Podcast Summary

New Books Network

Episode: Richard S. Ruback and Royce Yudkoff, "HBR Guide to Buying a Small Business: Think Big, Buy Small, Own Your Own Company"
Host: Caleb Zakrin
Guests: Rick Ruback & Royce Yudkoff
Air Date: November 24, 2025

Episode Overview

This episode explores alternative routes to entrepreneurship through buying established small businesses, based on the acclaimed book HBR Guide to Buying a Small Business by Harvard Business School professors Richard S. Ruback and Royce Yudkoff. The conversation challenges the popular image of the high-risk, high-reward tech startup and spotlights ETA (Entrepreneurship Through Acquisition) as a practical, rewarding, and accessible path for aspiring business owners—including those without prior CEO experience.

Main Topics & Key Insights

1. Backgrounds of the Authors

• Royce Yudkoff: HBS alumnus, private equity professional, and course developer specializing in acquiring mid-sized companies.
• Rick Ruback: Lifelong academic, expert in corporate finance, developed HBS’s small business curriculum in partnership with Yudkoff.
  [04:01–06:25]

2. ETA at Harvard: Who Should Consider It?

• Course Overview: 200 students per semester; open to all interested in practical corporate finance—not just aspiring searchers.
• No Early Evangelizing: Real-world case protagonists visit, inspiring self-reflection among students.
• Self-Selection: Most students realize post-course whether ETA fits them, often around Thanksgiving.
  [07:01–09:07]

3. Ideal Traits of an ETA Entrepreneur

• Diverse Backgrounds Succeed: No single profile; skills span sales, engineering, military, etc.
• Key Personal Qualities:
  • Decision-making confidence without paralysis
  • A blend of confidence and humility
  • Curiosity and grit
  • Willingness to work hard and accept responsibility
• Not Required: Previous CEO experience or love of risk—searchers work to minimize risk.
  [09:23–13:57]

4. The Emotional Side of Search

• Challenges: Emotional volatility, especially from failed deals and prolonged processes.
• Preparation Advice:
  • Get a dog (for unconditional support) — Rick Ruback [14:51]
  • Normalize the process by talking to current searchers
  • Be comfortable with uncertainty: “If you’re really short on self-confidence, maybe this isn’t the path for you.” — Rick Ruback [16:48]

5. Financing the Search

• Common Scenarios:
  • Family members as primary “investors” (housing, living support)
  • For others, self-promotion and demonstrating persistence is key – investors are betting on the individual, not the business idea.
    [17:33–19:28]

6. Search Stories & Strategies

• Case Highlight (Main Street Auto, Logan Leslie):
  • Transforming auto repair shops by centralizing admin, empowering local managers, and creating value for all stakeholders.
  • Demonstrates power of “rollups” and operational improvements over mere acquisition.
    [21:21–23:16]
• Industry Thesis vs Horizontal Search:
  • Some develop deep knowledge in a sector; others review all sorts of companies and discover unexpected niche gems.
    [23:16–24:20]

7. How to Find a Small Business to Buy

• Start with Brokers: 3,000-4,000 brokers in the US, plus listing sites like BizBuySell.
• “Bathing in deal flow”: Looking at many deals builds intuition about what makes a business attractive.
• Less Strategy, More Action: Avoid excessive planning (e.g., entity naming)—just start engaging with real listings.
  [25:24–27:28]

8. Red Flags & Due Diligence: Dismissing Bad Deals

• Why Are They Selling?: Retirements are common—not usually “bad news.”
• Quick Screens:
  • Long, stable profitability is a strong indicator.
  • Margin is key: “If you can only look at one number, look at margin…” — Rick Ruback [29:25]
  • Move on from low-margin businesses.
• Seller Motivation Often Private: Don’t overanalyze the reason for sale; focus on business fundamentals.
  [28:18–31:53]

9. Valuation in Small Business Acquisitions

• Typical Multiples: 4–4.5x pre-tax profit for firms with $700K–$1.2M profit—substantially lower than public market valuations.
• “The magic is in the multiples”: Few buyers able to operate these companies, so prices are more attractive.
  [32:46–34:21]

