Making HUGE Profit With NO RISK! Podcast w/Jeremy Harbour

00:00:00:00 - 00:00:20:01
Jeremy
What you're trying to create effectively is asymmetric risk, which is as the buyer, you're protecting your downside, but allowing upside. And if, you know, if you think about it, if you went to a casino and every bet you made, you can't lose, but you could win, you'd bet every penny in your in your pocket, wouldn't you? And that's effectively what we're trying to mimic.

00:00:20:01 - 00:00:27:21
Jeremy
We're trying to create a scenario where the downside is protected, but the upside is still intact.

00:00:30:28 - 00:00:55:18
Matt
Guys, Matt Haycox here. And welcome to another episode of the Matt Haycox show here from Dubai. And I've got with me today a good friend and a guy I'm very interested to talk to. And I know that you guys are going to benefit very much too. I have with me Jeremy Harbour, who is founder of the Harbour Club and he is a business buying extraordinaire, not just buying businesses, but buying them for little to no money down and with really creative deal structures.

00:00:55:18 - 00:01:09:00
Matt
So, I mean, Jeremy and I are friends over here, like I say, and I love to pick his brains. And one of the best things for me about this podcast is I always get to sit down with guests that, you know, I want to talk to and I can kind of dig deeper on, dig deeper and pick their brains even more.

00:01:09:12 - 00:01:23:28
Matt
But you guys get to listen and watch the benefit of that too. So this is going to be a special one. Welcome, Jeremy. Thank you very much. They’re funny these microphones aren’t they.. Yeah, yeah. First first time I've done one like this, I feel like I feel like I'm a robot. Well, the next generation

00:01:23:28 - 00:01:27:17
Jeremy
one will follow you around. But for now, I have to go manual.

00:01:28:06 - 00:01:37:05
Matt
So I've given a, I guess, a brief and probably very butchered overview of of you. Just tell me. Tell me how it starts because I actually don't know what.

00:01:38:04 - 00:02:00:19
Jeremy
The origin story. Yeah. Yeah. I said to you, after knowing you for about a year, I just googled you, but yeah, no, it is one of those things where, yeah, you can actually spend a lot of time with someone and still not understand where they're from, but I mean, look, my, my kind of origin story has been repeated a million times on online and anyone can, can Google me and kind of look it up.

00:02:00:19 - 00:02:31:06
Jeremy
But the the, the kind of potted history was start up entrepreneurs doing, you know, starting businesses, working Minot's off, trying to grow them, hustling, you know, the traditional thing from a very young age, started it, you know, started over very young. Lester left school at 15 to pursue a business that I'd started. So I didn't finish didn't finish high school in the UK equivalent of and and that business spectacularly failed when I was 18, brushed myself off and got into telecoms and started a business in telecoms.

00:02:31:06 - 00:02:53:16
Jeremy
Just happened to be going through a massive consolidation at that time. It was the mid 1990s. The mobile phone industry had boomed and then everybody was buying everybody else. So it was a business that was kind of eating itself at the time. And so if you were in that industry, you were either being acquired or you were an acquirer and you know, the market was saturated, winning new business was getting harder and harder.

00:02:53:25 - 00:03:09:15
Jeremy
And so the next way to grow the, you know, grow your business was to buy a competitor down the road. And very simply, I sat there in my office having these meetings. I always took meetings. It beat the shit out of actually working during the day. So I'd always have these meetings and these people would say opposite me and try and buy my company.

00:03:09:15 - 00:03:24:27
Jeremy
And very quickly I realized the one thing they all had in common is none of them had any money. And literally my thought process was, Fuck, I don't have any money either. I should be on the other side of the table, you know, and literally flipped it to me, going and meeting people and trying to buy that business without using any of my money.

00:03:24:27 - 00:03:28:21
Jeremy
And that was kind of it in a nutshell. That was the genesis of of the whole thing.

00:03:29:01 - 00:03:34:25
Matt
And, you know, before starting out with the original start up business, I mean, did you always know that you wanted to be in business?

00:03:35:19 - 00:03:53:26
Jeremy
Yeah. I mean, there's that kind of nature or nurture type thing that people always talk about. And for me, I think it definitely was nature. So I remember getting in trouble with my parents at seven years old because I'd cut all the flowers down in the garden and stuck them in jam jars and was sitting on the street trying to sell them and so I definitely had that kind of thing.

00:03:53:26 - 00:04:10:27
Jeremy
And also growing up, I grew up on a farm and so I could go and feed the animals on the farm after school for a pound an hour and so that was my pocket money. So if I didn't feed animals after school, I didn't get any money. And so that gets your kind of creative juices flowing as to how can I make more than a pound an hour?

00:04:10:27 - 00:04:31:15
Jeremy
There must be something I can do to make more than a pound an hour. And that was really, you know, I guess the the kind of yeah, the first kind of thoughts of, you know, micro-businesses and also my dad being a farmer, farming is seasonal, so they always have side hustles as well. So I kind of I guess I grew up in an environment where there was always a side hustle and this desire to make more than a pound an hour, basically.

00:04:31:28 - 00:04:45:02
Matt
So you sat in this meeting or lots of these meetings where people are trying to buy your business, but you have no money to pay you. You decide to be on the other side of the table. I mean, how do you actually go about it from that? I mean, did you did you know what you were doing?

00:04:45:06 - 00:05:10:03
Jeremy
No. And actually, I think that helps a lot because if you realize the magnitude of what you're trying to achieve, sometimes you won't do it. And and I think entrepreneurs, you know, and you must know that some of the people you meet that are incredibly wealthy, they're definitely not smarter than other people. And and I think sometimes people can be too smart for their own good because they're able to then rationalize the full gravity of what they're about to take on and then decide it's too scary to do.

