1_10-01-2025 (23:44):
I've seen
sweet-eddie-b_1_10-01-2025 (23:44):
Give numbers.
Yep.
Give numbers that don't, thataren't real.
And then the second piece isthese, this development of what
the future is supposed to looklike, needs to be collaborative
at that CFO to principal, CFO,to vice president, CFO, to
director level, so that they'rewalking into the board meeting,
(24:05):
presenting.
A consensus forecast or aconsensus plan that management
has bought off on and that theprivate equity guys have worked
through.
And, and a lot of that beatingback and forth has happened in a
collaborative way and a trustingway at those lower levels, so
that that way when you get tothe board meeting and you've got
(24:26):
your senior person at the.
PE firm and your senior personat the company are not dis are
discussing it for maybe thefirst time the work has all been
done.
And if you surprise, it's whenyou surprise that's that's where
the problem occurs.
emily-sander_1_10-01-2025_15 (24:43):
Is that, is that a methodology or a
principle type of thing?
Like for instance, you know, youcome to partnership with the PE
group, like we are gonnaforecast aggressively.
Like that's just, we're gonnalean in really hard and whatever
you're gonna see from us isgonna be aggressive.
rory-liebhart_1_10-01-202 (24:57):
know.
I
emily-sander_1_10-01-2025_15 (24:57):
Or is it.
rory-liebhart_1_10-01-2025_ (24:58):
and true method of, of basically
preventing presenting things isyou, you always have a base
case.
You always have a stress case,and you always have an upside
case.
You're anchoring around the basecase, generally speaking, but
you need to communicate, youknow, what, what, what the
potential is both ways.
And so I think that's themechanical piece.
I think what, what, ed, reallyimportant that Ed alluded to, or
(25:21):
just that explicitly was like,have the conversation in a
genuine way, like collaborative,like, like you, you're sitting
at the same table.
From the same direction.
Looking at it as if you'realready partnered and say, this
is what we're gonna do, theseare the ways we can outperform
this.
It's gonna require more capital,it's gonna require
(25:41):
infrastructure, whatever,whatever that might be, type of
business.
Or like here's the exposure wehave.
Maybe you're in a consumerlending business and like the
macroeconomic drivers based on,you know, um.
Whatever elements of, you know,household income and all those
things like unemployment, likehere's what could go haywire,
(26:02):
you know, but we don't believethat's gonna happen for these
reasons.
I mean, so you're not trying tosell against yourself, but
sooner or later they're gonnaform their own opinions.
You'd rather have them formtheir own opinions based on
reality.
And, and really in a lot ofcases, the reality is what the
executive team.
Knows about the business.
Maybe they, they don't knoweverything they should, you
(26:23):
know, so informed.
Just, just, the point is don't,you're not serving yourself in
any way.
If you obfuscate informationyou, you
sweet-eddie-b_1_10-01-2025_ (26:32):
No.
rory-liebhart_1_10-01-2025 (26:33):
make stuff up or you justify things.
'cause very, these areprofessionals and they've seen
it all already, so,
emily-sander_1_10-01-2025_1 (26:40):
And I'm also thinking once you
partner with PE and you have theongoing forecast exercises you
do, is it kind of finding thatmind meld where like, okay,
here's how we do forecastingand, and that's simpatico with
rory-liebhart_1_10-01-202 (26:52):
Yeah,
emily-sander_1_10-01-2025_15 (26:52):
PE group's mindset around doing
forecasting.
Like I know for instance,there's a decision
rory-liebhart_1_10-01-2025_ (26:58):
way street on how that's dictated.
I'll say that.
It's like they have their way oflooking at things and you could
form your process to
sweet-eddie-b_1_10-01-2025_ (27:04):
and you're gonna have their way of
looking at things.
rory-liebhart_1_10- (27:06):
Absolutely.
emily-sander_1_10-01-2025 (27:07):
Rory, what is, what is the compression
you mentioned earlier?
Like the,
rory-liebhart_1_10-01-20 (27:12):
that's more of a stress case.
emily-sander_1_10-01-2025 (27:15):
okay.
rory-liebhart_1_10-01-2025 (27:15):
It's simply saying, Hey, this is the
downside potential based
emily-sander_1_10-01-2025 (27:19):
Okay.
rory-liebhart_1_10-01-2 (27:20):
factors In these scenarios, you could do
something really extreme or youcould just do something that
says, oh, you know, seasonalityin your earnings, or, you know,
maybe, maybe a, a, a negativedim view on the.
