Welcome to Upper Market

Thin week on the marketplace. Winter will do that, with a lot of owners opting to enjoy summer elsewhere.

As far as my own search has been - it looks like multiples/business valuations might be creeping up. Why? Plenty of buyers with low business stock hitting the listings. Hang tight - when the property market turns the corner, things will drift back to a buyers market in the business acquisition world.

What's ahead in this Newsletter:

Do you want to get Deal Ready?

July 14th, we start our first Deal Ready Cohort. We have 9 spots already taken and I’m going to put one more up for anyone who wants to join.

These will be 8 live, weekly sessions to put you in the best possible position while you go through your business acquisition journey.

If you want more information - here’s the link - the video will break down exactly what you should expect.

Note: If you like videos, you should check out the latest two on YouTube

Pricing power is the ability to raise prices without destroying demand.

It's one of the clearest signs of a structurally sound business - and one of the most overlooked things a buyer can check.

Here's why it matters so much.

Costs are not optional. Wages rise. Rent rises. Suppliers put through increases. Inflation is structural - over time, every business faces upward pressure on what it costs to operate.

The only question is what happens next.

A business with pricing power passes those costs through. Prices tick up, customers keep buying, and margins hold or even expand.

A business without pricing power absorbs them. It can't lift prices without losing customers, so the cost increases eat the margin instead. Surplus shrinks. Then it disappears. Then the owner is working harder every year for less, while they can’t match the required wage increases to keep their staff.

Two businesses in the same industry can sit on opposite sides of this line.

The one that competes on price has no pricing power by definition - the moment it charges more, the customer goes next door. The one that competes on trust, convenience, specialisation or brand can move its prices and keep the customer, because the customer isn't there for the price in the first place.

So when you look at a business, ask the question directly: when did they last raise prices, and what happened when they did?

When did they last raise prices - and what happened when they did?

If the answer is "we haven't in years because we'd lose everyone" - you've found a business that's a hostage to its own market.

If the answer is "we put prices up 8% last year and barely lost a customer" - you've found something with a real moat, and margin you can expand the day you take over.

Watch the margin trend, too. A business whose gross margin has climbed over several years is usually telling you it can price. One whose margin is compressing is telling you the opposite - the market is squeezing it and it can't push back.

Pricing power isn’t obvious. It doesn’t make it to the headlines. But it's the difference between a business that gets stronger through inflation and one that slowly gets eaten by it.

Short Summary:

$500,000 cash surplus. Forty years trading. Little competition. Asking $1m.

That's roughly 2x for a niche service business that pulls work from all over the country - and on the numbers alone, it's the pick of a quiet week.

The listing is deliberately coy about exactly what the service is, but the shape is clear: a specialist automotive service, four decades deep, with a reputation strong enough that customers travel to it. No special skill required from a buyer, the vendor will do a proper handover, and the seller flags "low hanging fruit" - no marketing plan, no modern tech, plenty of levers a new owner could pull.

That's the good news. Now the two words the whole deal turns on: reputation and team.

What I'd Want to Understand:

First is what "cash surplus to a working owner" really means. $500k to a working owner is not $500k to a hands-off buyer. What does the owner actually do in the business day to day, and what would it cost to replace them? The gap between those two numbers is the real earnings, and it decides whether 2x to a working owner is cheap or fair.

Second is the reputation - who owns it. Forty years of reputation is a genuine moat, but I'd want to know whether it attaches to the business name or to the owner personally. If customers travel across the country because of who runs it, that reputation can fade the moment the name on the door changes. If it attaches to the brand and the team, it transfers.

Third is the team, because the listing says the business "relies heavily" on them. That's an honest flag and a real risk. Who are the key people, how long have they been there, what keeps them, and what happens to that national reputation if one or two walk out after settlement? In a reputation business, the team is the reputation. The nature of the business (while being niche and market leading) could also be its downfall. How are the staff found, trained and retained? If that’s hard, your staff (and the leaving owner) ARE the business.

Fourth is the repeatability. "Not requiring any specific skill set from a buyer" is reassuring - but is that because the systems are strong, or because the team carries the knowledge in their heads? I'd want to see how work actually gets done, and whether it holds up without the current owner steering it.

Growth Angle: The seller isn't hiding it - no marketing, no modern technology, a niche with little competition. A business winning nationally on reputation alone, with zero marketing effort, has an obvious demand lever no one has pulled. Add a real marketing plan and some operational tech and the question becomes capacity, not demand. The freehold option also lets you control the premises and the rent long term.

The Drawbacks: Reputation and team dependency are the whole risk here, and the listing says so plainly. Strip out the owner and one or two key staff and you need to know the business still stands. And "niche with little competition" cuts both ways - it's a moat, but it can also mean a small, capped market. Understand the ceiling before you fall in love with the margin.

Final Thought: A 40-year reputation, half a million in surplus, a fair multiple and levers no one has pulled. The whole deal comes down to whether that reputation lives in the business or in the person selling it - and the team that holds it together. The handover is where you find out.

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

The owner works two days a week. The business makes over $1m.

What the fuck.

Read that again, because it's the whole pitch - and it's unbelievable.

This is a nationally operating New Zealand MSP - managed IT services - serving clients across all 16 regions. End-to-end IT support: cloud, VoIP, connectivity, hardware, software licensing, managed services and ongoing support, with a reseller commission stream layered on top as low-effort recurring revenue. Gross margin consistently above 50%.

The headline: over $1m in adjusted EBITDA with the owner down to two days a week, rising to $1.1m for a buyer who self-manages and removes the owner's pay. A structured team and strong systems mean the day-to-day runs without the owner in the building.

Talk about getting paid for doing… nothing?

What I'd Want to Understand:

First is the real price. It's "price on application", so we don't have eyes on it. At $1m EBITDA, an IT-services business with recurring revenue and genuine detachment could command 4x or more - this isn't a 2.5x trades deal.

Second is recurring revenue quality and churn. Clients rarely switch IT providers without a reason. But "managed services" can mean locked-in monthly contracts or month-to-month handshakes. What percentage of revenue is contracted and recurring, what's the churn, and how much leans on the reseller commission (which can change the day a vendor changes its terms)?

Third is customer concentration. Nationwide and diversified is the claim. I'd want the top ten clients as a share of revenue. MSPs often have a handful of anchor clients carrying the book - lose two and the EBITDA story changes fast.

Fourth is the team, because they are the business. The owner stepped back to two days because the team carries it. So the team is the asset - and the risk. Who holds the key technical knowledge and the client relationships? What's the retention like, what are they paid, and what stops a senior engineer leaving and taking three clients with them?

What's Blatantly Suspicious: Why is this person selling? Sure, getting the money off the table and in cash is a great move if you're holding a business asset. But what's the reasoning behind this? They're making a bunch of money, they don't need to do much for the business to keep operating - so why sell? Is there something they are seeing in the future that they don't like the look of?

The Drawbacks: Tech moves, and an MSP has to keep reinvesting in capability to stay relevant. And the team being the engine cuts both ways: it's why it runs without the owner, and it's the thing that could walk. Like we addressed, it's likely to govern a higher multiple.

Final Thought: This is the asset most buyers say they want and few ever find - real earnings, what seems like genuine detachment, recurring revenue, a national footprint. The business looks finished. The risks I see sits behind AI, new tech and whatever the real motivation of the vendor seller being.

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