My guests today are Rick Ruback and Royce Yudkoff. Rick and Royce are Harvard Business School professors who teach their students how to search for, acquire, and run small business directly after graduation. It has been almost a decade since our first conversation, and unlike many past interviews that have become outdated due to technology or market changes, the core principles they shared about entrepreneurship through acquisition remain remarkably relevant today. They explore fascinating developments in the search-fund ecosystem, including the bifurcation between funded searchers targeting larger companies and self-funded entrepreneurs finding success with smaller businesses. Rick and Royce share their accumulated wisdom on what makes a company worth buying, why the "magic is in the multiples," and how their students consistently achieve impressive returns through patient, value-oriented business acquisition. Please enjoy my conversation with Rick Ruback and Royce Yudkoff.

For the full show notes, transcript, and links to mentioned content, check out the episode page⁠ here.⁠

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Editing and post-production work for this episode was provided by The Podcast Consultant (⁠https://thepodcastconsultant.com⁠).

Show Notes:

(00:00:00) Welcome to Invest Like the Best

(00:05:23) Changes in the Small Firm Acquisition Space

(00:06:52) The Impact of SBA Loans on Acquisition Entrepreneurship

(00:08:55) The Evolution of Entrepreneurship Through Acquisition

(00:10:09) Risk and Return in the Search Fund Model

(00:13:38) The Role of Investors in Funded and Unfunded Searches

(00:19:33) Criteria for a Good Acquisition Target

(00:28:36) The Growing Popularity of Self-Funded Searches

(00:43:21) Challenges and Red Flags in Small Firm Acquisitions

(00:49:47) Exploring Margin Expansion and Growth

(00:51:02) The Impact of Practical Teaching in Business Education

(00:52:12) Keys to a Successful Business Class

(00:53:30) The Role of Theory in Practical Business Education

(00:55:29) Challenges and Rewards of Teaching Business

(00:57:46) Capital Allocation in Small Businesses

(01:00:50) Advice for Aspiring Business Searchers

(01:03:45) Value Creation and Business Lifecycle

(01:08:20) Deciding to Leave Private Equity

(01:11:20) The Future of Higher Education in Business

(01:16:06) Ongoing Relationships with Former Students

(01:18:45) Favorite Business Cases to Teach

(01:24:46) Encouraging More People to Pursue Business Ownership

Does Gold Rise or Fall in a Deflation?