00:05:10:03 - 00:05:33:00
Jeremy
Whereas I think when you're a bit young and dumb, you kind of just bowl into stuff, find yourself out of your depth and then figure it out. And that's actually not a bad learning methodology. It's it's the equivalent of being pushed off the edge of the pair and swimming back, you know, as a as a swimming lesson. So I think I think, you know, having that bit of bravado just to go in and try I was a cocky little kid.

00:05:34:11 - 00:05:51:20
Jeremy
The going bust bit taught me a good dose of humility, and that was very helpful. But the, you know, having that that ability to go in and then learn as you go, you know, served me really well at that time because I literally didn't know what I was doing. And and also, I mean, I was very plausible, implausible.

00:05:51:28 - 00:06:09:18
Jeremy
I was I think when I did my first deal, I was about 22 or 23 years old. And I was I would describe it as a light shaver. I always looked really young from, you know, you know, well, well into my kind of thirties. I still looked like I was in my late teens, early twenties, and then it all went wrong somehow.

00:06:09:26 - 00:06:30:12
Jeremy
But, uh, but yeah, basically I was very implausible approaching these people bashing my head against a wall to a great extent. But one thing, I mean, there was a few benefits. One of them was when I used to go to networking meetings, I had a telecoms company. So when I went to networking meetings, I always used to look at people like in terms of their phone bill, like how much do you spend on your phones?

00:06:30:12 - 00:06:49:23
Jeremy
And I was the shark, I was the hunter, the salesperson that wanted to get their get their phone bill to move from their current provider over to me, when I started looking to buy businesses, suddenly I became a lot more interesting because when you walk into a room full of people and you are a salesperson, you're basically like a threat and everybody tries to hide from you because you're going to pin them in a corner and sell them phones.

00:06:50:13 - 00:07:01:16
Jeremy
When I went in there and said, Oh, I've got a phone coming, I'm looking at buying another one. Even though I was a bit young and implausible, I was definitely interesting. So you would have a lot more interesting conversations with people in those sort of environments.

00:07:01:16 - 00:07:25:29
Matt
I think people, you know, just naturally want to believe in other people anyway. That, you know, even if people, you know, even if your ideas are crazy or, you know, or maybe it may be implausible, you know, you know, the vast majority of people, you know, whether it's subconsciously or actually they get excited about it and, you know, they do they do buy into you even even if it may be an unlikely outcome.

00:07:25:29 - 00:07:44:23
Jeremy
Yeah. And look, that whole process involved, you know, kissing a lot of frogs. I had a lot of meetings where people would pretty much laugh or, you know, in most cases not laugh, but politely decline my my offers. And you have to try and reposition those offers until you find exactly the right kind of way to to crack it.

00:07:45:03 - 00:07:59:05
Jeremy
And eventually I just I found a mobile phone shop. It was literally down the road from us. We were in Hertfordshire at the time. This was in a place called Slough, and Slough had a huge industrial estate. It's the largest commercial industrial estate in Europe and.

00:07:59:15 - 00:08:00:16
Matt
The home of Ali G.

00:08:00:21 - 00:08:03:25
Jeremy
Yeah, indeed, yeah. The East Staines massacre or.

00:08:03:25 - 00:08:04:22
Matt
Whatever it was.

00:08:04:22 - 00:08:27:00
Jeremy
Sorry. So. So this particular place basically serviced the whole of this industrial estate and had, you know, great customers. They had about 600 corporate customers. Nintendo was one of their clients and a whole bunch of others. But basically business was in a bit of a pickle. As I said, the market of matured so you could he wasn't winning as many new customers anymore which would be pretty much the thing that paid the rent.

00:08:28:06 - 00:08:45:24
Jeremy
He was just churning his existing base and upgrading people and doing that sort of stuff. And plus the building that he was in was going to be demolished and turned into apartments. So he was looking for a new retail outlet that he could move to. And in that area, believe or not, it's actually quite expensive to have retail.

00:08:46:02 - 00:09:09:12
Jeremy
You've got Stoke Park just up the road and it's it's like a little micro economy in terms of the retail outlets there. So he was looking at having to spend maybe 60, 70 grand just to relocate and making 12 grand a year of net profit. And so there was a motivation there to get out of the business. He had another business that he was more interested in anyway, and there was a ticking time bomb that the place was about to be bulldozed.

00:09:09:12 - 00:09:26:06
Jeremy
So my kind of ineptitude in how to structure the deal and how to get it over the line was counterbalanced by his desperation and the fact that there was a clock ticking. He insisted that I had to give money for the business. I insisted that I couldn't, and basically one that when the time ran out, he agreed with me.

00:09:27:02 - 00:09:49:17
Jeremy
And so it was a it was a scrappy little deal and quite a small deal. But for us as a telecoms company at the time, it was a year's worth of sales and we did it enough in an afternoon and we spent nothing on sales and marketing and we took, you know, almost no risk. So from a from an epiphany perspective, from a game changer perspective, it was a massive step forward.

00:09:49:26 - 00:10:09:10
Jeremy
And the confidence and experience that came from doing that one deal. I mean, literally just stupid stuff, like how did you do the Eagles? How did you transfer the shares over? How do you, you know, close the old company down? All the little things that we had to figure out in order to do a deal basically gives you like a step up in terms of your own experience.

00:10:09:10 - 00:10:22:20
Jeremy
And that obviously then comes across when you meet other people because two weeks later I did my second deal. So it was literally like a pull up a cork. It popped and, and yeah, not nonstop after that, basically.

00:10:22:24 - 00:10:37:28
Matt
So it's a quick question on this. And because and this was something that it took me a lot of time to get my head around in the beginning, you know, when I used to start to understand about buying businesses. And I'm sure it's something that people listening to this are thinking about. You talk about how he wanted money.

