Welcome to Upper Market
Each week, I pull out my mental scorecard and feverishly grade each business that’s come up for sale.
I haven’t thought about doing it before, but:
Do you want an uncut video of me doing this?
What’s ahead in this Newsletter:
[Series]: Playing The Game - Avoid The Ceiling
This Week’s Deal
Last Week’s Deal
Playing the Game: Avoid The Ceiling
You’re going to hear me repeat this often. Everyone goes through this phase (even me):
Don’t play small.
I’m lucky enough to speak to a lot of you who are interested in buying a business.
To say it straight: small businesses are difficult to grow, have limited surplus capital and don’t have the resources you need to move fast.
A business that gives you $100,000 in earnings will cost you money and sanity.
A job that gives you $100,000 costs less (usually free), is realistic for most acquirers and will definitely save you a lot of stress.
One of the motivators for being in the game is building something that’s financially worthwhile.
I’m sharing with you the financial reality of what you’re considering.
Any money that you earn off your own efforts is going to feel meaningful. But it isn’t going to move the needle in the way that business needs it to.
Surplus cashflow allows you to navigate down periods, expand organically, invest in marketing, make key hires, buy another business and finally;
Invest in whatever wealth preservation strategies you already invest in.
If what the business spins out isn’t meaningful, you can miss the boat on all of these.
While you spend time playing barista, front of house and chef in the small cafe you caved on and bought.
The goal is to own - not be owned.
Summary:
Small businesses are hard to grow, capital-light and resource-poor. They don't rev the engine
A $100k business costs more than a $100k job in every way that matters
Surplus cashflow isn't a luxury. It's what allows you to navigate, expand, hire and acquire
If the business can't spin out meaningful money, you miss every downstream opportunity
The goal is to own, not be owned
This Week’s Deal: There is No Deal.
I know. I was disappointed too.
But you've come this far and I'm not going to leave you hanging.
Here's the deal and thesis I'm personally working on right now with partners of mine from the UK.
Notes:
Melbourne-based healthcare talent agency
B2B model - supplies healthcare businesses with workers when they're short-staffed
$4M buy price, $1M net earnings (prior to due diligence)
4x multiple on earnings at asking price
Thesis Notes:
Healthcare in Australia is primarily government-funded through the NDIS, making demand relatively stable and recession-resistant
Direct healthcare providers are margin-constrained. Scheduling employed staff profitably is difficult
A talent agency sits above this problem. They invoice the healthcare business for work completed and pay contractors only when work is done
The client relationship is with the healthcare business, not the worker. This makes their clients sticky.
Revenue repeats as long as the client is understaffed, which in Australian healthcare, is structural
What I'm unsure of:
Talent procurement - how are they consistently sourcing contractors and where does that break?
Geographic expansion - is there a credible pathway into Sydney and Brisbane, and what does that require operationally?
Owner dependency - haven't mapped out their involvement yet to determine the true cost of replacing them
Contractor classification risk - are workers engaged as genuine contractors or is there reclassification exposure under Fair Work?
Client concentration - how many healthcare businesses make up the revenue, and what happens if the top two or three churn?
NDIS policy risk - government funding settings can shift. Worth understanding how exposed the client base is to any pricing or eligibility changes
Acquisition Pathway into Private Care - I would only pull this trigger if there are clear synergies. For example, buying a Private Care business that already uses a competitor to the Talent Business.
If this goes somewhere, I’ll be sure to let you know.
Last Week’s Deal: Synthetic Turf Installation
Who would have thought there’d be an entire business dedicated to fake grass?
3,000+ projects delivered. Residential, commercial and education sectors. Importer advantage. Compliance-driven, non-discretionary spend.
Niche.
The systems are the standout. Custom quoting tools, a structured CRM and a proprietary Deal Intelligence Workspace Application means the sales operation has discipline behind it. Leads are tracked, followed up and converted. Not very common in trades businesses.
The team covers sales, operations, warehouse, technical design and finance. This business has the shape of something that can operate without you. That's the goal.
What I'd Want to Understand:
First is how much of the revenue is residential vs commercial and education. The compliance-driven segments tend to be stickier and more defensible. I'd want to know what that split looks like.
Second is how the leads are being generated. Strong systems are worth less if the top of the funnel is fragile or over-reliant on one channel.
Third is the hiring and training process. Tradespeople normally slot into disciplines that they can grow in. What attracts people to work for this business and how are they trained? This is a potential bottleneck if you wanted to scale.
Growth Angle: Schools, childcare and multi-sport surfaces are potentially underserved in the regions. If the systems are as strong as described and you have distribution to solve this problem, there's a clear case for pushing harder into these channels and a national brand is a plausible outcome.
The Drawbacks: This is a project-based business. That means revenue isn't fully recurring and installation requires coordinating people and equipment. Staff capability and retention matters more than most people realise in this type of operation.
Final Thought: A business with 3,000+ projects behind it, importer margins and a team in place doesn't come around often. The question is whether the systems and team hold without the owner as stated.
If you want more details on either of these businesses or would like an introduction to the sellers, just reply to this email.
