Royce Yudkoff:

Welcome to Think Big, Buy Small, a podcast from Harvard Business School about entrepreneurship through acquisition. We’re your hosts, Royce Yudkoff…

Rick Ruback:

…and Rick Ruback. Starting on Monday, February 3^rd we’ll begin to release new episodes of Think Big, Buy Small. It will be Season Two. Royce and I are really looking forward to sharing some fantastic conversations with you. In the podcast’s second season, we’ll feature a mix of episodes, including new searcher journeys and some episodes to help listeners sharpen their skills on search. This season, we also speak with some investors, to get a better sense for how they think about investing in search, which we think will be a really helpful perspective to keep in mind when you’re looking for capital for your acquisition. Ahead of the Season Two release, we thought we’d build a bridge, of sorts, between the two seasons by first checking with our Season One guest, Geoff Duckworth, who was featured in the episode, “The Self-Funded Journey from Searcher To Seller.” Listeners may recall, Geoff not only successfully completed the ETA journey and acquired a small business, but that he went on to successfully sell his company. We ended our conversation with Geoff as we end all of our Think Big, Buy Small episodes, by asking him if he had any questions for us. This is what Geoff had to say:

Geoff Duckworth:

Because I've got you both here and you wrote the book, I'm in this position now where I made a little bit of money on the business. I made enough money to buy myself a little bit of a sabbatical and a little bit more financial security, let's say, but certainly not enough where I don't have to work any longer. You know, Rick, you and I had spoken a little bit about what do I do next? You feel like I should buy another business.

Rick Ruback:

I do.

Geoff Duckworth:

I'm kind of at a crossroads here. I think I could be happy running another business, but I'm also wondering if there's other ways to put this experience that I've developed to work.

Royce Yudkoff:

Well, Geoff, before we answer your question, I want to just ask you a question, which is, it sounds through its absence, like one option is not going back and working for someone else as an employee?

Rick Ruback:

I don't think that is actually off the table, based on other things you and I have talked about. Is it?

Geoff Duckworth:

Yeah, the day after I sold the business, a lot of that background stress lifted off. And I thought to myself, “I could probably be happy just being a worker for a little while.” Now, it's got to be the right role, and I feel like having been a boss, I feel like I could probably be a better employee than I was as an employee. There is an element too of, I have a different relationship with employment now than I have ever had in my life where like -

Rick Ruback:

You can quit.

Royce Yudkoff:

You can't tell me to do that.

Geoff Duckworth:

Right, you know, like at a certain point, I don't really want to do that. They're like, "Well, you have to." I'm like, "Well, I don't." I may not push that button ever but knowing that the button existed might give me enough freedom of the ego to be like, "Yeah, I can take lumps differently."

Rick Ruback:

Yeah, there's a phrase for that, but I guess we can't say that on the podcast.

Geoff Duckworth:

Yeah. If the deal that I had done had another zero or another comma in the thing, you know, I would be perfectly happy to just enjoy my time skiing and being in the mountains. But there's certain financial realities that come to play, so I need to make some money still, you know.

Rick Ruback:

Yeah, Royce, I'm interested in what you think about this. My answer is when you do something well and it succeeds, why not do it again?

Royce Yudkoff:

Rick, that's my answer too. I'm a big believer in “if something works for you, do it again”.

Rick Ruback:

Nothing succeeds like success, Geoff. And you were really successful at it. Why not do it again?

Rick Ruback:

Today, I’m going to check in with Geoff to see what he’s been up to since we last spoke. So, Geoff, tell us what is going on. Last time we talked, you had sold your business; you were thinking about what you were going to do with yourself and your life and your professional career; and were thinking about launching a geographic search. I wonder what’s going on.

Geoff Duckworth:

Yeah, so long story short, as of Friday a week ago, I am under LOI on a business.

Rick Ruback:

Congratulations! That's wonderful news. Where is the business?

Geoff Duckworth:

The business is in Vermont.

Rick Ruback:

That's great! You found a business in Vermont. Tell me a little bit about that process, because it is so hard to find businesses in small places, and Vermont is a lovely place but only 600,000 souls.

