The Mike Ye Briefing

Season 1, Episode 4: The Side They Never Sat At

Welcome to The Mike Ye Briefing.

I’m Mike Ye.

This is Episode 4.

The Side They Never Sat At.

One of the most difficult things about selling a business is also one of the most obvious.

Most founders have never bought one.

They may have spent twenty years building a company.

They know every customer.

Every employee.

Every problem.

Every competitor.

They know which month is usually slow.

They know which customer always pays late.

They know which employee can fix almost anything.

They know which machine makes the funny noise but somehow keeps running.

They know why the business works.

Then one day, they decide to sell.

And for the first time, they sit across from someone whose job is not to understand the business the way the founder understands it.

The buyer has a different job.

The buyer has to decide whether they want to own it.

That sounds like a small distinction.

It is not.

It changes almost everything.

For much of my career, I sat on the buyer’s side of the table.

And one thing I learned is that founders and buyers can look at exactly the same fact and see two completely different things.

The founder says:

“This customer has been with me for fifteen years.”

The founder hears loyalty.

The buyer asks:

“How much revenue comes from that customer?”

The buyer may hear concentration.

The founder says:

“My customers only want to deal with me.”

The founder hears trust.

The buyer may hear dependency.

The founder says:

“My employees have been here forever. We’re like a family.”

The founder hears culture.

The buyer asks:

“Who actually makes the decisions?”

The buyer may hear lack of management depth.

The founder says:

“I know every part of this business.”

The founder hears experience.

The buyer asks:

“What happens when you leave?”

Neither side is necessarily wrong.

They are simply looking at the business from different places.

And if you are a founder preparing to sell, understanding that difference is very important.

Because the buyer is not buying your memories.

The buyer is not buying the years you worked weekends.

The buyer is not buying the nights you worried about payroll.

The buyer is not buying the sacrifice your family made.

Those things matter.

I respect them deeply.

My own family taught me what work and sacrifice mean.

But the buyer has to answer a different question.

What exactly am I taking ownership of?

And what happens after I do?

That is where the view begins to change.

Imagine a founder who built a business over thirty years.

The company generates five million dollars of revenue.

It makes good money.

Customers love the owner.

The owner personally knows every major account.

Whenever a customer has a problem, the owner gets the call.

Whenever the sales team has trouble closing something important, the owner steps in.

Whenever there is an operational problem, the owner knows how to solve it.

From the founder’s perspective, this may feel like strength.

Look how important I am to the business.

From the buyer’s perspective, the same fact can feel like risk.

What happens when you are gone?

That is why I often tell founders:

The traits that helped you build the business are not always the same traits that make the business transferable.

That can be a hard thing to hear.

Because founder heroics are often exactly what got the company through the early years.

You worked harder.

You knew more.

You cared more.

You took the calls nobody else wanted.

You fixed problems at midnight.

You personally kept the biggest customer happy.

That is how many good businesses are built.

But eventually, the question changes.

The question is no longer:

Can the founder make the business successful?

The question becomes:

Can the business remain successful without requiring the founder to do everything?

That is the buyer’s question.

And that is the side of the table many founders have never sat at.

Sourcing Journal is a good example.

When we acquired Sourcing Journal, Eddie Hertzman was the face of the company.

And when I say the face of the company, I really mean it.

Eddie did everything.

He knew the industry.

He knew the customers.

He knew the relationships.

He understood the editorial voice.

He understood the events business.

He knew the manufacturers, the brands, the people inside the supply chain.

A lot of what made Sourcing Journal valuable was connected to Eddie.

From Eddie’s perspective, that was one of the reasons the company had succeeded.

And he was right.

From our perspective as the buyer, it also created a very obvious question.

What happens after the acquisition if Eddie leaves?

You cannot simply pretend that dependency does not exist.

You have to structure around it.

So we signed Eddie to a multi-year earnout.

We wanted him involved through the transition.

We wanted the relationships to transfer.

We wanted the knowledge to transfer.

We wanted the business to continue growing while becoming part of a larger platform.

The earnout was not punishment for founder dependency.

It was a bridge.

It aligned Eddie’s success with ours and gave the business time to transition from a company where so much revolved around the founder into something that could operate successfully inside a larger organization.

That is an important distinction.

A buyer may identify a risk.

