Jeremy Harbour
Hi, my name is Jeremy Harbour. I run an experiential training program called The Harbour Club. In The Harbour Club, we teach you how to source and buy distressed or motivated businesses. Now typically these deals are done on the basis where you don’t pay any capital upfront and you don’t have to borrow money from banks or investors or even the previous owner financing the sale. They are true no money down transactions.
Jeremy Harbour
Now one thing that can crop up from time-to-time is you end up getting involved in a business that perhaps you keep for a little bit longer than the usual turnaround project. In those situations, it’s good to have a way that you can get money out of the business. You see, I’m a big believer that businesses are for taking money out of, not putting money into, and that they shouldn’t be considered a savings plan for the future. So, one of the things that you need to do is almost install a one-way valve on the business’ bank account so that it pays you, but the money doesn’t go back again.
Jeremy Harbour
One of the policies that we put in place for doing this, which we write into our heads of terms agreements when we’re buying a new business, is we insist on having a dividend policy. How that works is you basically agree with you and any other shareholders involved in the business that you’re going to distribute 80 of the company’s profits as dividends. Now a lot of the times people don’t do that because by the time they get to the end of the year, they might have made 100,000 profit, but there’s not 80,000 physically in the bank account to be able to distribute, so people tend to just overlook it and leave it, and it goes on for another year and another year and another year, and before you know it, you’ve had a company for five or six years and you’ve not taken any shareholder funds from that business.
Jeremy Harbour
So one of the things that this dividend policy does is it just creates a good habit, and it’s a good habit that the business is being run for the benefit of the shareholders. And in that situation where it doesn’t have the cash to actually pay it, all we do is we move the payment into the balance sheet as a loan from the shareholders. So effectively, the company issues the dividend, but on paper the shareholder is lent that dividend back to the company again. So in the example of the company that made 100,000, it now has an 80,000 shareholder’s loan sitting on the balance sheet.
Jeremy Harbour
Now this does a number of things. One of the things is that after a few years when the business does have cash, you’ve already got a voted dividend sitting in that business that you can withdraw. So effectively, you can withdraw money very tax efficiently and very easily from that business going forwards. Also it gives you a really good extra tool in your toolbox when it comes to selling the business because when you’re negotiating with a potential buyer, obviously the business owes you some money. So you can use this as one of the tools for negotiations. So you could agree that they can pay it over some time, or that it has to be part of the initial purchase. Or you could even agree that you’re going to write it off in exchange for some other benefits or a higher price for the business. But if you didn’t have it there in the first place, then you’ve removed one of the potential tools that you could use during your negotiation. So, it’s a really good habit to get into.
Jeremy Harbour
If you have a business already, I would advise putting in place a dividend policy, but certainly if you’re a minority shareholder or a shareholder in other businesses, it’s of benefit to all the shareholders to take on a dividend policy, so why don’t you talk to them about how they could possibly do that. So, thank you for listening.
Jeremy Harbour
Hi, my name’s Jeremy Harbour. I’m going to talk today about growing your business by acquisition. I had an epiphany a few years ago when effectively I grew my business by a year’s worth of sales in an afternoon and it didn’t cost me any money and I didn’t have to take any risks with sales and marketing type techniques. But before I get into that, if we go back to the start, growing up I was always quite entrepreneurial. In fact, I started a business when I was 14 years old and I left school when I was 15 to go and pursue that business. In fact, it went spectacularly bust when I 19, which is a great lesson in humility. I think everyone needs a good kick in the nuts when they’re a bit young and cocky. So, it was a really useful experience, and actually it’s really helped me in later life to be able to empathize with businesses that are in trouble because I know exactly what it feels like to be in their shoes.
Jeremy Harbour
So basically I was running businesses like this. I was always a firm believer that if you wanted to be successful, you had to start a business and you had to work really hard, and I did sacrifice everything. I put in the blood, the sweat, and the years into growing my businesses at the expense of almost everything else in my life, and it was great fun. It’s a rite of passage. I think everyone should start a business and have that experience. But one of the things I realized, I was growing a telecoms company at the time, and we’d grown very quickly organically. So I think in our first year we did a few hundred thousand. The next year we doubled that. The year after that we doubled it again. And an interesting thing happened. We obviously appeared on the radar of quite a few of our competitors.