Geoff Duckworth:

So, with so many things in life, right, weaknesses and strengths are sometimes intertwined. Vermont has a challenge in the sense that it's a very small economy and not a huge number of businesses, period. A very much smaller number of businesses that would fit the typical search parameters, so then inevitably a very much smaller number than that are for sale right now, right?

Rick Ruback:

Yup, right.

Geoff Duckworth:

Now, on the other side of that, what I've found compared to searching even in Boston, which is a relatively small community as well...

Rick Ruback:

…which was the locale of your last search, really, north of Boston.

Geoff Duckworth:

Right. Outside Boston. You know, I was looking more or less an hour drive, ideally from the North shore of Boston, last time. But even then, we're talking about millions of people in that area.

Rick Ruback:

Sure.

Geoff Duckworth:

Here I was trying to be like more or less an hour from where I like to be in Waitsfield, Vermont. What I found as the positive side to a very, very small community is that everybody that I've reached out to has been very willing to engage and talk and help.

Rick Ruback:

That's fabulous.

Geoff Duckworth:

In the first search, I didn't have a tremendous amount of success with personal outreach and proprietary deal flow. Whereas this time, I feel like I had a greater success with that because I'd find somebody, let's say they're a venture capital guy in the Burlington area. And I'll be like, “Hey, I don't know there's anything there, but I just want to meet you and talk.” And everybody's like, “Sure, I'll either sit down with you on the phone or on Zoom or let's have a coffee.” And then they're like, “Well, I'm not the right person for you to talk to but let me suggest these three other people for you to talk to.”

Rick Ruback:

That's great.

Geoff Duckworth:

It's been that way all along. And then the other thing that I've found, which has been kind of interesting to see, is that the levers of government and pseudo-government organizations are just incredibly accessible in Vermont. For example, I met the Commissioner of the Department of Labor at some kind of like advanced manufacturing demonstration night that I went to, and I was just chatting with him about what I was trying to do. And he was like, “Huh, well, you're near Montpelier. If you wanted to have a coffee at some point, I'd be happy to meet you for a coffee.” So, I went into Montpelier and had an hour coffee with the Commissioner of the Department of Labor.

Rick Ruback:

Try doing that in Massachusetts.

Geoff Duckworth:

Try doing that in any state, you know? So, just in that respect, it’s been really helpful. And the regional economic development corporations, and things like that, like all those people have been very willing to give time and make introductions, so that's been super helpful. Turns out the deal that I have on the line right now was not found through any of that but it gave me a lot of hope. And definitely there's not like a ton of people doing it up here, right? So, it's not like these people are inundated with searchers and they're like, “Argh God, I'm so sick of searchers!”

Rick Ruback:

So, tell me a little bit about your confidence level going in. This is the second time you've done it. Was it easier, harder? Were you more confident, less confident?

Geoff Duckworth:

You know, I think from a recognizing good opportunities perspective, I think it's been a little bit easier. Like, I think I have a better sense for what “good” looks like and more willingness to be like, “Look, it doesn't have to be perfect.” Because I think a lot of searchers get hung up on trying to find a perfect deal versus a good deal.

Rick Ruback:

Right. And that's an education process. As Royce likes to say, you need to bathe yourself in deal flow, but you've already bathed yourself in deal flow. You were in the bathtub for a long time. So now you don't have to sit in the bubble bath quite so long to say, “Yeah, this is the kind of business I would like to run.”

Geoff Duckworth:

Yeah, so I think it's been easier to kind of be like, “Yeah, I think this fits. So, I think I can just sort of move forward.” From an evaluating deals perspective, I think it's been easier. There's a strong sense I get since 2018 or 2019, when I was doing this last time, that like the space is a lot more crowded.

Rick Ruback:

Mm-hmm.