00:10:38:05 - 00:11:05:01
Matt
Yeah. And he was insistent on wanting money and you were insistent that you that you wouldn't or didn't have any to give. Yeah. And that it was going to be very low risk for you. I mean, how, how do you convince a vendor in that situation, you know, to, to sell a business on those terms? Because I mean, you know, everyone's initial expectation will be anyone who's prepared to sell a business for, you know, where they're taking all the risk in selling and receiving little money at the beginning.

00:11:05:19 - 00:11:30:19
Matt
The business must be shit. It would be it would be the natural, natural expectation. Yeah. Because, you know that as much as that guy may be desperate to sell his business, if he's actually making some money or he owns some assets, you know, is he not better off just. Just liquidating it rather than, you know, selling it to you, losing all control, You know, you you accidentally fuck it up or purposely screw him and, you know, you've got nowhere to turn.

00:11:30:19 - 00:11:49:07
Jeremy
Yeah. Look, you're not going to buy Apple on that basis or, you know, so. But, you know, when you look at small companies, they're all a bit shit, to be honest. You know, if you look at any small to medium sized company, if they lose a couple of key staff or a couple of key customers, it's you know, it's a game changer and the whole thing can be done.

00:11:49:07 - 00:12:10:28
Jeremy
You know, the whole business can disappear. So you also have to look at the flip side of it as to where do you deploy capital, because effectively, small businesses are an incredibly volatile asset class. I mean, you know, like I say, the whole thing can evaporate in a moment. You know, Amazon could do it for free or Google could do it for free, you know, and suddenly you have a massive problem in your and your industry.

00:12:11:17 - 00:12:34:07
Jeremy
And so, you know, they are very volatile assets. So by the same token, do you really want to be putting capital into a very volatile asset? And if you do put capital, what's the risk weighted return you should expect from that capital? Because, you know, there are you know, you can buy aa2 year Treasury bond at the moment that will give you 5% a year.

00:12:34:22 - 00:12:56:09
Jeremy
And there's loads of really good investments now because interest rates are rising. There's loads of really good investments now that will give you a double digit low, you know, low double digit return. So when people talk about selling a small business and wanting, you know, ten times earnings, well, ten times earnings is 10% return on capital, but you're in a completely fucked up, illiquid, risky asset class.

00:12:56:09 - 00:13:18:00
Jeremy
And so there is a dose of realization that small business owners need to have about fair pricing. And then the other the other dose of reality is about just the audience they have for their business. So if you look at a $100 million plus enterprise value businesses, there is a large audience of potential buyers, you know, private equity funds, SPACs that are sitting on cash.

00:13:18:00 - 00:13:43:24
Jeremy
I think there's 3 trillion empty at the moment looking for looking for a home. So supply and demand economics when there's lots of demand and not much supply prices go up and it all looks wonderful, but it's as you move down the food chain, the audience get smaller and smaller and smaller. And if you find a business that's doing 1 to 5 million in revenue, there are almost no buyers, almost no natural buyers in that in that space.

00:13:43:24 - 00:14:06:02
Jeremy
There might be a couple of trade buyers that will go and pick stuff up, but equally they'll probably be looking at low money down or no money down type structures for acquiring those companies. And look, when there's low money down or no money down, it doesn't mean they're getting no money. It just means that the deal is going to be structured so they receive their money over a period of time.

00:14:06:09 - 00:14:26:21
Jeremy
And what you're trying to create effectively is asymmetric risk, which is as the buyer, you're protecting your downside, but allowing upside. And if you know, if you think about it, if you went to a casino and every bet you made, you can't lose, but you could win, you'd better every penny in your in your pocket, wouldn't you? And that's that's effectively what we're trying to mimic.

00:14:26:21 - 00:14:45:12
Jeremy
We're trying to create a scenario where the downside is protected, but the upside is still intact. And sometimes we might have to sacrifice some of the upside to make sure that there's no downside. So a common example of that is the person that wants to achieve and maybe a slightly unrealistic value for their business. And you can help them achieve that.

00:14:45:12 - 00:15:01:21
Jeremy
But they have to work with you for you to pay them out of the business over a period of time. So what you might find is that you're buying a business for half a million that you could probably get for 300 grand in cash. But in order for them to get the half a million, they've got to work with you to get to that, to get to that figure.

00:15:01:29 - 00:15:24:16
Jeremy
And then from their perspective, the headline is more attractive to them. And if they believe that you can actually deliver on that stuff or they believe they can put the security in place around it, that they know that protects them, you can probably get that that deal away. But every deal is different. And I mean, we we have many different deal structures that we use to approach people.

00:15:24:16 - 00:15:42:20
Jeremy
Some of them we use, you know, public companies where we issue bonds and we use the bonds as consideration. So they actually have a, you know, regulated financial product that pays them money every month. So it's not like, you know, just give us the business and hope everything is okay. There's there's a a firm a structure sitting behind it, but that's for bigger companies.

00:15:42:20 - 00:15:51:19
Jeremy
But at that smaller end, yeah, there it really is a buyer's market. There are not a lot of natural buyers for these businesses and that's that gives us most of the strength in the negotiation.

00:15:52:05 - 00:16:11:06
Matt
So you you've partially answered one of my questions. Actually, one of the questions I was going to ask you about what, you know, what does an ideal acquisition candidate look like? I mean, you've said that, you know, in the market, businesses turning over between one and 5 million have very limited buyers. I mean, what other characteristics might. May Yeah, profitability or loss making.

00:16:11:06 - 00:16:32:02
Jeremy
Or no so profit making or loss making both. Both work? Well, most most people in my Harbor Club community prefer profitable, you know, obviously profitable companies. That's a bit of cash that works a lot better for them and that doesn't hamper getting a deal done. There's the different deal. I can come on to some deal structures later. One point I would say is below a million.

00:16:33:18 - 00:16:35:03
Jeremy
It's often hard to do something.

00:16:36:00 - 00:16:37:04
Matt
By a million turnover.

