Jeremy Harbour ┃ Buy, Build, Exit: The Entrepreneur's Guide to Scaling Without More Capital

If you don't give it 110%, if you don't, if you're not all in, you're not going to be successful in a startup. So you basically have to sacrifice everything for 2 to 3 years— relationships, family, you know, finances, everything. You have to go all in for that 3 years to have a chance of coming out the other side of it. When you come out the other side of it, your business will be valued on a multiple of the profits that it's generating. It won't be valued on how many people you pissed off in that first 3 years.

So What if the fastest way to grow your business isn't by selling more, but by buying the right company? Today I sit down with mergers and acquisitions expert Jeremy Harbour to explore why entrepreneurs should think beyond organic growth. We discuss how acquisitions, strategic exits, and building businesses that can thrive without you can create leverage, increase value, and accelerate success without requiring massive amounts of capital. I'm thrilled to be here today with Jeremy Harbour. Welcome, Jeremy.

Hi, thank you for having me.

Well, it's great to have you. I'm really kind of excited through the magic of Zoom to be able to have this conversation with you all the way over in Dubai. I've never been to Dubai, but it just brings up all kinds of exotic images in my mind and from the photographs I've seen and what I've read about it with some of my favorite tennis stars living there and things like that. Must be a very—

Yeah, Roger. Roger's just down the road.

Roger. Yeah. Okay. Well, I'm going to share your bio and then we'll jump right into the conversation. Sound good?

Perfect.

All right. Jeremy Harbour is a globally recognized expert in mergers and acquisitions, celebrated entrepreneur, and the founder of Unity Group and the Harbour Club. With decades of experience, Jeremy has mastered the art of buying, fixing, and selling businesses, developing innovative deal structures that allow entrepreneurs to scale without relying on capital, debt, or Expensive Advisors. His work has helped small to medium-sized enterprises unlock shareholder value and access capital markets with investments spanning 12 countries across diverse industries. Jeremy's entrepreneurial journey began early, launching his first business at 15 years of age and overcoming the challenges of a business failure by 19, which he credits for teaching him humility. In 2009, he founded the Harvard Club, an experiential training platform that equips entrepreneurs with real-world strategies for acquiring and growing businesses. With over with over 1,000 active members, the Harvard Club has become a transformative force empowering entrepreneurs to create wealth and positively impact their communities. A sought-after speaker, Jeremy has shared his expertise on acquisition strategies at prestigious venues like Buckingham Palace and the British Houses of Parliament. His insights have been featured in the Sunday Times, Financial Times, and the Money Channel. When not closing deals or mentoring entrepreneurs, Jeremy enjoys traveling with his family, art boats and connecting with like-minded business leaders worldwide. I think people can see why we're excited to have this conversation with you today on this day that's focused on exit planning and growing through mergers and acquisitions and so forth. I'm always a little reluctant to ask somebody to encapsulate their, their kind of origin story or life story in just a minute or two. But we got a lot of ground to cover today, so I am going to do that. But maybe you could hit some highlights or maybe, you know, you know, at some point every entrepreneur it kind of has a make or break it moment or a moment of deep doubt or a real, you know, big mountain they gotta overcome on their journey. And I wondered what that was for you. And I know you got started at a very early age, so maybe if you could tell us, just so people understand who you are as an entrepreneur and they can relate with you, right?

Yeah, so I think in entrepreneurship, obviously your first failure I think is always the, you know, the tough one to take, particularly if things have gone your way initially. And I was really lucky that I did that at a young age. So I'd started a business when I was really, really young, and I left school when I was 15 to pursue that business. And when that business failed, it was a huge sense of relief, actually, because I'd reached this strange point where, you know, when the phone rang, I came out in a cold sweat. There was a physiological reaction to it because I knew when I picked it up, they were going to say horrible things to me, you know. And, and so when that business actually failed and I had to move back with my parents, I'd left home when I was 17, so I had to move back with my parents. It was, yeah, a big kind of tail between the legs. Moment, a good dose of humility. But I think the biggest lesson that came from that was that the tightrope is like 6 inches off the ground. When you fall, it doesn't hurt. So if you know the tightrope 6 inches off the ground, why not run next time? You know? And so, and I think there's been a few of those kind of moments, like when I bought my first company, I built businesses in the past, always through sales, marketing, and managing your team. We were talking about this just before we joined that your main focus is your, you know, the growing of your, of your business. And when I found you could acquire a company and effectively grow by a year's worth of sales in an afternoon, that was a huge epiphany because the sales, marketing, and team stuff are quite unpredictable and quite unreliable. And you can pour a lot of money into that as well and not get results. And then when you do find things that work, maybe they work temporarily and stop working again. And so I really felt like this was a hack that you don't have to run the marathon, you can just run the last 10 yards and they still give you a medal.