Geoff Duckworth:

And so, what I've observed is that in the last go around, I'd be like, “Here's a teaser. That's interesting. Let me sign the NDA and get the SIM, and we'll see what we get.” And this time around, I'm like, “Oh, that's kind of an interesting teaser. Let me sign the NDA.” And then brokers are like, “Whoa, whoa, whoa, who are you? Why is this business interesting? And why are you a credible buyer?” I feel there's a lot more gatekeeping going on on the broker side. But as a second time searcher, I feel like I'm much more easily able to break through those gatekeeping because I can say like, “Look, I did this before and here's my LinkedIn and you can see my experience.” And I just have a lot more confidence to try to kind of cut through the nonsense. I'll see people sometimes be like, “This deal is not appropriate for search fund.” They'll sometimes say that in a listing, which I think is weird. I don't know why it wouldn't be. Maybe because it's not really bankable, which to me kind of makes it maybe not a great deal.

Rick Ruback:

Mm-hmm, yeah.

Geoff Duckworth:

Or you'll hear like little snippets in their comment or whatever about how they're sort of just fatigued from having to deal with so many searchers, which they say “searcher” like it's this bad thing. Alternately, it would be like a real estate agent being like, “I’m just so sick of dealing with all these people interested in buying houses.”

Rick Ruback:

You know, there was a bakery that I used to frequent in Maine and it was great. It made great bread, great donuts, all the things that a carb lover like me just can't get enough of. And then it went out of business. And I asked the person why they closed up. Why did they go out of business? They said, “We had so many customers, we just couldn't deal with them. So, we decided to just go out of business.” And so there is a weirdness, that sometimes people just feel overwhelmed with servicing their business and don't want to be engaged in it, be it a broker or a baker, I guess. It's amazing the craziness of business sometimes. What about your business, the one you're looking at? I know we're going to keep things general but is it bigger?

Geoff Duckworth:

It is bigger. It's not ten times bigger, but it's bigger than the last deal. But I'm approaching it with the same notion of trying to not take outside equity on the deal, if I can. And I believe that I can do this deal without outside equity, a little bit of profit from the sale of the last business.

Rick Ruback:

Sure.

Geoff Duckworth:

But it's a similar business in the sense that it's still a small business, it’s still one guy who’s owning it. But it has the benefit of a bit more of a management team, this time, which I think will be nice, to have people in functional roles. Hopefully that'll allow me to be in a bit more of a “work on the business” versus “work in the business” position.

Rick Ruback:

That's great, that makes a lot of sense to me. So, a few questions, why are you so hesitant about outside equity?

Geoff Duckworth:

In a general sense, money is easy to get when you don't need it and expensive and hard to get when you do need it.

Rick Ruback:

That sounds like an Abbott and Costello line right there.

Geoff Duckworth:

When business is going well, it's like really easy to get a line of credit, right? When business isn't going well, it's pretty hard to get a line of credit.

Rick Ruback:

Right, but that says you have some reserves before you need them.

Geoff Duckworth:

Right. But it's the bigger thing, which is to say, the people who are handing out money to people who need the money, make the rules on how the money gets handed out and generally make those rules in their favor.

Rick Ruback:

Yeah, although for you, as a self-funded searcher, you basically make the rule. I mean, the way most people do this is they figure out how much ownership they have to give for their outside investors to get a 35% rate of return. And they end up owning 80% or more of the company. So, it's not like a funded search, where they're making up the rules and you either live with them or you don't. You're in a position of much more flexibility.

Geoff Duckworth:

Yup. So, I agree with what you're saying. I still think that to achieve a 35% return, let's say, probably would necessitate a transaction at some point in the future, which I don't want to be tied to. In an ideal world, this would be a long-term hold.

Rick Ruback:

I get it.

Geoff Duckworth:

I'm buying this business not to turn it around and flip it. I'm buying this business to own it for a long period of time. In an ideal world, at some point in the future, there's a general manager who sits in my chair and I don't work there really that much any longer and maybe have moved on to adding to build a portfolio or maybe I'm a little bit older and it's just time to go skiing, or who knows what, right?

Rick Ruback:

Maybe Masters racing is in your future.

Geoff Duckworth:

Exactly. Yeah.

