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In 1988 Nestlé paid around £2.5 billion for Rowntree, the British chocolate maker, several times what its factories and machines were worth on paper. Along with the factories and machinery came the names on the wrappers: KitKat, Aero, Smarties, Rolo.

The chocolate costs pennies to make. The name costs billions. The name was what took up shelf space.

It’s magic when deal-making to find parts of business you can isolate and transact for value. Just like the BP Convenience Store Carve Out that could be happening right now.

What's ahead in this Newsletter:

Sometimes, what makes a consumer business valuable is invisible. The factory, the stock and the equipment turn up on the balance sheet, but what makes a customer pick your product off a crowded shelf; the name, the reputation, the trust, the design people recognise, sits nowhere in the accounts.

Not always, but sometimes, it’s worth more than everything else. When you buy a brand, you're buying the name, and working out its value can be a pain in the ass.

Here’s some good news for all Small Business Buyers…

Most of the time - the brand doesn’t stand for much. But tread carefully. Tell that to a business owner who’s either tattooed it on their body and feel it in their soul and you risk the chance that they’ll descend into undiscovered levels of heartbreak.

Brand is relevant - but as far as I see it; it’s relevant if it’s shit

When you open up a conversation around “intrinsic brand value”, you’re opening a can of worms. You have a small business owner, operating in as mall market, who doesn’t really make a whole lot of money and are in the grand scheme of things limited. Their brand isn’t going to change the world and become the next Nestlé.

There are a handful of small business where the value in the brand is meaningful, but what’s more meaningful is that the value that the customers get from spending money with you is fair and reliable.

That’s it. No art to it - and it’s not that deep.

The investment, time and skill required to become a household name that everyone knows and loves is astronomical - and this isn’t something that the local pool cleaning company really cares to achieve.

What they want, is a clean website, regular marking to existing clients and new clients, communicating that they have done and will continue to do a good job…

While maintaining a logo and brand presence that isn’t overly offensive.

Tread carefully when told “the brand alone is worth $400,000” - if you’re buying a small business, it’s all about the cashflow and repeatability of the asset.

Short Summary:

Earlier this week, I saw something interesting. What looks to be one (or potentially multiple) gas station owners are hoping to unload the rights to the convenience stores on the sites of property - or gas businesses that they own.

Interesting.

Enough so, that it warrants its own slot.

It’s not something that I’d spend too much time sniffing around (while I like the smell of gas, I’m aware it’s not healthy). But it points directly to a concept in business acquisition that I think is valuable for you to know.

It’s called a “Carve Out”.

Carving Out, is when you take an asset (or parts of an asset) and start selling them for capital (or sometimes no capital). Smart, but sometimes “crazy” concept to the naked eye.

A carve out can happen for a bunch of reasons - but we’re going to cover two.

1) Capital Reallocation - The asset (or pieces of) have a value to them. That’s capital. Rather than having the money sitting in that asset, it may be better of recouped and deployed in another opportunity.

2) Cutting Losses - The asset (or pieces of) are underperforming. Holding them, costs money to the current owner. In the hands of someone else, it might be more valuable.

Essentially, the convenience stores no longer make sense for the owner to own, they would prefer the money and it could be far better off for someone else to own them.

This is most common in Small Businesses when the asset would make more sense to be owned by someone who wants to step in and run the operation as a owner-operator, rather than staff it to be a managed operation.

From my eye - this tells me a couple of things:

1 - The stores are not actually profitable and;

2 - They’re a pain in the ass to run.

This isn’t a call for you to try buy any of them, but take a look if you like. You’ll see that they’re really just a dairy attached to a pump.

So what does this mean for you and how can you use a carve out to find your first acquisition?

There are businesses which have unprofitable or “annoying” profit centres which are causing more harm than good to the current owners. You’re in for a deal to pick this up, find a way to return them some of their capital and potentially walk off with a no-money down deal, or an asset that you can resell for cash in the future.