00:16:37:04 - 00:17:02:24
Jeremy
Yeah. Once you take the owner out, often the owner is, you know, doing the job of three people for the salary of half a person. So you can't get you can't really replace them very effectively. And also they tend to be kind of one customer centric or one product centric at that point. They haven't really evolved. Now, obviously industries are different that that might be half a million or 800 grand or something, but generally speaking, we like to look at a million plus above 5 million.

00:17:03:09 - 00:17:29:25
Jeremy
The audience of potential buyers starts to get a bit thicker, so you get more trade buyers that can afford to do the due diligence, to look at it, to to do an acquisition. We've we've done deals in so many sectors it's is not true. But if I if I was to say there was a weighting, I would say that more than half the deals that are completed in the Harbor Club community are what I would describe as blue collar businesses or businesses where you wouldn't wear a suit to go to work.

00:17:29:25 - 00:17:54:28
Jeremy
So engineering businesses, cleaning businesses, heating ventilation, air conditioning companies, you know, the kind of man and van type type businesses. And often these are the most cash generative, you know, best businesses to be involved in. They often have, you know, contracted revenues or maintenance contracts that they actually look really good when you when you analyze them, but they suffer the most from having a natural succession plan.

00:17:55:08 - 00:18:14:18
Jeremy
So kids don't want to take them over Second layer of management probably isn't sophisticated enough to take them over in terms of, you know, operating the finances and stuff of of the company. So they tend not to have a natural succession built in. And then, you know, there comes a time where they want to move on and they need to find a home for it.

00:18:15:04 - 00:18:30:15
Jeremy
And again, the other competitors are often in the same position that they're looking for the same solutions, and they're not particularly in particular, have the appetite to buy out more companies in the same space. So we see a lot of deals happening in that area. And I think for those reasons.

00:18:31:06 - 00:19:04:04
Matt
I mean, I know you've got your Harbor Club, which is which we can talk about in a minute, which is a great flow of deals, great sort of deal flow for you. I mean, for guys listening to this who, I guess, you know, want to start to get into the market, to look, to acquire, acquire businesses. What's your view on business Agent is a bit of a leading question because you know I mean I always you know, come across either business agent contacting me about business you and we can flog it for you at this price or you know other people are looking to buy a business and therefore looking looking for funding from it

00:19:04:09 - 00:19:22:20
Matt
and the prices and the valuations, you just absolutely fucking bonkers. Yeah. And you know, I mean, I never get deep enough into the conversations to understand if these guys are just, you know, pitch in year high to get you excited and then they'll chip you along or if it's just a fee based business because they try and take a couple of grand of everyone as a listing fee.

00:19:22:26 - 00:19:35:04
Matt
I mean, I mean, is the value for someone who wants to acquire businesses to go and make relationships with business agents? No, I was I was quick into your next question.

00:19:35:07 - 00:19:59:17
Jeremy
So brokers should always carry a pot plan with them to compensate for that waste of oxygen on the planet that really look, there are some good there are some good business brokers, and I've met a few who, you know, who do bucked the trend, but 99% of that industry is incredibly scammy, basically, that their business model is selling listings.

00:19:59:21 - 00:20:16:11
Jeremy
They charge you a fee up from anything from a couple of grand to 40 grand upfront to list your business. It's those listing fees that keep the lights on and so they will tell you anything to get you listed. And it's a bit like I think if you've ever advertised your car, you get those people who bring you up and go, Hey, I've got a buyer for your car.

00:20:16:11 - 00:20:30:06
Jeremy
He's sitting here with a bag of cash. All you need to do is register with us. It's 3999, and we'll put your ad up and I'll introduce you to him. You know, it's. It's a fucking scam. It's bullshit, as the oldest one in the book. And yet they get away with it again and again and again. And their contracts are quite punitive.

00:20:30:06 - 00:20:44:18
Jeremy
So what happens is they sign you up, do fake call, and you find a buyer and they get paid because of the contract they've they've signed you into. And so, you know, from their perspective, they're selling listings. If they accidentally sell a business, it's a bonus.

00:20:45:04 - 00:20:49:25
Matt
But and it's literally it's literally as bad as just selling the listing. It's not even.

00:20:49:27 - 00:21:07:05
Jeremy
Well, they will they will mail their database and that will that will generate a half a dozen tire kickers. That makes you feel like they're doing a good job and they'll probably list it on businesses for sale dot com which you can do for 39 quid and that will get another bunch of tire kickers or probably people that have watched my content but haven't done the course yet.

00:21:07:17 - 00:21:09:03
Matt
So I see it bring.

00:21:09:05 - 00:21:10:04
Jeremy
Them out and try and buy them for a.

00:21:10:04 - 00:21:26:09
Matt
Pound. I sell a lot with pubs and leisure properties as well because I mean obviously that's that's a core business for me and always and always has been. And if you ever see a pub for sale with the likes of a you know, an Ernst Young or someone like that, you know, you always know there's no point even engaging with this buyer.

00:21:26:09 - 00:21:43:11
Matt
Yeah. They sell around that because he's had these expectations so ridiculously high and yeah, I mean if I buy pubs and bars, you know it's from the likes of a flower or a Christie's, you know, like I said, a credible industry specialist who, you know, offers a price, which is, which is, you know, related to the market.

00:21:43:15 - 00:22:18:25
Jeremy
My, my advice to all people when they come in to the Harbor Club is, I mean, you can use brokers, let's say you're inexperienced when it comes to you don't know any of the terminology. You know things like what's a bit da what's pal what's you know if you don't know the this kind of terminology and M&A terminology particularly and you don't understand accounts and looking at accounts and things like that, then by all means sign up to a broker and get bombarded with shit that you can analyze and look at and get used to the language because it will help your education in terms of just getting you from zero to sounding a little

00:22:18:25 - 00:22:35:07
Jeremy
bit like, you know what you're talking about. And so, you know, by all means, register with the broker and get some get some information. But in terms of actually identifying a deal, the best thing you can do is, you know, think about the industry that you're going to be acquiring. And it needs to be an industry where you can build rapport and empathy with the business owner.