So I want to follow up on that particular point, but I have to ask you first, what was that first business that you started when you were 15?

Well, so I was market trading. I was selling watches and jewelry on a market stall, and then I started supplying watches and jewelry to other market traders, and then I expanded into more general trading, um, so buying and selling all sorts of things. And one of the things I used to sell was, was gaming machines, like, uh, I think you'd call them slot machines in the, in the US. We call them fruit machines in the UK. When I say fruit machines to foreigners, they look at me like I'm some sort of weird—

different pictures of fruit come up on there. Is that why they call them that?

That's right. Yeah, yeah. So there's, you know, things. So I was selling fruit machines and video games and pinball machines and all this kind of stuff. And I ended up buying, when I was 18, buying an amusement arcade, like, uh, like a, um, a venue that was full of these. And, uh, and that was the business that eventually went bust. So it was kind of several, several evolutions, I think. Um, These Gen Zers call it a pivot. Back then it was just going into a new line of business. It was more profitable than the main one. But yeah, effectively it was finding anything you could buy for a dollar and sell for $2 was the original business.

Yeah, well, obviously you had really had entrepreneurial instincts from the beginning. So the follow-up question to what you just shared, so There's a lot of risk in the startup phase, and most startup businesses fail, as we know. And, and so getting a business working is hard work. So I think you're referencing you can come in and buy a business where a lot of that work's been done, but there's still risk. I mean, there's still, you know, at every stage of a business, the market changes, your business changes, competition changes. You still got to get the teamwork working. You got to have the sales and marketing working and so forth. When you're buying businesses, what's the difference there in risk? Is it just that you're kind of avoiding the startup phase particular type of risk, but you're still in the general business milieu? Or could you unpack that a little bit?

In my experience, that startup phase is the pushing water uphill part. And it's typically 2 to 3 years that you never get back and is never really loaded into any future valuation of the business. But there's 2 to 3 years where it's all money out, not a lot of money in. You're still figuring out your product. You're still figuring out the product market. It fit, who's going to buy your product. You're doing everything from creating the logo, the name, the website, the, the company culture, all of those things. It's huge amounts of effort, and I genuinely believe if you don't give it 110%, if you don't, if you're not all in, you're not going to be successful in a startup. So you basically have to sacrifice everything for 2 to 3 years— relationships, family, um, you know, uh, finances, everything. You have to go all in for that 3 years to have a chance of coming out the other side of it. When you come out the other side of it, your business will be valued on a multiple of the profits that it's generating. It won't be valued on how many people you pissed off in that first 3 years. So you never get that bit back. And so you only have so many of those you can do in your life. I mean, look, the first 20 years of your life, you're not particularly useful. And you might argue the last 20 years of your life is probably not the most productive years. So what's the gap in between? How long is that bit in between? And how many segments of 3 years are in that bit in between? Because you can't keep doing these startups. And so when you acquire a company, it already has a website, it already has revenue, it already has staff, it already has product market fit, and it's delivering product. And it's, you know, it's figured all those bits out. And so the risk profile changes to one of, I guess, really time and opportunity that you're putting into, into the businesses is your downside. If you can structure a deal that doesn't require capital upfront in order to enter the business, then effectively you've created an asymmetric risk. You've taken away the downside, but you still have some of the upside. And, and that's the bet I prefer to make rather than investing 3 years just to find out if this is the one or if I need to do something different. Mm-hmm.

Yeah, it makes a lot of sense. And so I want to talk to you a lot about, you know, building through mergers and acquisitions and, you know, building a portfolio of company and everything you do and train people to do. But first, I want to speak to, you know, I think in our audience, I hope we have, you know, some people interested in growing through venture capital. I hope we have some corporate leaders interested in what we're offering, because I think there's a lot here in the summer for everyone. But I think the bulk of our audience are probably bootstrapping entrepreneurs building their own companies. Right. So I think a lot of times entrepreneurs fail to think about exiting until it's almost too late sometimes. And then they're really exiting at a disadvantage. And so I wonder if you could say something about the mindset of building towards an exit early on. And of course, the more you're exiting the operations of your company, the more you're going to be able to get out of that all-in, you know, leading to divorce situation and be able to have a life, but also have your company be more successful, more highly valuable. So I wonder if you could talk about that that mindset of building exit strategies from the beginning for entrepreneurs?