But identifying the risk is only half the work.

The better question is:

Can we design a structure that reduces it?

Sometimes that means an earnout.

Sometimes it means retained equity.

Sometimes it means a transition agreement.

Sometimes it means building a stronger management team before the founder leaves.

Sometimes it means transferring customer relationships gradually instead of pretending they become institutional on the day the deal closes.

The buyer lens is not simply:

Here is what is wrong.

It should also be:

How do we make this work?

I remember looking at other businesses where the financials were strong.

Revenue was growing.

Margins looked good.

The presentation was impressive.

Then we started asking questions.

Who owns the customer relationships?

The founder.

Who handles the largest sales opportunities?

The founder.

Who approves pricing?

The founder.

Who knows why certain customers receive certain terms?

The founder.

Who knows which employee should handle which problem?

The founder.

Who approves most major expenses?

The founder.

At some point, you realize something.

The company may have fifty employees.

But the operating system is still one person.

That does not mean it is a bad business.

It means the buyer has to think about what happens when that one person changes roles, loses interest, retires, or leaves after the transition period.

That affects value.

It affects structure.

It may affect how much of the purchase price is paid upfront.

It may affect whether there is an earnout.

It may affect whether the founder has to stay for one year or three years.

The founder sees the purchase agreement.

The buyer sees a transition risk that has to be solved.

Same business.

Different side of the table.

Customer concentration works the same way.

Imagine a founder tells me:

“Our largest customer is amazing. We have worked together for fifteen years. They would never leave.”

I believe the founder.

Maybe the relationship really is that strong.

But if that customer represents forty percent of revenue, the buyer still has to think differently.

Because after the acquisition, the buyer owns one hundred percent of that risk.

If the customer leaves, the seller does not have to replace the revenue anymore.

The buyer does.

So the buyer asks questions the founder may find frustrating.

Is there a contract?

How long does it run?

What are the termination provisions?

Who owns the relationship?

Does the customer have a change-of-control right?

Has the customer ever rebid the work?

Could they bring the service in-house?

Who are the competitors?

When was pricing last negotiated?

The founder may think:

You are making this sound much riskier than it really is.

Maybe.

But the buyer is not trying to disrespect the relationship.

The buyer is trying to understand the downside.

That is the buyer’s job.

And this is one of the most important things for a seller to understand.

Buyers do care about upside.

Of course they do.

Nobody buys a company hoping nothing good happens.

But buyers also spend a tremendous amount of time thinking about regret.

What could go wrong after we own this?

What did we miss?

What assumption are we making that may not hold?

What happens if the founder leaves?

What happens if the biggest customer leaves?

What happens if margins normalize?

What happens if the industry changes?

What happens if the technology becomes obsolete?

What happens if the employee we thought was critical decides not to stay?

What happens if the growth story turns out to be temporary?

The founder is often explaining why the business is special.

The buyer is also trying to understand how the business can hurt them.

Again, neither side is wrong.

It is just a different responsibility.

Long Beach Surgical is another good example.

When you looked at the center as it existed, it was a successful GI-focused outpatient surgical facility.

It had clean financials.

It had physicians.

It generated earnings.

The owners could look at it and reasonably say:

This is a good center.

And they were right.

But from the buyer side, we were asking something else.

What could this center become under a different structure?

We saw reimbursement rates that could potentially improve under institutional affiliation.

We saw the opportunity to add additional specialties.

We saw the possibility of diversifying beyond GI.

But we also understood something very basic.

A surgical center does not create value by itself.

The surgeons create the activity.

They bring the procedures.

They bring the patients.

They determine whether the operating rooms stay busy.

So when we structured the center, we made sure the most productive surgeons owned shares.

Their success became our success.

And our success became theirs.

That alignment mattered.

Instead of asking the surgeons to simply continue supporting a center that someone else now owned, they participated in the value they helped create.

When volume increased, they benefited.

When the center became more valuable, they benefited.

When we benefited, they benefited.

That sounds simple.

But alignment is one of the most important tools a buyer has.

You cannot always eliminate dependency.

Sometimes you turn the people you depend on into partners.

That is what we did.

And it is a lesson that extends far beyond healthcare.

If the future success of the business depends heavily on certain people, ask whether the economics reflect that reality.