I welcome your thoughts, questions or commentary on this

300-plus properties under management, strong recurring management-fee income, and an owner return near $400,000 a year. Asking $1,375,000. An established residential property-management business with scale from day one, where the whole value sits in one question: how sticky are those 300 doors?

This is a residential property-management operation in Northland, running under a recognised franchise brand with the portfolio, team and systems already in place rather than a blank territory to build. Management fees on 300-plus properties throw off income that recurs month after month, largely independent of whether anyone's chasing new business that week. The homework is the durability of the rent roll, the franchise terms, and how much of that $400k is really the owner's wage.

It manages 300-plus residential properties across Whangarei and wider Northland as an exclusive franchised territory, with an experienced team handling day-to-day operations and established systems, training and support behind them. The business reports a business-owner return near $400,000 a year on strong recurring management-fee income, with tangible assets included and an optional premises lease available. It's pitched at an owner who wants to lead an established service business, focus on client relationships and keep growing the portfolio, and detailed financials are released to qualified buyers after an NDA.

What I'd Want to Understand:

First is the churn on that rent roll, because it's the whole asset. 300-plus properties is a headline, not a guarantee: I'd want how many properties the business manages now versus one and three years ago, how many landlords leave each year and why, and the average length a property stays on the roll. A rent roll that quietly loses 15% a year and tops up with new wins is a treadmill; one that holds its doors and adds to them is a compounding annuity. The retention number decides which of those I'd be buying.

Second is the franchise deed, because I'd be renting the right to run this. It operates under a franchise brand with franchisor approval required on sale, so I'd read the agreement closely: the royalty and marketing fees that come off the top, the term and renewal, the territory protections, what the franchisor can require me to spend, and the rules and cost of exiting when I eventually sell. The brand and systems are genuine value, but the deed sets how much of that $400k I actually keep and how free I am with the asset.

Third is what that "$400k owner return" really is. A business-owner return typically includes the owner's own labour, so if I want to step back and pay a manager to run it, that wage comes off and the hands-off number is lower. I'd confirm whether the ~$400k is before or after a full management salary and the franchise fees, and whether it's an actual recent result or a blend. At $1,375,000 that's roughly 3.4x the stated return, which is reasonable for sticky recurring income and dear if the income isn't as sticky as it looks.

Fourth is the Northland market and the regulatory load. Property management lives and dies on landlord relationships and on rules: healthy-homes standards, tenancy law, and anything that makes being a landlord harder can shrink the pool of properties to manage. I'd want the concentration across the biggest landlords (one investor with 30 properties leaving hurts), how the local rental market is trending, and how exposed the fees are to regulatory change and to competition from other managers in the region.

Growth Angle: The clearest lever is adding doors to a machine that already works: every new property is almost pure margin on top of an existing team and system, so growth through landlord referrals, local business development and relationship-building drops straight toward the bottom line. For a buyer with people skills or an existing property footprint, the franchise brand, training and exclusive territory are the slow, expensive things already done, leaving the fun part: filling the roll. Scale also makes the recurring income more defensible, since no single landlord can swing it.

The Drawbacks: You're buying the right to operate under someone else's brand, so franchise fees come off every dollar and your freedom to run and sell it is bound by the deed. The return likely includes the owner's labour, so the true passive figure is lower, and the entire value rests on retention you can't see until the financials open. Property management is also people-heavy and regulation-exposed, and a soft Northland rental market or a few departing landlords would be felt directly.

Final Thought: A 300-door rent roll with an experienced team, established systems and recurring management fees is exactly the kind of predictable, financeable, pay-you-while-you-sleep asset worth owning, if the doors stay. The deal turns almost entirely on retention and the franchise terms: prove the roll holds and grows, read the deed, and confirm what's left of the $400k after a manager and the franchise cut. Get those right and 3.4x for durable recurring income is fair. Get them wrong and you've paid an annuity price for a treadmill.

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