Yeah, actually, I think the mindset around exits and acquisitions is the same mindset. It's the next rung on the entrepreneurial ladder. It's becoming an acquisition entrepreneur instead of, instead of an operating entrepreneur. And I think what happens is too many people start a business. Now, when you start a business, you do everything in that business. You're the salesperson, you're the marketing department, you're the product development department, you're the customer service department, you're the finance department, you wear all the hats.

You're stressing me out because I'm still there.

Ah, damn it. Okay, well, listen to this then. So what then happens is, as the business grows, you need to be handing those things over because all of those things are jobs. So basically, you need to hand those things over. And where you see companies glass ceiling or plateau is where they basically don't hand things over. So if they don't pass all of those things on to other people—

now entrepreneurs want to cling on to all of these bits.

Now entrepreneurs are great in that startup phase, but they're not great in the growth, you know, in the next, uh, phase. And so you need to hand all of those jobs over. The problem is entrepreneurs are worried they won't have anything to do. So there's a bit of the business that's their favorite bit, they carry on doing, whether it's the sales or the marketing or the operations or whatever it is. They stay ingrained in that part of the business, and they often become the anchor that's dragging along behind the ship. They're the ones that are actually slowing down the growth and development of the business. So What we try and do is encourage people to move one rung up and become non-executive in their own business. So effectively have the management team run the business and the entrepreneur's job should be focusing on joint ventures, mergers, acquisitions, and exits. Um, those are the four, uh, shareholder value, uh, contributions that the entrepreneur can now keep busy and keep bringing that don't annoy everybody else in the business or hold the business back in any way. So they can handle those things over and a, and a great way to check if you're there is go back to your calendar for last week, take all of the meetings you had and categorize them. Were they about product? Were they about customers? Were they about finance? Or were they about joint ventures, mergers, acquisitions, and exits? Because those 4 things create, you know, huge amounts of value. A joint venture could double your revenue next year if you, if you did the right joint venture. It's leveraging somebody else's, you know, customers or products or whatever it is that you leverage through that joint venture. A merger is a great way of creating scale. And scale is important because when you become bigger, you become more interesting to potential buyers. So I always talk to people about the two pyramids. So this is the pyramid of all the businesses in the world, and there's a few big ones and lots of small ones. And then this is the pyramid of buyers in the world, and there's hardly anybody that can buy the small ones and loads of people that can buy the big ones. So as you move up, the scale pyramid. You widen the audience of potential buyers. That not only makes it easier to sell but increases your valuation exponentially. So mergers are a great way of moving up the scale pyramid. It's also a great way of, of getting the best talent, because the best talent is very loyal. So it's hard to poach them to come and work for you. But if you acquire the company or merge with the company, they come with you. Acquisitions can obviously create massive scale. And then your question was around exits and being ready for an exit is actually putting your business in the best possible operational standpoint. So, um, if you have a data room that's up to date, you have, uh, your accounts audited, um, you are positioned in a way that makes you sellable, that also means you have good systems and processes that drive all of your numbers. You have good systems and processes that drive all of your other activity like marketing and sales and these kind of things. These are good habits to get in. I mean, Michael Gerber famously said, working, you know, on your business and not in your business. It's just a truism, you know, it's just something that as an entrepreneur you need to do. And, you know, he talked about franchising your business even though you're not going to sell a franchise. And that's a lovely way of describing what I'm talking about.