10. Raising Capital for ETA

• Distinct from Venture Capital:
  • Investors expect most deals to succeed (not a “home-run” approach)
  • Primary sources: high-net-worth individuals, specialized small funds, and banks (often 50–60% bank-financed)
    [35:02–35:50]

11. The First Year: Running Your New Business

• “Don’t catch the school bus and then crash it.”
• Universal Advice:
  • Avoid big, hard-to-reverse decisions in the first 6–12 months.
  • Focus on learning the business, managing day-to-day, and understanding real-world issues (e.g., weather, HR basics).
  • Seller often stays for a short transition—use this time to absorb knowledge.
  • “There is nothing that goofs a business up by making big changes before you know what those changes should be.” — Rick Ruback [41:52]
    [38:35–42:24]

12. Lessons from Students & The Power of Case Learning

• Continual Feedback: Regular updates from book readers and former students inform class content and cases.
• Pattern Recognition: Thousands of examples build wisdom on common challenges and best practices.
  [44:45–46:01]

13. ETA for International Students

• Popular Motivation: Many returnees want to stay in their home countries rather than be transferred abroad by multinationals.
• Lower Multiples, Higher Rewards: Less developed ETA ecosystems mean lower acquisition costs but also more creativity required.
• Example: In some countries, businesses acquired in exchange for a used car—a reminder to scale expectations to local context.
  [46:39–49:10]

14. “If You Did ETA Today…” — The Professors’ Hypothetical Search

• Yudkoff: Focus more on business characteristics (recurring revenue, low customer concentration, high margins) than on industry.
• Ruback: Location first—start with what’s available in a desired area, prefers blue-collar business, influenced by personal background.
  [50:07–54:09]

Notable Quotes & Memorable Moments

• On Character Requirements:

  “A curious mix of confidence and humility. Humility in dealing with other people...but confidence because you do have to make decisions and lead.” – Royce Yudkoff [09:23]

• On Risk:

  “People say, oh, entrepreneurs love risk. That is not the case...They do everything they can to minimize it. They don’t love it.” – Rick Ruback [13:11]

• On Endurance:

  “Get a dog. I really do recommend some form of unconditional love because you get beat up in the process.” – Rick Ruback [14:51]

• On Screening Deals:

  “If you can only look at one number, look at margin, and if the margin is high, then the firm is doing something right.” – Rick Ruback [29:25]

• On Valuation Attractiveness:

  “The magic is in the multiples.” – Rick Ruback, as quoted by Royce Yudkoff [32:46]

• On Post-Acquisition Caution:

  “Try to avoid really big, expensive decisions for six to twelve months...” – Royce Yudkoff [38:48]

Key Timestamps

• 04:01–06:25 — Guest introductions and backgrounds
• 07:01–09:07 — Introducing ETA and student interest
• 09:23–13:57 — Profile of successful search entrepreneurs
• 14:51–16:48 — Preparing emotionally for the search process
• 17:33–19:28 — Financing the search: family and networks
• 21:21–23:16 — Main Street Auto: a flagship case study
• 25:24–27:28 — Finding a company: using brokers and deal flow
• 28:18–31:53 — Screening for red flags and understanding seller motives
• 32:46–34:21 — Valuations: multiples and market dynamics
• 35:02–35:50 — Seriously, where does the money come from?
• 38:35–42:24 — The first year post-acquisition: what to do (and not do)
• 44:45–46:01 — Lessons from students, evolving cases
• 46:39–49:10 — International ETA: challenges and vast opportunity
• 50:07–54:09 — Professors’ own advice if they personally started a search

Style & Tone

The conversation was candid, humorous, and practical—emphasizing personal stories, honest assessments of risk, and actionable steps. Both guests stressed the accessibility of ETA and the variety of paths to entrepreneurship, consistently grounding advice in real-world cases and student experiences.

Conclusion

This episode serves as both inspiration and a practical roadmap for anyone considering small business ownership as an alternative to high-risk startups or corporate careers. Ruback and Yudkoff’s principles: know yourself, seek stability before novelty, act decisively, and remember that most small businesses are not just “boring”—they are the backbone of enduring entrepreneurial opportunity.