Economy influences your businessdepending on what it's, maybe
you've got like a manufacturingbusiness, the possibility of
tariffs going from like 20 to ahundred percent is like real,
you know, like of my formerclients is in that exact space
(27:45):
manufacturing.
They're like, yeah, we have toproject for the fact that
tariffs are gonna crush us.
So those are real conversations.
emily-sander_1_10-01-2025_1 (27:53):
All right.
The fifth and final fail for afounder when they're partnering
with private equity.
rory-liebhart_1_10-01-202 (27:59):
Well, I'll throw one out.
I don't know if it's the fifthor the final, so, it's like,
it's one that I think a founderin particular and, you know,
employees as well of a, of afounder purchased company.
Like what's the exit strategyhere?
Like what's the end game here?
Private equity does not mate forlife.
We know that.
(28:20):
So what is the end game?
You know, you may not havespecific timelines, but like,
are the types of discussions youhave before you cut a deal.
Like, it's like we're looking athow do we make one plus one
equal three here?
So what is the plan and whatare, what are we gonna be
expected to execute as amanagement team?
I should say like they're gonnawant to.
(28:40):
How you expect to make it go,one plus one equals three, and
how they can maybe support that.
But yeah, what is the exitstrategy?
Very simply.
emily-sander_1_10-01-2025_15 (28:50):
So going in with the end in mind,
understanding your risk premium,
rory-liebhart_1_10-01-2025_ (28:53):
I'd want
emily-sander_1_10-01-2025_1 (28:53):
all of those good things.
rory-liebhart_1_10-01-2025_1 (28:54):
am I gonna get paid out again?
Like, how am I gonna, likewhat's, what's my next bite at
the envelope?
If they, specifically to whatEd's saying is like if you roll
your equity, which means you'retaking less upfront, that's
maybe like a requirement.
You know, maybe not evennegotiable, but like, okay, if
I'm like deferring mycompensation or my, my proceeds.
(29:17):
Am I gonna be expected to notsee liquidity for 10 years or
are we talking like two or threeyears, like basic stuff?
Like that's kind of important.
sweet-eddie-b_1_10-01-202 (29:27):
Yeah, I think the, the.
Key is knowing you willtransact.
rory-liebhart_1_10-01-202 (29:33):
Yeah,
sweet-eddie-b_1_10-01-2025_ (29:33):
And so the other side of it is
rory-liebhart_1_10-01-2025_15 (29:36):
I
sweet-eddie-b_1_10-01-202 (29:36):
don't get too comfortable.
rory-liebhart_1_10-01-202 (29:38):
true.
sweet-eddie-b_1_10-01-2025_ (29:38):
And if you're performing well,
you're gonna transact faster,most likely.
And so as a result, the betteryou do, the more likely it is
you're gonna be disrupted with aokay.
We're gonna transact yourbusiness and so therefore we're
gonna disrupt your apple cart.
And I think some CEOs, the, theCEOs who are most successful
have kind of avoided one throughfour, and then they get to five
(30:03):
and they go and.
I'm, I'm, I've figured this outand now you're telling me I'm
getting sold to a strategic andI'm about to lose my job and my
folks are gonna get laid off.
Not that that ever happened.
Um, but yeah.
Yeah.
So I'm gonna get sold to astrategic, I'm gonna, yeah.
I'm gonna get my second bite ofthe apple and all that other
good stuff.
But I, I'm out of a job.
I, my folks are getting laidoff.
(30:24):
I, you know, again, the baby I,the baby I made, now I figured
out how to work with you guys,and this has gone well.
Now it's gonna be like, well.
No, it's, we're done.
Thanks.
Thanks for playing.
You know, time time's up and youknow, we're gonna flip this
business.
And so recognizing that thatbusiness will transact and
(30:44):
maintaining a healthy emotional.
State with respect to thebusiness, knowing that one, it's
not yours anymore, and two, itwill go away
rory-liebhart_1_10-01-2 (30:54):
Mm-hmm.
sweet-eddie-b_1_10-01-2025_ (30:55):
you and the business will get split
normally after.
Again, going through anotherexercise of transaction that you
went through the last time, um,is just something to keep in
mind and it's gonna bedisruptive.
You're gonna be expected toactually, you know, you may be
asked to do window dressinggoing into it.