Jeremy Harbour
Now our competitors were looking at buying us out because obviously they could add our revenue to their business, but they didn’t have to take all of our costs. So they could get rid of our office and our staff and everything else, and just add the profitable revenue, which meant that they would get a much, much bigger upside from buying our business than we would get from our own business. So, I basically spent every week having meetings with these various different telecoms company bosses, who were trying to pitch me. That’s the only way to describe it really. Pitch me on why I should sell to them and how I should do a deal. And the reason it was a pitch was because there wasn’t going to be any money upfront. All of these deal structures were quite creative. They were all targeting things that I needed and wanted, and that would help fulfill other needs, but ultimately all the jam was tomorrow, so there wasn’t going to be anything upfront.
Jeremy Harbour
Now fortunately I had quite a few of these meetings. I think too many people are negative on the phone when people ring up and don’t have meetings, but I think I always took the view that it’s part of my business education to meet as many people as possible and talk about what it is they’re looking to do. And sure enough after awhile what happened was instead of me having two or three opportunities to choose from, I ended up with 15 opportunities, and then it made me start to think about everything a little bit differently. And the thought process I had was pretty much, well at the time I didn’t have any money at all, so maybe I could buy a business. Maybe I could use the same type of strategy they were doing in order to grow my telecoms company.
Jeremy Harbour
So I decided to just go out there and start talking about wanting to find a business. Now a really interesting thing happens when you go out and start telling people what you want. Lots of little sign posts pop up that weren’t there before. In fact, all the same conversations you used to have, suddenly with this new pair of spectacles on, there’s new opportunities. And it didn’t take long before I started to get opportunities to talk to other telecoms companies about the possibility of buying them.
Jeremy Harbour
I got a few slaps around the face from not being able to come up with any cash, but sooner or later, I found a 13 year old telecoms company that was based in the UK. It had some great customers. Nintendo was one of its customers. I was able to structure a deal with him because he had particular motivations that I was able to satisfy. I was able to structure a deal with him where I bought the business for no cash upfront whatsoever, and also I didn’t have any borrowing. I didn’t borrow any money from the bank. I didn’t borrow money from the guy that was selling me the business. I didn’t have to take on investors’ capital to complete this deal. And like I say, I effectively grew the business by a year’s worth of revenue in an afternoon.
Jeremy Harbour
And I had an epiphany. I don’t need to start a business and work really hard. I don’t need to put all the blood, sweat, and years in that I’ve been putting in before. I don’t have to run the marathon. I can just do the last 10 yards and I still get the trophy, and that was a really important epiphany for me, and it suddenly made me realize that maybe I’d been doing it wrong all these years. Well not wrong, but just not the right way. And the funny thing was, now when I started looking back at all the books and all the things that I’d read before, with this new idea that you can just run the last 10 yards of the marathon and still get the trophy, I realized that everybody that I thought was telling me to start a business and work really hard, they’d all made their money doing deals. In fact, all of the dragons on Dragons’ Den bought or sold businesses as the way that they accelerated their success and their wealth, so it was almost like, well it was a complete paradigm shift. I completely changed the way that I looked at business.
Jeremy Harbour
It was around about this time I basically, having had that epiphany, I went on a little bit of a rampage and I ended up buying lots and lots of businesses. In the space of 18 months, I built up a mini empire of businesses, turning over about 13 and a half million pounds a year on a monthly run rate. We had about 135 staff, all based around the Hartfordshire area in the UK. And yeah, I became extremely busy doing all of that. I bought a seminar company, was one of the businesses I bought. This seminar company taught people various business skills and business techniques, and out of the back of that I thought, “Well how would I teach people what I do?” And it was actually at one of their seminars, I started to write a little script down of how I would do a training course.
Jeremy Harbour
One of the first things I realized is actually to learn how to buy a business, you really need to buy a business. It’s an experiential thing. So I titled this course The Harbour Club, and I wrote down all the things that would make it interesting for the participant. So how would they source deals? How would they effectively continuously source deals? Because they’re not where you think they are. They’re not with accountants or insolvency practitioners or people like that. How would they get to have a meeting with these people because if you ask the average entrepreneur how is business, generally it’s their best month ever, isn’t it? So, you need to be able to have an honest conversation with the entrepreneur about how things are going and what it is.
