Welcome to Upper Market

The level of persistence needed to find the right business for you, shouldn’t be a surprise.

Most listings aren’t going to work - and that’s okay. We’re trying to rustle up a “life-changing” transaction.

It *should* take more effort than you realise.

What's ahead in this Newsletter:

YouTube Videos from the Week:

I’ve subconsciously always been aware that revenue isn’t the draw card when it comes to placing value on a business.

When I started buying businesses, I always heard the phrase “Million-Dollar Business”. To me, this meant that the business was making $1m in profit.

I slowly realised that it wasn’t the same definition everyone else was using.

You could imagine the shock when I realised it wasn’t even the “Valuation” of the business people were referring to…

But it was the revenue.

The revenue? You have to be kidding me.

In hindsight, I can kind of understand it. It’s a milestone to have a business bring in 7-figures of sales.

But it really means nothing, if you aren’t keeping any of it.

This is just a vanity metric: a big, true number that tells you almost nothing about the business you might own.

When there’s nothing else to lean on in the business, you could almost bet that the owners will be pointing towards revenue figures, rather than the profit, or the way that the business is run.

The art, is selling products/services at a price that can sustain the expenses it incurs as it provides the product/service, allows for overheads, income for the owner, plus surplus to reinvest and grow.

Don’t get me wrong, a big top line isn’t a bad thing - but it’s no reason to do a deal. It just points to several major points of failures that the business could hold:

If changing none of the above can fix the performance, you’re cooked.

Short Summary:

Large revenue or sales is a good indicator for product/service to market fit. But if it’s not resulting in profits, the next question should always be “Why?”

SDE of $1.83m. Asking $4.8m. Around 2.6x - and the biggest earner on the board this week.

It's a 20-year-old Auckland manufacturer of cabins and small homes, and it's riding a genuine tailwind: the rule change that lets small homes go up without consent. This seems like a legitimate claim.

The business builds cabins and small homes for residential and commercial customers, has traded for two decades, and comes with 20 skilled staff and $2.2m+ of plant, equipment, work-in-progress and stock included in the price. The owners are retiring. There's $1.4m of forward bookings already secured for the rest of 2026, and the seller points to the regulatory shift as a real demand driver.

Diversified customers, a booked pipeline, a policy tailwind and a proper asset base. It's the most substantial business of the three. Two numbers to interrogate before the multiple: the SDE, and the assets.

What I'd Want to Understand:

First is what's inside the SDE (see this week's briefing). $1.83m of seller's discretionary earnings includes the owners' pay and whatever else runs through the business. The owners are retiring, and you've got 20 staff - so how much of that $1.83m survives once you're paying a full team and a manager to replace two departing owners? That's the number the 2.6x should really be measured against.

Second is how much you're paying for the earnings versus the gear. $2.2m+ of the $4.8m is plant, equipment, WIP and stock. Back that out and you're paying roughly $2.6m for the earnings stream - which reframes the deal and changes how a bank funds it. I'd want the assets independently valued, and the WIP and stock aged: half-built cabins and slow stock aren't worth book value. Also - the cash reinvestment required to keep buying stock isn’t going to show up on the profit and loss. I’d be very wary of the cash flow in this business.

Third is the regulatory tailwind - is it durable? "Small homes now unconsented" is a real driver, but policy giveth and policy taketh away. I'd want to understand exactly what changed, how permanent it is, and how much of the pipeline depends on it. A demand driver a future government can reverse is a tailwind, not a moat. Construction comes and construction goes.

Fourth is the team and the retiring owners. Two owners are leaving a 20-person manufacturing operation. Who runs the floor, who holds the customer and supplier relationships, and is there a manager in place - or are the owners the management? A manufacturer losing its leadership needs someone to step in on day one.

Growth Angle: The seller lays out the levers: offer finance to buyers, build a rental portfolio using your own product, or open a second plant. The tailwind is doing the demand work; the constraint is capacity and capital. This is a business you scale by adding production and financing options, not by hunting for customers - which is the good kind of problem. I think this could be a good fit for a big property investor.

The Drawbacks: It's asset-heavy and cyclical - construction-adjacent, exposed to interest rates and building confidence - and it leans on a regulatory change that isn't guaranteed to last. The SDE flatters what a hands-off owner would actually keep, and it's the biggest cheque of the three, needing real asset-backing to fund. This is a buy for an operator or an aligned trade player, not a passive investor.

Final Thought: A profitable, 20-year manufacturer with a booked pipeline and a policy tailwind is a real business, not a listing gimmick. The whole question is how much of that $1.83m is left once the retiring owners are replaced and the assets are stripped out of the price. Rebuild the SDE honestly and you'll know whether 2.6x is buying an asset or an optimistic headline.

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

$570,000 profit. Asking $1.2m. Around 2.1x for an "award winning" trade business.

It's a Canterbury tiling business with a serious reputation - residential, architectural and small-to-medium commercial work, involved in multiple House of the Year projects with a range of builders. Year-on-year growth, solid cashflow, a strong forward pipeline, and new enquiries every week from builders, developers, private clients, and referrals from tile shops, architects and quantity surveyors.

It runs on skilled staff and subcontractors with modern, well-maintained gear. The seller pitches an obvious next step: push harder into the larger commercial market the business currently only dabbles in.

A profitable, growing, well-regarded trade with a clear growth lane. The questions are the ones every trade business raises: who does the work, and who brings it in.

What I'd Want to Understand:

First is the labour. Skilled tilers and reliable subcontractors are the whole delivery engine, and good ones are hard to find and keep. How many staff, how long have they been there, how much is subcontracted, and how exposed are you if a key tiler or two leaves? In the trades, capacity is people - and people are the constraint. How are they finding, training and retaining them?

Second is the owner's role. Someone prices the jobs, holds the architect and builder relationships, and keeps the work flowing. If that's the owner, the reputation and the pipeline may be more personal than the brand suggests. I'd want to know exactly what the owner does day-to-day and what breaks when they leave.

Third is where the work comes from. Weekly enquiries and referrals from architects, builders and QSs are a great sign - but referral relationships are personal. Do those referrers send work to the business, or to the owner? A pipeline built on a handful of relationships is a strength you need to make sure transfers.

Fourth is the cycle. The listing says demand holds "regardless of economic conditions" - I'd test that hard. Tiling rides on residential and commercial construction, and Canterbury has had its own building cycles. I'd want three to five years of revenue through the ups and downs, not just a strong recent pipeline.

Growth Angle: The seller's already named it: the business does mostly residential and architectural work and only touches small-to-medium commercial. Larger commercial is the lane - bigger jobs, bigger contracts, better utilisation of the crew. The brand, the awards and the referral network are the credibility to win that work; the constraint will be skilled labour and working capital to fund bigger projects. Solve those and there's a real second gear here.

The Drawbacks: It's a people business in a trade with a labour shortage, so retention is the standing risk. Construction is cyclical whatever the listing says. And at 2.1x you're paying a fair price for a good business - this is a solid buy, not a steal, so the return comes from running it well and growing it, not from buying it cheap.

Final Thought: Of the three this week, this is the most "what you see is what you get" - a genuinely good, growing trade business with a real brand and an obvious growth lane. The whole question is how much of the reputation and the pipeline is the business, and how much is the person selling it. If the awards and the referrals belong to the brand and the team, 2.1x buys you something that compounds. If they belong to the owner, you're buying a very nice job.

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