Rick Ruback

Those are two of the things that I think Rick and I have found are very powerful and students in their end of year evaluations routinely comment on those. So that's what I would offer as things that we've done well. Rick, thoughts?

Those are two of the things that I think Rick and I have found are very powerful and students in their end of year evaluations routinely comment on those. So that's what I would offer as things that we've done well. Rick, thoughts?

I would say we direct our students to businesses that are capital light. So once they buy a business, and we probably should have put this on our list of qualities, which is superb free cashflow characteristics, we are nudging them to business service companies where EBITDA almost exactly equals free cashflow. And so capital allocation decisions are very episodic.

I would say we direct our students to businesses that are capital light. So once they buy a business, and we probably should have put this on our list of qualities, which is superb free cashflow characteristics, we are nudging them to business service companies where EBITDA almost exactly equals free cashflow. And so capital allocation decisions are very episodic.

They usually center around a tuck under acquisition. Sometimes they're expenses that are really investments like launching a new sales force. And of course, they're taught how to do projections and see what kind of return on expense there is. But I don't think there's a lot of allocation that goes on in these businesses because of the nature of the businesses we suggest they buy.

They usually center around a tuck under acquisition. Sometimes they're expenses that are really investments like launching a new sales force. And of course, they're taught how to do projections and see what kind of return on expense there is. But I don't think there's a lot of allocation that goes on in these businesses because of the nature of the businesses we suggest they buy.

I agree with everything Rick just said. I'd just add a couple of numbers that add to this, which is the sense of possibility here. In the United States alone, because searching has become global, there are approximately 3,000 small business brokers, professionals who do nothing but intermediate small businesses.

I agree with everything Rick just said. I'd just add a couple of numbers that add to this, which is the sense of possibility here. In the United States alone, because searching has become global, there are approximately 3,000 small business brokers, professionals who do nothing but intermediate small businesses.

There's something like 300,000 small businesses that change hands every year where the seller sells. It is not that hard to get in the flow of this harder to filter and find a good business at the right price with a committed owner. But getting started at it and bathing in a flow of companies, which is how you learn and how you find, that's really not that hard.

There's something like 300,000 small businesses that change hands every year where the seller sells. It is not that hard to get in the flow of this harder to filter and find a good business at the right price with a committed owner. But getting started at it and bathing in a flow of companies, which is how you learn and how you find, that's really not that hard.

Do you agree with that, Royce? Yeah, totally. That's when these entrepreneurs have really learned what the customer wants and start to come up with programs and service lines that address that.

Do you agree with that, Royce? Yeah, totally. That's when these entrepreneurs have really learned what the customer wants and start to come up with programs and service lines that address that.

Before we go to that, I want to say one more thing. Will Thorndike, who you know well, and we know well, and has been a long time and thoughtful investor in this space, has actually looked at a lot of the data and concluded that everyone sells too early, that the successful companies really compound their success in year 7, 8, 10, 12, and that really there should be much longer holds.

Before we go to that, I want to say one more thing. Will Thorndike, who you know well, and we know well, and has been a long time and thoughtful investor in this space, has actually looked at a lot of the data and concluded that everyone sells too early, that the successful companies really compound their success in year 7, 8, 10, 12, and that really there should be much longer holds.

And I think we agree with that idea because the successful searchers we know really well keep getting better and better and the companies keep growing.

And I think we agree with that idea because the successful searchers we know really well keep getting better and better and the companies keep growing.

What takes searchers out more than anything else early, meaning year five or six of operating the company, is that they have 95% of their net worth in this one company and it's a good company, but their capital allocation is just not sensible anymore. And they're an entirely different manager than they were when they were a newly minted MBA.

What takes searchers out more than anything else early, meaning year five or six of operating the company, is that they have 95% of their net worth in this one company and it's a good company, but their capital allocation is just not sensible anymore. And they're an entirely different manager than they were when they were a newly minted MBA.

They are now an accomplished CEO entrepreneur with seven years of experience. And maybe there's a different economic deal that they could get on next. And in many cases, this propels a sale. which I think, Rick, I know you'll speak to this too, but I think we have questions about that.

They are now an accomplished CEO entrepreneur with seven years of experience. And maybe there's a different economic deal that they could get on next. And in many cases, this propels a sale. which I think, Rick, I know you'll speak to this too, but I think we have questions about that.