If they do not, you may be relying on goodwill.

Goodwill is useful.

But incentives are stronger.

People respond differently when the success of the business is also their success.

That is another thing the buyer has to think about after closing.

The seller may think:

These surgeons have always supported the center.

The buyer asks:

Why will they continue supporting it when ownership changes?

That one word — why — matters.

Sometimes the answer is loyalty.

Sometimes it is convenience.

Sometimes it is economics.

Sometimes it is equity.

Sometimes it is all of them.

But the buyer has to understand it.

Because after the deal closes, assumptions become operating reality.

That is another reason the two sides can see different values in the exact same company.

The seller knows how the business has operated.

The buyer has to underwrite how the business will operate after the transaction.

BuzzAngle was similar.

The founder could look at BuzzAngle and see a music data business.

Customers.

Technology.

Methodology.

Revenue.

The things the company had already built.

Those were real assets.

But we were looking at another question.

What could BuzzAngle enable inside our portfolio?

Rolling Stone had tremendous authority in music and culture.

BuzzAngle had data.

Put the two together, and suddenly the asset could become part of something larger.

Rolling Stone Charts.

A new strategic position in the music industry.

The seller saw the company they built.

The buyer saw the move the company made possible.

Again:

Same asset.

Different side of the table.

This is why I do not think founders should wait until they receive an offer to start thinking like a buyer.

By then, the buyer is already doing it.

The founder should start earlier.

Take your own business and ask:

If I were buying this company, what would make me nervous?

Not what would make me excited.

Founders already know the exciting parts.

Start with the uncomfortable questions.

If I disappeared tomorrow, what would stop working?

Which customer would scare me the most if I were the buyer?

Which employee would be hardest to replace?

Which relationship exists because of the company, and which relationship exists because of me?

Which process is documented?

Which process exists only because somebody has been doing it for fifteen years and remembers how?

Which contract have I avoided cleaning up?

Which expense have I been calling temporary for the last three years?

Which part of my growth depends on a platform I do not control?

Which assumption about the future would a skeptical buyer challenge?

And if there are people the business cannot succeed without, are they properly aligned with the future of the company?

Those questions are not fun.

But they are extremely useful.

Because before there is a buyer, those issues are yours to improve.

You can build the management team.

You can spread customer relationships.

You can document the process.

You can clean up contracts.

You can reduce concentration.

You can give other employees decision-making authority.

You can make the company less dependent on you.

You can create incentives for the people whose continued participation matters.

You can turn weaknesses into projects.

Once the buyer arrives, the same issue changes.

The buyer now gets to decide how much the weakness matters.

That is the difference between preparation and leverage.

One of the things I enjoy about working with founders is seeing the moment when they begin to understand this.

At first, the buyer view can feel negative.

Why are we only talking about problems?

Why does the buyer keep asking about risk?

Why does the buyer not understand how special this company is?

But eventually, something clicks.

The goal is not to make the business look bad.

The goal is to see it clearly.

And once you see the business clearly, something interesting happens.

You often discover strengths the founder did not recognize either.

Maybe there is a manager inside the business who can become much more important.

That happened with SheMedia.

When we acquired SheMedia, Samantha Skey was the Chief Revenue Officer.

She was not the CEO.

But she stood out.

She had ideas.

She had energy.

She understood the creators.

She had credibility with the women who made up the network.

About six months after the acquisition, we promoted her to CEO.

She became the face of SheMedia.

And the business grew rapidly.

From the outside, someone might have looked at the organization chart and seen a CRO.

We saw someone who might become the leader of the next chapter.

That was part of the value too.

A buyer lens is not only about finding problems.

It is also about finding potential that the current structure may not fully capture.

That distinction matters.

Because sometimes founders assume a buyer is only trying to reduce the price.

Good buyers are trying to understand the truth.

The risks.

The opportunities.

The people.

The dependencies.

The incentives.

The things that are scarce.

The things that can be improved.

And the things that may become more valuable under different ownership.

That is the real work.

It also explains why two buyers may look at the same business and offer very different prices.

One buyer may see the business exactly as it exists today.

Another buyer may have distribution that makes the business more valuable.

Another may have technology.

Another may have better reimbursement.

Another may have a brand that changes the economics.

Another may already own an adjacent asset.