00:22:35:13 - 00:23:02:07
Jeremy
So it helps if you know a little bit about the industry or perhaps some of the key characters in that industry or the latest scandal that's going on in that industry, because that's going to really help you in that in that rapport building part of the of the process. When you first meet people. So pick the industry and then just set yourself a goal of speaking to business owners in that industry, hit them up on LinkedIn, go to their, you know, their conferences and shows that relate to that industry and just me as many business owners in that space as you can, no agenda around buying their company.

00:23:02:11 - 00:23:24:02
Jeremy
You can say that you're an investor in that industry and you're looking for opportunities to to invest. That's a great way of getting people to talk to you, but just basically just go and do fact finding, find out what the pain points are, find out where the challenges are, and you'll be amazed from those open conversations how many of them would be for sale under the right circumstances or how many of them actually have synergistic problems.

00:23:24:07 - 00:23:43:08
Jeremy
So you'll find, you know, maybe one has a young, hungry management team, but it's still quite a small company and they aggressively want to grow and they'll be another one that's really big. And it's got a 70 year old owner who really wants to move on but can't find anyone to run the business. Well, obviously, if you put those two together, you've got a young, hungry management team that could take over running his business and solve the succession.

00:23:43:17 - 00:24:04:25
Jeremy
So, you know, that's a potential merger and a merger is probably the simplest, no money down strategy to execute, because a merger is an acquisition where you use shares to acquire a company instead of cash. So by effectively using the shares of one company to buy the other one, you yeah, you create a NewCo and then again that becomes more sellable because you've got something bigger now that you can go out.

00:24:04:25 - 00:24:06:26
Jeremy
And so so yeah.

00:24:07:15 - 00:24:27:24
Matt
So let's talk about actual deal structure then. And obviously early on we were talking about, you know, matching, you know, matching risk and matching cash flow, etc.. I mean, is that is that the name of the game to, you know, to take your business at, for argument's sake, making 400 grand. So there's that once 400 grand to buy it and it's making 100 grand a year.

00:24:27:29 - 00:24:32:11
Matt
Do you try and structure a deal as paying them over four years.

00:24:32:11 - 00:24:47:23
Jeremy
It can be, yeah. So look the, I mean the simplest no money down is just deferred payment. So deferred payment is just I'm going to pay you some money over a period of time. But look, and I've seen it work lots of times and often where people just want to get out of the business and want somebody else to take it over.

00:24:47:23 - 00:25:03:28
Jeremy
And if they can find a safe pair of hands, they'll do that deal. But in most cases, if you approach, let's say you approach a baby boomer who's been running this business for 40 years, you know, this is a sophisticated been around the block entrepreneur, you're not going to pull any wool over anybody's eyes or get away with anything.

00:25:03:28 - 00:25:16:03
Jeremy
This is not about tricking them into giving you their business for for nothing. But what you will often find is if you if you went to that baby boomer and said, I'm going to pay you half a million for your business, but I'm going to pay it over the next five years, and he goes, Well, hang on. I make underground.

00:25:16:03 - 00:25:33:25
Jeremy
Yeah. So you're just you're just giving me my money over the next five years. No, thanks. That that would be that would be the most common answer in that situation. You know, And more than 80% of cases, it will be a a polite no or or an impolite no. And so one of the strategies that we use in the Harbor Club is something we call the Y bow.

00:25:33:25 - 00:26:06:27
Jeremy
The work in by out and and we offer there's many different ways you can start this conversation, but one of the ways we do is we have a piece of software called Valor Teller, which is actually unique, licensed to the Harbor Club. But it's a it's a real valuation tool. And basically you go through this questionnaire with with the business owner, it spits out a 30 page report on what the business is worth and all the areas that you could improve the business for it to be worth more and and like I said, every business is a bit shit.

00:26:06:27 - 00:26:26:28
Jeremy
So in small businesses you will often find they are in no way prepared to be sold. It's one of the reasons why brokers can't sell businesses because small businesses aren't very sellable in that they don't have a data room with all of the due diligence info in one place. They don't have their accounts properly together. They've got personal expenses running through there.

00:26:26:28 - 00:26:46:28
Jeremy
They've got all sorts of exceptional items, you know, just not run in a in a professional way. They haven't got the systems and processes in place that would enable them to hand over to new management particularly easily. It's all in here and those kind of things. So so basically then you can say to them, look, here's the list of things you need to do before this business is going to be viable.

00:26:47:05 - 00:27:14:01
Jeremy
Now, somebody who's in their seventies has been doing it their way for the last 40 years. When they look at, you know, digitizing the business, changing the way you deal with the accounts, setting up a virtual data room, generally, they'll look at that and go, I can be asked, So you then offer to basically do that piece of work for them and you can say, look, it's going to take four or five months to do all of this stuff, but it's going to have a notable impact on the ability to sell the business, not necessarily the valuation, but just the ability to actually get a buyer to buy it.

00:27:14:14 - 00:27:34:02
Jeremy
And so so how about you pay me to figure out a number they can afford a grand a month, five grand a month, whatever it is for five months. I'll do this list of things inside the business for you. And if I can achieve these parameters, you'll give me 20% of the company as a as a bonus at the end of it.

00:27:34:13 - 00:27:51:28
Jeremy
And the parameters normally around cash flow, profit improvement, which is some of the areas that we can help with, with this with this plan, you then go in and do your six month contract with them. Sometimes the Harbor Club does this themselves and immerses themselves in the business is the best due diligence you can ever do on a company is to work there for four, six months.

