Royce Yudkoff & Rick Ruback·November 11, 2024

The 2 Professors Who Helped Start the ETA Movement | Royce Yudkoff & Rick Ruback Interview

Rick Ruback (HBS tenured finance professor) and Royce Yudkoff (former private equity firm founder, HBS lecturer) are the co-authors of the HBR Guide to Buying a Small Business and co-hosts of the Think Big Buy Small podcast. This is a landmark 300th-episode interview on Acquiring Minds in which both professors discuss their 15-year collaboration building the ETA academic ecosystem at Harvard Business School. Rather than sharing their own acquisition story, they recount how discovering the dramatic valuation gap between small private businesses and larger comparables — 'the magic in the multiples' — inspired them to create a course that now attracts nearly 20% of the HBS graduating class and has produced ~4,000 alumni. They discuss the rise of self-funded search as a complement to traditional funded search, the role of the book (75,000+ copies sold) and podcast in democratizing ETA beyond elite business schools, and share their philosophical views on wealth creation through small business ownership as simultaneously personally fulfilling and socially valuable. Both professors also reveal that their own adult sons are currently searching for businesses to acquire, giving them a personal stake in the path they have spent 15 years evangelizing.

Deal facts

notes: No specific deal discussed. Guests are HBS professors and ETA educators/evangelists, not buyer-operators. They reference a case example of a business with ~$1.5M EBITDA used in teaching materials, and mention early case studies such as 'Great Eastern in Pet Foods' bought for approximately $700k equity at roughly 2.5x EBITDA, but these are illustrative examples, not the guests' own deals.

Why this business

Not applicable — guests did not buy a business. Royce Yudkoff had a prior career founding and running a private equity firm (ABY) for 25 years before joining HBS. Rick Ruback is a tenured HBS finance professor. Together they created a course on buying small businesses and co-authored the HBR Guide to Buying a Small Business after being struck by the 'magic in the multiples' — the dramatic valuation gap between small private companies and larger firms in the same industries.

What's working

The HBS course on buying small businesses has grown from 17 students in year one to nearly 20% of the graduating class (~194 students per year), with almost 4,000 total students over 15 years.
The HBR Guide to Buying a Small Business has sold over 75,000 copies, far exceeding the publisher's expectation of 10,000-20,000.
The Think Big Buy Small podcast extends their reach beyond campus, bringing ETA education to a broader audience including those without MBAs.
Self-funded/unfunded search has been normalized alongside traditional funded search, opening the path to more diverse participants.
Alumni consistently report that the course 'changed my life,' demonstrating lasting impact on career trajectories.

What's hard

ETA was initially perceived as a quirky, non-traditional path — early searchers were sometimes assumed to be unemployed or in psychological distress.
Family and in-law anxiety around the uncertainty and visibility of entrepreneurial outcomes versus corporate careers remains a real challenge for searchers.
Geographic constraints (e.g., Rick's son searching in New England, Royce's son mid-career searching) can limit the addressable market of businesses.
The pedigree concentration of early ETA practitioners (HBS, Stanford MBAs, finance backgrounds) means the path is still underrepresented among non-MBA professionals.
Students sometimes over-generalize lessons from 'Stephen King week' (failed search cases set in recessions/COVID) as 'don't buy before a downturn' rather than understanding what structural business characteristics create vulnerability under pressure.

Notable quotes

The magic is in the multiples — when we first looked at the space we had written a couple cases on running small firms but when we first looked at the acquisition of a small firm we said my word he's buying this firm at like two and a half times EBITDA maybe less... and we started looking at the market and talking to people and finding out that in this small firm space the multiples were really magical that the private company small company multiples were what would you say half to a third of what you had been trading when you were in the private equity business.

One of the students said — and one of the most amazing comments of the year I will say — she said well she was looking for something more interesting to do. And I thought to myself we have gone full circle... because this student felt that running a print shop with a million dollars of EBITDA was more interesting than being high up in the strategy department of a Fortune 500 company.

You're solving for two problems: one is to have a really fulfilling career where you metaphorically run to work every day because you like what you do, and the second is that you want it to be work that has a reasonable chance to give you the kind of living you aspire to... and I would assert that pool of opportunities that gives you both of those is large enough that reasonable people who are reasonably flexible can find something that brings both.

What you're getting is a business model that works. You're getting customers, you're getting workers, you're getting suppliers, you're getting a business model that works — and so many zero to ones they might have great technology but they don't have a business model that works.