Rick Ruback:

You have a few decades ahead for that.

Geoff Duckworth:

Maybe I'll break down and take up golf someday but, gosh…

Rick Ruback:

Yeah, that's hard to believe.

Geoff Duckworth:

So, I really like the notion of being master of my own destiny.

Rick Ruback:

Yeah. And you feel like if you have 100% equity ownership that you have more of that control. I'm not sure that I agree with that but I understand why you think that. In part, it's because these equity contracts with self-funded searchers tend to have very different forms, so they don't require a liquidity event. There's usually a put-call agreement, where you get to repurchase the equity, or you collectively decide to keep it rolling. But I understand your thoughts. Let's move on. There is this concern that Vermont isn't a friendly environment for business. The governor seems very friendly in what he says, but historically it's not been. Is that a concern for you or not?

Geoff Duckworth:

Depending on what you're trying to do, I think certain sectors are harder than others. You know, like I think if you're trying to do any kind of like housing development or something like that, like Act 250 seems like it's a real problem. And I understand it was probably enacted in good faith with good intentions, but it just kind of seems like from a business perspective, it has a sort of a tendency to just sort of become a roadblock, right?

Rick Ruback:

Yeah. It's just another level of permitting. Permitting in Boston isn't so easy either, I hear.

Geoff Duckworth:

Permitting is, I think, a thing everywhere, and it's kind of understandable why, right?

Rick Ruback:

Absolutely.

Geoff Duckworth:

The places that are easy to get stuff done with limited permitting, are the same places that everybody's like, “Wow, the place has change so much. It's not what it used to be.”

Rick Ruback:

And how does your family think about a business in Vermont?

Geoff Duckworth:

The whole family really likes being in Vermont and if we can figure out a way where there's good school options for both boys, I think we would become a full-time Vermont family.

Rick Ruback:

This all sounds so exciting, Geoff.

Geoff Duckworth:

Yeah, I'm excited about it. I think I learned a lot in the last go around, both on the search side and the operations side, that hopefully I can avoid some missteps in both cases. This will be another blue-collar business that sort of has some manufacturing component. And I think I learned some lessons about how to effectively work with that type of workforce in the last go around. And I can probably maintain some trust that maybe I lost and had to rebuild in the first go-around, early on.

Rick Ruback:

And you think about this as a step up? It's a step up in size. It's a step up in where you want to live.

Geoff Duckworth:

Yup.

Rick Ruback:

So, I guess, I mean, you never know if a deal is going to make, but assuming it makes, the sort of round trip of selling your old business, taking some time to think about what you want to do and repotting in this other business has been a real plus.

Geoff Duckworth:

I would say a hundred percent. I mean it's been almost a year now since I closed on the sale of the business, and I definitely took some time to just enjoy myself and celebrate the win, I guess, call it.

Rick Ruback:

Yeah.

Geoff Duckworth:

But then, if we can get this deal done, which fingers crossed, I really would like to get the deal done - as long as it's a good deal, right? It will have been a significant upgrade and I don't think I could have gotten the first business to this next place like in a year.

Rick Ruback:

That's fabulous. Well, it will be a busy three months for you, with diligence and the like. Please keep us posted. Good luck on due diligence. Please reach out if there's anything I can do to be helpful.

Geoff Duckworth:

Yeah, I appreciate it.

Rick Ruback:

It was so great to catch up with Geoff. It’s so exciting that he has a business in Vermont under LOI. And as I said in Season One, nothing succeeds like success. Royce and I hope you’ll join us for Season Two of Think Big, Buy Small. Starting February 3^rd, tune in wherever you get your podcasts! 

Royce Yudkoff:

You’ve been listening to Think Big, Buy Small. We’re your hosts, Royce Yudkoff…

Rick Ruback:

…and Rick Ruback.

Royce Yudkoff:

Katie Zandbergen produced today’s episode.

Rick Ruback:

Craig McDonald is our audio engineer.

Royce Yudkoff:

We’ll be back with another episode of Think Big, Buy Small.