Right? Absolutely. Yeah. And I have a lot of follow-up questions there. And yeah, and, you know, I'm on the way myself. I'm very much built a good team and I'm kind of still in, but but getting in the direction of mostly spending more and more of my time working on the business and, uh, um, still wearing a few hats that I hope to turn over to some really smart people someday. I know you, you purchase a lot of companies, you train people to buy companies, so you're dealing with, you're often buying companies from founders probably. So I want to talk about, uh, you know, that emotional side of that founder selling their company. But before that, you're talking about growing, about mergers and acquisitions as a strategy for growth. So inevitably, if you're talking about mergers, I mean, acquisitions would be one thing, but mergers, you may be giving up equity. And I know for a lot of bootstrapping entrepreneurs and founders, just the whole idea of giving up equity, giving up control can bring up a lot of fear and uncertainty. And so how do you navigate that space? Clearly, you could— with a good merger, you could end up in a more valuable place. But now maybe you've got partners, you got less control, you got it. So talk about that a little bit in terms of how—

so I guess for the listeners, the easiest easiest way to describe a merger is an acquisition using equity instead of cash. So you're, you're issuing shares in order to execute a merger. Now, the two key reasons to do a merger would be to move up that pyramid. So you're, you know, if you're a small business, it's very hard to find a buyer, and it's very hard to get a decent price for your business. But if you move up the pyramid a little bit, you widen the number of people that can buy it, and you increase the valuation. So, uh, 2 2 6 in that environment, because, uh, you're now sellable, and you can get a better deal deal. The other thing is it allows you to create a better depth of management, because the last thing you want when you sell it is to be the guy that's stuck running it for the next 5 years on some protracted earnout. Whereas if you can merge together so you have a better depth of management, it again makes it more viable. Um, the, the buyer will like it more because there's plenty of people in there that can run the thing, uh, and it's not so, uh, dependent on you. So I guess coming to those people that, uh, um, uh, would be scared to kind of lose some control or, or whatever, it's more about making you exit ready. It's more about finding that capital event, the person that's going to acquire the company. Now, of course, you can also do roll-up strategies using mergers. So we, we discuss lots of different roll-up strategies in that, in my Harbour Club community. Some of them allow you to retain 100% equity in the holding company. Others are effectively collective mergers where you get diluted in terms of the equity percentage that you hold, but your earnings per share, so the profit per share that you hold goes up. So they're beneficial in that respect, but dilutive in terms of ownership. So yeah, it really depends what the end goal is and how you want to go about executing it. But sometimes, yeah, giving up a bit of percentage in order to have something you can sell is quite a good idea.

So, and I wanna talk a lot more with you about mergers and acquisitions, but just to kind of to put a cap on this, you know, speaking to the current bootstrapping entrepreneur, if you have the mindset, even if you, you know, love running your company and you know, hopefully you can run it as a true CEO where you're mostly working on the company, you have a good management team, you're coaching them, and maybe you wanna do that for quite a few years, you love doing it. But if you make your company exitable now, it's gonna be a much better company. It's gonna be a better run company. It means you're doing all the right things to have a fabulous company. Company, uh, if you're making it exportable. Would you agree with that?

Yeah, absolutely. It's the same idea as making it franchisable in the, in the EMIF, uh, kind of context. Um, but also I would say, look, um, organic growth is one engine on the plane, M&A is the other engine on the plane. So do you want a plane with one engine or two engines? It's, uh, yeah, uh, it just, it's a great way of increasing, uh, you know, your, your growth rate. Mhm.

Well, for any of the entrepreneurs in our audience that are maybe thinking about selling their company and they're at whatever stage of being exitable or not. And hopefully they're learning a lot here in this summit about how to get their company exitable. But I wonder if you— because you have a lot of experience in buying companies and probably buying them from founders, what do you say about the emotional journey that founders go through in exiting their companies and how to make that work? And, you know, some that with earnouts you can end up, you know, well, either wanting to be there for a while or being stuck being there for a while, or you can, you know, be able to walk away day one. But, you know, then there you are with maybe a bucketload of money but nothing to do. So I wonder if you could talk about what you've seen and understood about that, the emotional journey for founders who are exiting their companies.

Yeah, I mean, what typically happens in the businesses that we're targeting is that they've reached some point of motivation. So something has happened that makes them, you know, that now makes it important for them. And that, you know, typically it's things like wanting to retire, business partner has retired, business partners died, business partners ill, they're ill. You know, there's a range of different motivations that can, that can drive people to want to actually take some action and do something. And then with regards to kind of deal structures and preparation and things like that, It really depends if you're buying or selling. You know, if you're buying the business, you want to pay as little upfront as you possibly can and as much on a deferred basis and linked to performance as you can. And you want them to stick around for as long as you can. And if you're selling it, you want to get out as quick as you can with as much as you can.