Another may have a structure that better aligns the people who create the value.

Another may see no strategic value at all.

The business did not change.

The buyer changed.

That is why strategic value is not some fixed number sitting inside a company.

Value exists partly in the relationship between the asset and the buyer.

That is something founders sometimes miss.

They say:

“My company is worth ten times EBITDA.”

Maybe.

To whom?

That is the more interesting question.

A financial buyer may see one value.

A strategic buyer may see another.

A competitor may see another.

A buyer that already owns the missing piece may see something completely different.

This is why understanding the buyer universe matters.

But there is another side to this.

Founders should not become so focused on what buyers think that they forget what they themselves want.

The buyer lens is a tool.

It is not the final answer.

If a buyer says your business has a weakness, that does not mean you have to agree with every conclusion.

If a buyer offers a price, that does not mean that is the value you have to accept.

If the buyer wants you to stay for five years and you are selling because you want to retire, the highest offer may still be the wrong offer.

The founder has their own side of the table for a reason.

That is why judgment matters.

Understand how the buyer sees the business.

Then decide what that information means for you.

Maybe you fix the problem.

Maybe you challenge the assumption.

Maybe you provide better evidence.

Maybe you find a different buyer.

Maybe you change the structure.

Maybe you use retained equity.

Maybe you use an earnout.

Maybe you align the key people economically.

Maybe you decide not to sell.

The point is not to surrender your view.

The point is to understand theirs.

I think about this in everyday life too.

My father was very good at looking at things from another person’s perspective.

He did not always agree.

In fact, sometimes he strongly disagreed.

Especially when it came to the Lakers.

But he wanted to understand why someone believed what they believed.

Politics.

Economics.

History.

Sports.

He would read different opinions and think about them.

That curiosity matters.

Because understanding someone else’s point of view does not require accepting it.

It gives you a better understanding of the problem.

M&A is no different.

The founder has spent years looking at the company from one side.

The buyer arrives with another view.

The best outcome usually comes when both sides understand what the other one is actually seeing.

For the founder, that work should begin early.

Not the week before the management presentation.

Not after the letter of intent.

Not when diligence has already started.

Earlier.

Look at your business as if you had never seen it before.

Pretend the history is not yours.

Pretend the relationships are not yours.

Pretend the sacrifices are not yours.

Pretend you are writing the check.

Then ask:

Would I buy this?

What would I love?

What would worry me?

What would I want explained?

What would I want fixed?

What would make me willing to pay more?

What would make me walk away?

What would I need the founder to do after closing?

Who else would I need to retain?

And how would I align the people whose behavior determines whether my investment succeeds?

And maybe the hardest question:

What am I seeing as strength simply because I have been living with it for so long?

That exercise can be uncomfortable.

But discomfort is useful when you still have time to do something about it.

That is the point.

The buyer will eventually look at the business this way.

You might as well get there first.

Because when the founder sees the weakness first, it becomes preparation.

When the buyer sees the weakness first, it becomes leverage.

And sometimes the answer is not to eliminate the weakness completely.

Sometimes the answer is to design around it.

With Eddie Hertzman and Sourcing Journal, that meant giving the founder a multi-year economic reason to help us make the transition successful.

With Long Beach Surgical, that meant making sure the surgeons creating the value also participated in the value.

Different businesses.

Different problems.

Same principle.

Understand what the business depends on.

Then align the structure with reality.

And sometimes, when the founder looks through the buyer’s eyes, they discover something else.

An asset they underestimated.

A leader they did not fully recognize.

A scarce capability.

A customer relationship that is more durable than they thought.

A strategic position another buyer may value much more highly.

The buyer lens does not only show you what is wrong.

Sometimes it shows you what you really own.

That is why understanding the other side matters.

In the next episode, we are going to look at one of the patterns that hides inside many successful businesses.

Dependency.

And why dependency can sometimes look exactly like growth.

A company can be growing.

Revenue can be increasing.

Customers can be coming in.

Everything can feel like it is working.

But if someone else controls the platform, the distribution, the economics, or the rules, the business may be becoming more dependent at the same time it is becoming bigger.

That is Episode 5.

Dependency Often Looks Like Growth.

I’m Mike Ye.

This is The Mike Ye Briefing.

And this season is about seeing clearly before consequence arrives.