00:27:52:03 - 00:28:17:15
Jeremy
Other times they outsource that process to somebody else. And there's a whole bunch of people in the Harbor Club community who do who do this for people on split the split the retainer, and they'll go in and do do the grunt work. But at the end of that six months, you get your 20%. And now with that baby boomer entrepreneur, you're a guy that came in, transformed their business and and and they're now a 20% shareholder.

00:28:18:03 - 00:28:42:01
Jeremy
So you've basically promised you'll do something and then you did it. Now, you know, in this life, if somebody says they're going to do something and they actually do it, they're in the top fucking 1% of humanity. They're they're a rare beast indeed. And so when it then comes to, okay, should we sell it now? Because we've, you know, we've made it sellable or if you like, I can buy the other 80% of you and I'm going to pay you over five years.

00:28:42:04 - 00:28:43:08
Matt
We've already built that trust.

00:28:43:08 - 00:28:57:19
Jeremy
You built the trust, you built the rapport, you're the safe pair of hands. And they're generally more than happy to then sell you the balance of it. So over six months, you bought it, no money down and you've got a profitable cash flowing business at the end of that, at the end of that process. And you've been paid while you do it.

00:28:58:13 - 00:29:16:03
Jeremy
And the worst outcome is you just sell it, you know, and get you 20% of the of the upside, although selling them is a little bit harder. But, but yeah, it's a it's a great way to yeah. Effectively end up with a business so that's just an example we call that we buy work in buy out as a strategy.

00:29:16:13 - 00:29:25:20
Jeremy
Like I say within the Harbor Club, there's loads of people, there's people doing this on a wholesale basis. We've got one guy that's done, 28 of them now, and he's taking on average five grand a month out of each one.

00:29:25:20 - 00:29:26:23
Matt
Well, 28 working and.

00:29:27:00 - 00:29:50:07
Jeremy
Working buy out. And he actually splits them into groups of ten and puts them all in a room together once a month and does like a big brainstorming session where they all solve each other's problems and so that that's working really, really well for him. And yeah, it's almost limitlessly scalable actually, particularly if he starts outsourcing the the going going in and doing the work part of it.

00:29:50:14 - 00:29:57:24
Matt
But let's talk about some of the deal structures that would be that would be relevant for, you know, for people starting this journey at the beginning. Yeah. Look, the what.

00:29:57:25 - 00:30:14:23
Jeremy
The SIBO one, the reason I brought it up was it is kind of the path of least resistance for a newbie. So, you know, obviously our a report is one way of approaching that client. The most common way people do it is actually what are you good at. You know, most people have a skill, they're good at marketing or they go to h.r.

00:30:14:23 - 00:30:34:12
Jeremy
Or they're, you know, they've been involved in i.t. Or something like that. Could you bring those skills to bear in exchange for equity and equity in a company? So can you go in and solve a problem for that company and receive some equity in in return? So for consultants and coaches, that's really easy. That's, that's just a quick flip.

00:30:34:12 - 00:30:56:09
Jeremy
You know, at the moment they're selling their time for money. How about they sell the time for equity? It's a really simple transition. That guy that we've got this done, 28 of them, he's been selling consultancy for the last 30 years, so he just switched his consultancy sale to do an equity based performance fee and yeah, completely transformed his whole wealth outlook.

00:30:56:09 - 00:31:21:06
Jeremy
So, so I think, you know, as a, as a, the path of least resistance to breaking your deal virginity is probably something like this because it's much easier to persuade somebody to part with a percentage of their business than it is the whole thing. But then you can come back for the whole thing relatively easily after that. So yeah, that's probably the simplest to actually go because I mean, we we cover everything from distressed deals to IPOs on on the Harbor Club.

00:31:21:12 - 00:31:37:03
Jeremy
But both of those two extremes are actually quite technically challenging. So distressed acquisitions, you need to know what you're doing. Otherwise people's livelihoods are really at risk. And like likewise at the IPO stage, you need to be relatively sophisticated to build those kind of transactions off as well.

00:31:37:12 - 00:31:51:23
Matt
I mean, obviously for any business buying or business selling transaction, you're going to need your professional advisors on board. I mean, do you find that in your more creative structures that you know, your typical professional advisors struggle to get their head around this? You know, you need to specialist people?

00:31:52:01 - 00:32:11:22
Jeremy
Yeah, a little bit. So look at the kind of capital markets IPO end of the spectrum that's dead straightforward. There are securities lawyers, you know, all over the place. We have our own in-house counsel plus several external firms that we use the really, you know, the lower end of the market, the distressed deals, the widows and things like that.

00:32:11:22 - 00:32:32:09
Jeremy
Actually, most people don't use lawyers. Most people will suggest the other party takes legal advice on the agreement, but we do the agreement between us. Okay. Just because if you're not careful, you can run up 3040 grand's worth of legal fees doing a deal for a pound. And it just doesn't make you know, again, it's that asymmetric risking.

00:32:32:09 - 00:32:47:27
Jeremy
It doesn't make sense to do that. The first deal that I ever did that mobile phone business in Slough, I couldn't afford a lawyer. You know, the guy was asking me to give him two grand down on the deal and I couldn't give it to him. So there's no way I was giving two grand to a lawyer to write an agreement.

00:32:48:03 - 00:32:48:22
Jeremy
It was you.

00:32:48:22 - 00:32:50:28
Matt
Could your contracts off the Internet just grumble.

00:32:51:20 - 00:33:09:25
Jeremy
So we just wrote a letter and we both signed it. And so we wrote a letter explaining the terms of the transaction, and we both signed it at the bottom. I mean, you have to remember, you know, in law, contracts are relatively straightforward in terms of what constitutes a contract in law with an invitation, an offer, an acceptance and consideration.

00:33:09:25 - 00:33:28:17
Jeremy
So as long as you can show those four components exist, then there is a binding contract in law. And then the terms of those contracts are, you know, the worst case scenario is you end up in front of a judge and he's trying to interpret what you meant when you wrote this agreement. Well, if you write a plain English one sentence, it's there's not much interpretation.

