Welcome to Upper Market

Here's a strange one - studies of decision-making find people take more risks in sunshine and turn cautious when the weather sours. Traders, shoppers, even judges - all a little braver on a clear day.

Worth remembering as spring arrives and everyone's mood lifts. The business that looks irresistible on a bright September morning is the same business it was in the July gloom.

Buy on the numbers, not forecasts.

And happy incoming September

What's ahead in this Newsletter:

Speed Running Capitalism

Official Release date: 20th September. Pre Order Here

YouTube Videos from the Week:

"Grown almost entirely through word of mouth" is one of the most revealing lines a listing can contain - and it says two opposite things at once.

On one hand, it's a genuine compliment to the business. Word of mouth can't be bought; it's what happens when a product is good enough that customers do the selling for free. A business that's grown for a decade on referrals alone has a strong reputation, high quality of work, clear trust - that a fresh competitor with a big ad budget can't just buy their way into. That's a signal of substance, and it's worth respecting.

On the other hand, it's a confession: there is no marketing engine. The business grows when customers happen to recommend it, not when the owner decides to grow. There's no lever you can pull, no channel you can turn up, no repeatable way to win the next customer on demand. Growth is passive, and passive growth can be fragile - it drifts along at whatever pace the referrals happen to arrive, and it can stall the moment the reputation stops spreading or a key advocate moves on.

For a buyer, that combination is genuinely interesting, because it usually means the hard part is already done and the easy part is untouched. The hard part - building something people actually recommend - takes years and can't be shortcut. The easy part - putting a real marketing engine behind it - has simply never been attempted. So the upside is often refreshingly concrete: take a business with a genuine reputation and no marketing, add lead generation, a website and a sales process, and you're not hoping the product is good, you already know it is. You're simply giving a proven thing a way to grow on purpose instead of by accident.

Word of mouth proves the product is good. It also admits no one's ever tried to grow it on purpose.

But interrogate it before you fall in love. Confirm the reputation is real and attaches to the business, not just to a departing owner everyone happens to know and trust - because if the word of mouth is really the founder's personal network, it walks out the door with them. Check that demand is genuinely inbound and not quietly propped up by one big referrer. And be honest about your own ability to build the marketing engine that isn't there - because "clear headroom to add marketing" is only upside if you can actually do it.

A word-of-mouth business is a proven product waiting for a growth plan. If the reputation transfers and you can supply the plan, that's a lovely thing to buy. If the reputation is really the owner's, and you can't market either, you've bought a business that only grows when strangers happen to be kind.

Short Summary:

Adjusted earnings of about $463k, plus roughly $1m of stock included in the price. Price on application. A decade-old, nationwide specialist in European truck parts - and the whole deal turns on the quality of that inventory and the strength of the moat.

This is a Christchurch-based, nationwide business supplying OEM, aftermarket, reconditioned and used parts for European commercial trucks. The seller's pitch is barriers to entry - supplier relationships, technical know-how and inventory depth that would be "costly and time-consuming to replicate." That's a moat if it holds. The homework is the stock and the suppliers.

It supplies parts for leading European truck brands to customers throughout New Zealand, across multiple lines - OEM, aftermarket, reconditioned and quality used - so a customer can source a wide range from one trusted supplier. Ten-plus years of trading, a diversified customer base, an experienced team, and adjusted earnings around $463k, with about $1m of inventory included in the asking price. It's a distribution business with genuine tangible asset backing and, the seller argues, a defensible niche.

What I'd Want to Understand:

First is the stock, because $1m of it is in the price. Deep inventory is the moat here - having the part a customer needs, today - but it's also the risk. I'd want the inventory aged line by line: what's turning, what's sat for two years, and the honest resale value of the slow stuff. In a parts business with thousands of SKUs, some of that million is live and defensible, and some is shelf decoration at cost. You pay for the first, not the second.

Second is the supplier relationships, because they're the real barrier. "Diversified sourcing" and "strong supplier relationships" for European truck brands are the actual moat. So are they contracted and durable, or informal arrangements a manufacturer could cut, or hand to a competitor, tomorrow? A distribution business is only as defensible as its right to keep getting the product - I'd want that in writing, not just in reputation and a handshake.

Third is the adjusted earnings, and the working capital. "$463k adjusted" means add-backs - I'd want to see them, and confirm the number after paying for whatever the owner does. And this is an inventory business, so its cash is parked in stock: I'd want the real earnings after honestly funding the working capital the model needs, because a parts business grows by buying more stock before it sells it.

Fourth is the niche and its future. European commercial trucks are a specific, technical market - a genuine niche, which is the moat, but also a ceiling and a question mark. I'd want to understand the size of the NZ fleet, whether it's growing or shrinking, how the shift in trucks and drivetrains over the next decade affects parts demand, and who the technical expertise sits with in the team.