Jeremy Harbour
They then needed to understand the no money down deal structures that you can use because there’s lots of different ones. In fact, on The Harbour Club course we have six core no money down strategies. There’s actually seven or eight all together, but there’s six core no money down strategies that we work through, which shows things like how I was able to buy an air conditioning company for a pound where we met them at nine o’clock in the morning and at 5:00 p.m. the same day we’re being introduced to the staff as the new owner, and then go on and sell that later for six figures. How we bought a furniture manufacturer for a pound 100% and again were able to turn that around and sell that on in a very short space of time. And a whole load of other stuff. So, a call center business.
Jeremy Harbour
We bought a gym and spa. It was a health club, 15,000 square foot health club that cost 3.2 million to fit out just a few years before, but we were able to buy lock, stock, and barrel, and actually the way the deal was structured we ended up 25,000 pounds in front after the deal was completed. So, there’s some really, really interesting techniques that we’ve stuck in there, and everything is backed up with real case studies. And not only do we use the real case studies with the real company names, but we also give you the documents that we used when we completed those deals. So all of the contracts and spreadsheets and questionnaires and things like that that we’ve had to do.
Jeremy Harbour
Now people often ask, how would you buy a business with no money? And my facetious answer is you need to start with no money and try and buy a business, a bit like I did with that first telecoms company, because necessity is the mother of invention. So, I funneled all of that into this course called The Harbour Club, to give people the complete package on how to do things. And The Harbour Club’s been running very successfully since 2009. The references and things that people give us for it are always incredibly flattering and very, very positive, but actually quite a few people just want to come along to learn how to grow their business by acquisition. They’re not so interested in all the turnaround techniques and the insolvency tactics and the exit side of it. Really in the beginning what they’re looking to do is what I did in the first place, which is to grow that company by a year’s worth of revenue in an afternoon.
Jeremy Harbour
Now in order to grow by acquisition, actually one of the most important things is how you find motivated sellers because these people aren’t always in distress, but they are motivated. You need a consistent tactic that will get you those people. Now they’re not with insolvency practitioners. They’re not with accountants. They’re not with business brokers. So where do you find businesses that actually aren’t really for sale that you can then put these deals together with? The next thing is then how you have the meeting with them so that you can have a proper conversation about getting a deal done. Then we go into the legal protection, how you protect yourself from not getting yourself into trouble. You wouldn’t like to buy a company that’s potentially insolvent, and then it destroy the business that you have already. Now it’s very simple not to get into trouble like that, but as long as you know how.
Jeremy Harbour
Then the next thing is the deal structuring. So how do you actually put a deal together where you’re not borrowing money and you’re not paying anything upfront for the business? So we go through all the systems you need to do that. Then how do you reduce all your upfront costs in doing the deal? So we show you how you do it without any legal fees, without any accounting fees, without any cost of due diligence. We have a really smart system for taking all the due diligence costs out of doing the deal. We tell you exactly how I bought businesses, how I found them, how we got the deal done, the whole thing.
Jeremy Harbour
Then if you feel that you want to take everything a step further, you can come on one of my Harbour Club courses where we fill in all the gaps in terms of how you do the financial engineering, the seven steps to fixing a company’s cashflow. For example, we bought an air conditioning company that hadn’t paid its payroll for two months. It was 10,000 pounds overdrawn. We were able to fix that within about six weeks so that all the payroll was caught up and it constantly had cash in the bank.
Jeremy Harbour
We bought another business that was 85,000 pounds overdrawn. Its payroll was due in a week and the overdraft was personally guaranteed by the owners. So the deal we did there was if we could get you off the personal guarantee and we can pay the payroll, could we have the company? To which they said yes. Then we used a really clever tactic, which meant we didn’t have to put any money in ourselves, but we managed to get the overdraft back to zero, get the bank guarantee canceled, and we were also able to get the payroll met on time and ended up with the company, which we were later able to sell for six figures. So that’s one of the case studies that we use in the course.
Jeremy Harbour
So if you’d like to find out more, have a look at it. See how that works. Then maybe I’ll see you in a Harbour Club one day in the future. Thank you for listening.
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