00:33:28:24 - 00:33:53:22
Jeremy
You know, it's pretty much black and white. What it means when you have a 30 page agreement that a lawyer will draft that has, you know, a fucking whole ton of nonsense. Well, that requires an awful lot of analysis to understand exactly what it was that you meant when you signed this agreement. And so sometimes the intent gets lost in the lawyer drafted agreement, whereas it's absolutely abundantly clear in the kind of self drafted one.

00:33:54:03 - 00:34:17:06
Jeremy
I would caveat that with, you know, this is not advice that I want people running around trying to do their own contracts. If you don't feel competent or confident enough to do your own agreement, you definitely shouldn't do it. You know, it's but if you do feel confident and competent enough and you understand the risk that you're taking, then you know, I don't think there's a particular challenge in getting on and doing, you know, some of these things yourself.

00:34:18:11 - 00:34:33:22
Matt
And what's the flipside of this? And so so you've gone out there, you've found a found a business, you know, you've acquired that you've maybe even acquired a couple. What about the sale side of it? Because because I guess, um, you know, the way you want to buy your business probably isn't the way you want to sell it.

00:34:33:23 - 00:34:40:14
Matt
I mean, you'd like to buy it for no money down and sell it for 100% on day one. So, I mean, where do you where do you go? What's the journey?

00:34:40:20 - 00:35:17:27
Jeremy
Yeah, absolutely. So you're then into. Yeah, the kind of the traditional sales type model and selling small businesses is much harder than buying them. Like I say, there isn't a massive audience for these businesses. So there's a few things you have to do to be right at the front of the queue. And these are the things that brokers could easily do and actually add value, but none of them do, and that is to have a really good information memorandum around the business, ideally audit the business, or at least have it audit ready, because one of the biggest challenges with small businesses is direct a signed off financial statements that, you know, basically can be made

00:35:17:27 - 00:35:51:08
Jeremy
up. I mean, the a director will sign anything. So having having it audited adds a huge amount of credibility to to the transaction actually repositioning the accounts for profit. So you'll often find the business you pick up as doing 100 grand a year if you change the accounting treatment can be making two or three times that. What I mean by accounting treatment is that there are lots of different ways that you can recognize costs in the accounts, and there are lots of different ways you can recognize revenue in the accounts.

00:35:51:08 - 00:36:14:13
Jeremy
And not more often than not, the entrepreneur doesn't have any say in this. The accountant just picks the one that's most tax efficient. Well, we don't really like the one that's the least tax efficient because that means it shows more profit and that will make the business effectively look a lot better from from the curb appeal perspective. And that widens the audience of potential buyers because the potential buyers tend to like more profitable things.

00:36:14:22 - 00:36:34:22
Jeremy
And then the other thing is also being prepared to to do a deal structure. You don't want to necessarily do the same one that we we bought it on the basis of. But you also have to recognize you're not going to get 100% upfront. So some areas where we help our buyers is we try and rearrange finance on the business so we figure out how much we can leverage it by.

00:36:35:01 - 00:36:49:13
Jeremy
And then we say to them, by the way, this finance company will give you, you know, half a million. How much can you put on the table? Another 200 grand. Okay, That's seven underground. How much could you pay us over the next five years? 500 grand. Okay. We're at one point, you know, whatever. And then let's stick some earn out on that.

00:36:49:13 - 00:37:08:29
Jeremy
Now, what's interesting is brokers will often advise clients not to take deferred payment and not to take earnout. I believe that if you refuse to take deferred payment and you refuse to say, oh, now you're just leaving a ton of money on the table, that could be there. Otherwise deferred payment is really the bit you negotiate after you've agreed on the on the upfront money they're paying.

00:37:08:29 - 00:37:25:28
Jeremy
So it's almost like a bonus. It's almost extra money that you're going to get every year. An earnout is a sum of money that's linked to a specific performance. So the business has to do something in order for you to get it. And that's why people don't like it, because they feel like I'm being sucked into a job in the business where I'm going to get commission.

00:37:26:06 - 00:37:42:19
Jeremy
Well, actually, no, it's kind of the icing on the cake. What you're basically saying is if this business is a complete shit box, I'm going to get nothing. But if you hit it out of the park and you're incredibly successful, I want a piece. Why wouldn't you do that? It's again, it's a it's a asymmetric bet. It's a bet you can't lose.

00:37:42:19 - 00:37:59:21
Jeremy
So if you're ever given a bet, you can't lose, you should take the bet. And yeah, I think I think a lot of people have this ringing in. There is no, no, no, earn out, earn out. But they haven't actually sat down and thought about what that means and in practical terms or in reality. And so so yeah.

00:38:00:00 - 00:38:29:18
Matt
I mean, I guess I guess the key takeaway here for, you know, for anyone looking to sell a business is is selling a business is a business in itself. And, you know, there's always that disparity between, you know, business founders and CEOs, you know, the people who who've had the idea, who've been the entrepreneur, entrepreneur probably aren't the best person to run that business, but, you know, forcefully put themselves in that situation and ultimately do themselves down.

00:38:29:18 - 00:38:47:18
Matt
And I guess this is like the third step in that journey when it comes to selling the business. You know, not not only do you need, you know, the right expert advice, you need your months, if not potentially years or years of preparation of getting all the pieces in place, you know, to be able to be able to get that maximum price.

00:38:47:18 - 00:38:48:02
Matt
Yeah.

00:38:48:02 - 00:39:10:11
Jeremy
I mean, look, we I took a view on this a while back because what I used to do is keep the businesses for far too long on the basis that I'm trying to rinse every last like cent of out of the exit value. And what I realized is actually there's kind of an optimum where, you know, you the whole preparing for sale process takes about 100 days.