Growth Angle: A trusted, nationwide, one-stop parts supplier with deep inventory is a platform: the seller flags untapped digital - and an e-commerce and better-marketed front end on an established sourcing network is an obvious, concrete lever. Add adjacent brands or parts lines through the same supplier relationships, or bolt it onto an existing parts or workshop operation to share overhead and inventory. The hard asset - the sourcing network and the stock depth - is exactly what a competitor can't quickly build.

The Drawbacks: It's working-capital-heavy - a lot of cash lives in stock, some of which is inevitably slow - and it's a narrow, technical niche exposed to whatever happens to European truck volumes and technology. The moat depends on supplier relationships you don't fully control until you've read the agreements. And "price on application" plus "adjusted" earnings means the real number and the real multiple are still to be pinned down.

Final Thought: A defensible, nationwide specialist with real earnings and genuine barriers to entry is a genuinely good kind of business - the moat here is reasonable, not marketing. The whole deal comes down to two reads: how much of that $1m of stock is alive, and how secure the supplier relationships that create the moat actually are. Age the inventory, read the supply agreements, and you'll know whether you're buying a defensible cash machine or a warehouse with a good story.

This business isn’t the greatest I’ve ever seen, but based on what’s come up this week, this write up is the pick of the bunch.

If you want more details on any of these businesses or would like an introduction to the sellers, just reply to this email.

Around $863k of EBPITDA, three-year average. Asking $1.95m - about 2.3x. And the model behind it is the good kind: "clip the ticket" on every hour worked.

This is a 10-year-old Auckland labour hire business that places skilled staff with blue-chip clients and earns a margin on every hour they work. Recurring revenue, fast payment, lean overhead, and - importantly - not construction. On the model and the numbers, it's a genuinely attractive cash business. The questions are what the "specialised sector" actually is, and how sticky the placements really are.

Skilled workers are placed with established clients, and the business earns a margin on every hour billed - income that flows from ongoing placements rather than one-off recruitment fees, which gives strong weekly revenue and good forward visibility. It's traded profitably for over a decade, through recessions, government changes and a pandemic, on loyal long-term client relationships. Fast 7-day client payment, strong margins and low overhead mean it converts revenue to cash unusually well. The seller says a buyer needs no industry background - people and organisation skills matter more.

What I'd Want to Understand:

First is what the "specialised sector" actually is. The listing is deliberately coy, and it matters enormously. A specialised, non-construction labour pool could mean healthcare, traffic, security, aviation, industrial - each with different licensing, different labour supply, and different client economics. The whole risk profile hides behind that one undisclosed detail, so it's the first thing I'd want named.

Second is how recurring the recurring really is. "Ongoing placements" are stickier than one-off fees, but they're not contracts - a client can wind down a placement whenever their own workload drops. I'd want the average placement length, client tenure, and how revenue moved in the softer years, to see whether "recurring" means genuinely contracted or just habitually renewed.

Third is client and worker concentration on both sides. A labour hire business has two customer bases: the blue-chip clients who pay, and the skilled workers who deliver. I'd want the revenue share of the top few clients, and just as important, how the business finds, keeps and pays its workers - because in a tight labour market, the people you place are as scarce and as critical as the clients you place them with.

Fourth is who runs it, and what the "P" in EBPITDA hides. "No experience needed" hints it's fairly systemised, but I'd want to know what the current owner actually does day to day, whether there's a manager, and exactly what's added back to reach $863k. The three-year average is a good, honest frame; the adjustments are where I'd still do the work.

Growth Angle: It's a lean, cash-generative platform, so growth is about doing more of the same: the seller flags an improved digital presence, adjacent categories, and new sectors. Add real lead generation and a second vertical to an already-profitable placement engine and the margin structure carries it nicely. It's also a clean bolt-on for an existing recruitment or labour-hire operator who can drop the client base onto their own back office.

The Drawbacks: Labour hire lives on other companies' hiring appetite - resilient here, but never immune to a deep enough downturn. "Recurring" placements can still be switched off at the client's discretion. And a specialised worker pool can be as hard to maintain as it is valuable. The cash conversion and the track record are real strengths; the diligence is about how contracted, concentrated and defensible that recurring revenue actually is.

Final Thought: A decade-profitable, recession-tested labour hire business with genuine recurring revenue and excellent cash conversion is exactly the kind of boring machine that makes people money. It comes down to two answers: what the specialised sector is, and how sticky the placements are when a client's own work dries up. Get those, confirm the worker supply, and 2.3x for a real cash business looks well bought.

If you want more details on any of these businesses or would like an introduction to the sellers, just reply to this email.