So you may be asked to do somenon hires, preliminary layoffs,
(31:19):
you know, kind of do some stuffsix months in advance.
It's gonna make it much harderfor you to hit your numbers and
you'll be under more pressure tohit your numbers because you're
trying to, they're trying to getit ready for sale.
And so all that is just a longway of saying.
You will transact, it will bedisruptive, and you might've
figured out one through four andavoided those four, and you're
(31:41):
still gonna get whacked withnumber five because you're
probably gonna be comfortable atthat point and feel like you got
this thing mastered.
And that's exactly when they'regonna come in and go, okay, time
to sell.
I.
rory-liebhart_1_10-01-20 (31:51):
right.
Yeah.
And actually adjacent to that,I'll, I'll, I'll lump it under
this one, but it could actuallyhave gone through another, gone
under a couple of the others islike, what does doing this deal
lock you up from doing?
In other words,
emily-sander_1_10-0 (32:05):
Opportunity costs.
rory-liebhart_1_10-01-2025_15 (32:07):
I mean, if you are brilliant in
this space you all of a suddenget six months into that deal,
post-sale, post all your thingsyou signed and you're like, I
hate this.
I'll just go freaking do thismyself again.
No, you might not.
sweet-eddie-b_1_10-01-202 (32:22):
Yeah, you.
rory-liebhart_1_10-01-2025_1 (32:23):
be locking yourself out of that
and, and in, in exchange forthe, the compensation you took
on the deal.
So, know, that's another elementof to, to be.
Again, I'm honest with yourselfabout is like, is this, is this
possible?
Are you possibly content whereyou're no longer gonna be able
to be an entrepreneur in thisparticular space
emily-sander_1_10-01-2025 (32:44):
Well, well, there's,
rory-liebhart_1_10-01-2025_1 (32:45):
or something?
Who knows?
You know?
emily-sander_1_10-01-2025_ (32:46):
well there's like elements of like
control and ego we've talkedabout, but it's also about like
what is important to you rightnow?
what is important to you rightnow?
By the way, the answer to thatquestion changes as you go
through life.
rory-liebhart_1_10-01-202 (32:58):
true.
emily-sander_1_10-01-202 (32:59):
check, check in with your.
rory-liebhart_1_10-01-20 (33:00):
Alert.
emily-sander_1_10-01-20 (33:01):
Spoiler alert.
Yeah.
Um, but, and what you think isimportant might not be what's
actually important when youactually go through it.
So,
rory-liebhart_1_1 (33:09):
circumstances might inform that.
You know what I mean?
So
emily-sander_1_10-01-2025_1 (33:12):
but we were all just talking about
that before we jumped on airtoday.
Like what's important andthat's, that's changed or is
changing for each one of
sweet-eddie-b_1_10-01-2 (33:18):
Mm-hmm.
emily-sander_1_10-01-2025 (33:19):
just, it's life.
It's life.
But okay.
rory-liebhart_1_10-01-2025_1 (33:24):
is
emily-sander_1_10-01-2025 (33:24):
were, those were five, not the only
five.
I shouldn't have said FinalFive, but we could have done, we
could do part two.
rory-liebhart_1_10-01-2 (33:30):
through 10
emily-sander_1_10-01-2025_1 (33:30):
We,
rory-liebhart_1_10-01-2025_ (33:30):
uh, next, you know, down the road.
emily-sander_1_10-01-2025_15 (33:33):
we can do mistakes that PE firms
have made.
'cause they, they're
sweet-eddie-b_1_10-01-2025_1 (33:36):
Oh boy.
emily-sander_1_10-01-20 (33:36):
either.
So, I mean, this is just tip ofthe iceberg, but just heading
off like the major ones thatpeople listening like, please,
please avoid these, if you canreally think through them.
Make sure you know what you'regetting into.
rory-liebhart_1_10-01 (33:48):
Listeners like, comment, subscribe, and if
you have questions, hit us up.
You know?
Absolutely.
love
emily-sander_1_10-01-2025_15 (33:53):
We are here to help.
rory-liebhart_1_10-01-2 (33:54):
there's only so much we can cover in 35,
40 minutes, you know.
emily-sander_1_10-01-2025 (33:58):
we've got some great comments and
questions, clarifying questionsin the comments, so drop'em the
comments and you can alwaysreach out to us with our contact
info in the show notes.
But thanks, ed.
Thanks Rory.
rory-liebhart_1_10-01-2025 (34:08):
you.
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