00:39:10:11 - 00:39:32:14
Jeremy
It's about a 90 day process to get everything in place that it looks sensible to a potential buyer. The sale process after that can be 6 to 9 months but can equally be. I mean, I have one that took five years to sell and I've had ones that took, you know, one month to sell. But 6 to 9 months is probably a good average in terms of what it actually takes to sell them.

00:39:33:02 - 00:39:49:22
Jeremy
And I think doing that, the hundred day turnaround in the 6 to 9 month exit is kind of the optimum because it frees you up then to do the next one and the next one. What I found was that there's there's kind of a law of diminishing returns. And in fact, I was holding far too many businesses in thousand and nine, ended up closing three of them.

00:39:50:21 - 00:40:20:23
Jeremy
And if I'd been flipping those, rather than trying to add more and more value, I would have, you know, had a significant addition to my to my personal wealth that, yeah, I didn't end up having because we ran straight into a global financial crisis. And then lesson learned. I advise everybody that the right time to sell a business is now the, you know, getting the getting the capital in de-risked you and you can then deploy the capital into passive investments that you know, generate income doesn't rely on your time input.

00:40:20:23 - 00:40:45:04
Jeremy
And that's a really valuable place to to get to. But you know, I told everybody that for years and years and years and of course, we've had years and years and years of relative stability. So everybody kind of kept buying businesses and keeping them. And then the pandemic was like Thanos snapping his fingers. In half. The half the business is fucking disappeared overnight or ended up in so much debt that it's a matter of time before they disappear.

00:40:46:03 - 00:40:56:20
Jeremy
And and then we've got this forced recession that's going on at the moment, which is the the, you know, the central banks driving us off a cliff in order to fight inflation.

00:40:56:20 - 00:41:07:17
Matt
I mean, I was going to say, you know, where do you see, you know, the next 12, 24 months for you and for for for people like yourself and for people looking to buy businesses, is it going to be even more opportunity than back in 0809?

00:41:07:17 - 00:41:27:03
Jeremy
Yeah, for sure. Never let a good recession go to waste. I mean, and it's horrible because it does affect a lot of people's lives and it's no fun. And I've been through more than I'd like to have. But but like 2009, I did 12 transactions in 2009, but I was still I was still early in my career. I didn't know that much at that time.

00:41:27:10 - 00:41:46:19
Jeremy
This time around, obviously, I know a lot more have, you know, a lot more kind of skills and experience to bring to the table. There's going to be a sea of possible opportunities. And actually the biggest opportunities we're seeing right now are people that did leveraged buyouts and got completely over their skis. So lots of people were running around because debt was cheap.

00:41:47:00 - 00:42:10:02
Jeremy
Everyone was running around buying businesses with debt. And you've now got the perfect storm of interest rates rising, customers spending less and customers going bust in a lot of cases. So we're looking at one the other day where they just had £1,000,000 bad debt. So you've got these great businesses that have been great businesses for 20, 30 years and they're about to fall off a cliff because they're overleveraged and they can't and they can't survive.

00:42:10:02 - 00:42:20:10
Jeremy
So there's a lot of opportunity in that space where people had been doing elbows and now you can effectively pick up the pieces and, you know, walk away with some really good well-established revenue streams.

00:42:21:00 - 00:42:26:15
Matt
Well, I mean, I could go on for hours and hours picking picking your brains purely for my own purposes. But I'm conscious.

00:42:26:15 - 00:42:27:19
Jeremy
Of. We'll do that on the boat tomorrow.

00:42:27:28 - 00:42:38:26
Matt
Exactly. Cultures of time and you're busy day. But I guess, you know, before we go, where can people find you and just tell us a little bit about the Harbor Club? Because I guess that ties in with why people can.

00:42:39:24 - 00:43:00:18
Jeremy
Just Google Jeremy Harbor a job. Oh, you are the UK spelling, not the American spelling. And there's Jeremy Harbor dot com you can buy. I've got a book called Go do deals if you buy it from my website from Jeremy Harbor dot com or you can actually go to a URL which is go do dot deals if you buy the book from there we also give you a 21 day free email course.

00:43:00:27 - 00:43:05:19
Jeremy
And we generally we don't generally promote the Harbor Club very much. What we tend to do and this.

00:43:05:19 - 00:43:09:20
Matt
Is an email, of course, teaching you some of the stuff papers on today, how to buy bounce.

00:43:09:20 - 00:43:33:07
Jeremy
And how to source companies, how to acquire them, how to turn them around, how to sell them. Yeah, we cover, you know, the whole lot. You get an email every day for 21 days and each one breaks down a different component of it because it's a vast topic. So each day breaks down a component of it, and we tend to prefer people go through that route rather than inquire about Harbor Club, because a lot of people go, Yeah, I want Harbor Club, but without fully realizing the magnitude of what it is they might be embarking on.

00:43:33:07 - 00:43:47:07
Jeremy
So the 21 day free email courses are great. It's a marmite for any British listener. It's a marmite thing. They either love it or they hate it. And so they'll go through that process and they'll either think, Fuck, I can see myself doing this every day, I'm going to love this, or they're going to know this is too much.

00:43:48:02 - 00:43:58:21
Jeremy
And so we'd much rather polarize people early on, and then they can decide if it's something they then want to learn more about and pursue and and take on. So yeah, I highly recommend going that route.

00:43:59:04 - 00:44:25:22
Matt
Perfect. Well, Sir Jeremy, thanks a lot for being there, buddy. I'm sure we'll do it. We'll do around two points in the future, guys. I'm sure you enjoyed listening to that. Watching that. Go find Jeremy at Jeremy Harbor dot com and as always, I'm the Matt Haycock THG matter why share works on all things social and hyphenate Cox dot com on the on the WWE W so I look forward to seeing you again in a future week with a future guest.

00:44:25:29 - 00:44:26:25
Matt
Thanks again Jeremy.

00:44:26:26 - 00:44:35:08
Jeremy
John for now.