Jeremy Harbour

Okay, I just wanted to talk a little bit about sourcing, so how do you find deals, because ultimately, we’re looking for motivated sellers. Now, I think too many people get confused between motivated and distressed, and everybody thinks we just do distressed deals, but quite a lot of the deals that we do are multimillion dollar companies with profits, that are perfectly good long established businesses.

Jeremy Harbour

So motivations can be in lots of different shapes and forms. I guess one of the key things to always look for, and one of the traps that a lot of the Harbour Clubbers get sucked into, is you need to look for businesses that aren’t for sale.

Jeremy Harbour

So it’s finding businesses that have motivations. They have things that they want to solve, but they haven’t thought about selling the business as a way of solving those problems.

Jeremy Harbour

A lot of the Harbour Clubbers get sucked into this thing of dealing with brokers, or with agents, where they’re constantly being fed businesses that are for sale with fairly unrealistic valuations. Quite often those valuations are based on profit that’s been manipulated, so it’s basically they’re saying, “If you took out all of these costs, it would make this profit, and if it was making this profit, it would be worth this amount of money.”

Jeremy Harbour

Well, clearly taking out those costs are the upside for you, so you don’t want to pay for that upside, you want the benefit of that upside yourself. So really the key is finding these off-market deals. So you shouldn’t talk to brokers, you shouldn’t talk to accountants, or bankers, or insolvency practitioners, or any of these people.

Jeremy Harbour

We’re looking for businesses that are… We can purchase without using any cash upfront, without borrowing money and leveraging the business in order to buy it, because that’s very toxic for the future survival of the business, and if we do end up paying any money for the business, it needs to be self-financing. So it needs to have been paid for from the business itself.

Jeremy Harbour

So, when you’re considering these criteria, clearly somebody that’s put their business on for sale with a broker for several million dollars has already spent that money in their mind. They’ve already got themselves past a certain point. So, yeah, the focus has to be to find businesses that are off-market. Obviously on the Harbour Club, we run through lots of different sourcing strategies you can use to do that, but the first thing is don’t waste your time dealing with any third parties or intermediaries. You need to deal with just the principles only and you need to focus on solving their motivation, not just how much cash needs be thrown at a deal to make it happen.

Jeremy Harbour

Thank you.

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