So there's the—

it really does depend if you're buying, buying or selling. And of course, the advice is different if you're buying and selling and the deal happens somewhere in between. So, you know, I know Chris Voss wrote that famous book, Never Split the Difference, but in most of these situations, ultimately somebody splits the difference and it ends up being a kind of compromise between the two extremes that people are looking for.

I think that's really interesting that you said that because they are two completely different strategies, whether you're the buyer or the seller. And, you know, I was just listening to someone yesterday talking about, you know, if you're selling your business, you know, you want to get all that money upfront that you can because you don't really know if the rest of it's going to play out. And, and of course, from the buyer's perspective, if you're, if you're taking this approach of buying with little money out of pocket and wanting to assure good transition and have the owner involved as long as possible to assure that transition and based on earnouts and things like that. So there are two very different strategies and mindsets and sets of needs. So obviously the deal is going to fall somewhere in the middle there. And nobody's going to get completely what they want, probably.

Yeah, but the only difference is that, um, it's a buyer's market. So the seller doesn't have many options, the buyer has infinite options. So this means that if you can't get the deal you want from Dave, you can get it from Jeff. Um, so whereas the seller doesn't have that luxury of, well, I've got these 15 people that all want to buy my company, so I can do the best possible deal, Yeah, typically there's one game in town and they just have to decide if they can swallow that, that offer or not, or whether they carry on. And it's strange. We're seeing— I'm seeing businesses that should be incredibly sellable that are just closing down because there's no natural succession and no plans. And I saw one that really surprised me because they sold solar panels and I thought selling solar would be such a modern, cool business that the next generation would actually quite like it as a business. And this company was doing 10 $10 million a year in revenue, had been going for over a decade. And most of their sales were online. They tried to sell it for a couple of years, hadn't had any offers. And they had a notice that their website URL was going to— needed to be renewed. And they just didn't renew it. And they just locked the door on the office and walked away and retired. And I was just gobsmacked. Wow, if we'd found this like a month earlier, it was $10 million of revenue in a sector that I would perceive to be be sexy enough. I mean, okay, it's ultimately, it's a, it's a trading business. You import stuff and you, you sell it. It's with a margin, you know. Um, so it's, it's a simple business and you're only as good as your last month's sales. But this had, you know, goodwill, reputation, 10 years of trading history, a big customer list. Um, and yet they couldn't find a buyer. And so that, you know, after 18 months, 2 years, and they just closed it. And that is getting more and more common.

Well, you're pointing to what's, you know, really possible for someone who wants to just really start an M&A business or who wants grow their current business through acquisitions and mergers is there are a lot of companies for sale. The majority of them end up just closing their doors. Is that correct?

Yeah.

Yeah, exactly. And unfortunately, the business broker community doesn't help them a lot because they, they convince them that there's this big pot of gold somewhere that they can get. And that's, that's often what stops them from getting the sale and then makes them close the business down. Because when you've been told you're getting $2 million and it's going to be in a single check, you're kind of holding out for that. And of course, if you're in your, you know, 80s, for example, how many years do you want to keep holding out for that? And how, you know, before you get on with your retirement? And so this is what's driving people to just close the doors, was their unrealistic expectations aren't being met, and therefore they're just going, well, balls to it, and locking the door.

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I'd like to contextualize the rest of our conversation, if it makes sense, in kind of two directions. And maybe we'll weave back and forth. But one would be the current entrepreneur who's built their company and is considering the possibilities of now continuing to grow through acquisition, whether it's vertical integration, horizontal integration, you know, bolt-ons, whatever it might be. Talk about that. And then the other possibility, the other way we could talk about is someone who just really wants to get into the M&A business and just start— go find a company to buy and then start building a portfolio or roll-ups or whatever. So those seem to be two different avenues. So what if we could talk first about the entrepreneur who has a company, they're growing their company, they've been focused on growing through marketing and sales and all the strategies they can come up with to grow organically. And then now considering the possibilities of growing through acquisition or mergers. So what if you could talk about some of the strategies there and what you found, you know, how to— how an entrepreneur who's, you know, busy creating success in your own company can begin to think about that and think about, you know, how should I be looking at companies and where am I going to find them and should I think horizontally or vertically?

Yeah. So the first thing is obviously to make yourself non-executive in your own business. So you are now the chairman, uh, you have a board, you have a CEO that runs the company and those jobs have all been delineated because if you are, um, in the business the whole time, you're not gonna be able to focus on that shareholder value piece. So that's obviously step one. Step two is then to shortlist all of the potential acquisition targets.

Targets.

So are you looking to expand geographically, or are you looking to expand within your own geographical region? Are you looking to buy more companies that do the exact same thing you do? So if you're a lettings agent, is it more lettings agents, or are you looking to vertically integrate? So do you want to provide the services that you're currently paying for outside of the business, or that you're currently selling services to? So if you're a letting agent, it might be a, you know, mechanical and electrical engineering company, it might be a property management company. It might be, you know, these kind of, uh, related, um, businesses that kind of fit into the same orbit. So once you've kind of brainstormed that list, then start to look at the size of the universe of potential acquisitions that there are. So you can use things like Sales Navigator inside LinkedIn to search for those businesses by geography and jurisdiction and type of business, or you can use some of the software applications. Like in the US you have Hoovers, and there's things like Fame. Um, in UK there's things BizCrunch, CreditSafe. There's, there's a whole bunch of different software tools you can use. A little hack, by the way, some of this software is super expensive, but if you go to your local library, you can often get access to it for free. So things like Hoover's, which you might spend several thousand dollars a year for access to, you can go to your local library and access the same data for free. So go there, draw up your shortlist of all the businesses that meet your criteria, and then just start an outreach campaign. Now, outreach campaigns often work best when there's multiple points of contact. So you might want to write them a letter, hit them up on LinkedIn, email them, WhatsApp them, depending on what data you have available for them. But reach out to them just on the basis that you're an investor in their industry. You can mention your company name because you're in the industry. You know, they may have heard of you or they can at least Google to figure out who you are. And just say you're an investor in this industry and you're just trying to figure out, you know, what the opportunities are out there. And that you'd love to have a quick chat and, and try and have just conversations with them, kind of fact-finding conversations where you really just figure out what's their plan in the next 3 to 5 years. Are they going to retire? Are they going to grow? Are they going to IPO? You know, what's going on in their mind? And also just brain picking their brain on where they see the industry going. If you, if you go to them with that humility that you'd love to talk to them about where they see the industry going in the next 5 to 10 years, this builds huge amounts of rapport and trust with them because they will then feel like you're, you're taking counsel from them around the industry that you're both in, um, as to where you see it going. And of course, because you're inside that industry, you'll have a lot of, um, uh, people that you know in common or scandals that happened in the industry, you know, things that you can talk about together that will create huge amounts of rapport and trust, uh, between you. Um, and what you'll find is as you know, build out this universe of potential targets, you'll start to see how the stars line up between them. Okay, this one has a young, hungry management team that are in this for the long haul. This one is desperate to get out and wants to retire, would have retired 5 years ago if they could, but can't see a way out. You know, maybe if you put these two together, you've got a management team that can run both of them and we can bring them into our group, etc., etc., etc. So just start building up that kind of universe of potential targets and speak to as many of them as you can. And the other thing is when you're building groups, everybody thinks that your business is going to buy that business and it's all going to be integrated somehow. It's not necessarily the case. We normally create a separate SPV, a separate company that sits alongside yours. You acquire the other company through that and all of the synergies are through inter-trading relationships between your two companies. You're not looking to take your big barrel of nice shiny apples and potentially introduce a rotten apple. You want to keep the apples separate and just do business together. You can, you know, if there's obvious savings, you can make those savings through an inter-trading relationship. You don't have to push everything together under one brand in one pot. So yeah, think of it in those terms.

So you made the point that if you're going to go in this direction, you need to exit your own company really to a board level, to an investor level. You got a CEO in place, you're not involved in operations. So are you suggesting that if you're still still, let's say, at the CEO level and you're a true CEO, you're not mired deep in operations, you're really managing the company as a CEO at that level, that it would be too distracting to also get involved in acquisitions?

I think you need half your diary to be empty to give it its due, you know? So yeah, I mean, people can make their own judgment, I guess, about how much time they have available to put into something. But like everything in life, the more you put in, the more you get out.

Yeah.

Well, I think that seems to be a pretty good sage advice, having at least half your diary empty there before you think about doing something like that. Yeah, because to succeed in anything, hobbyists don't do very well at succeeding in things, especially when the stakes are very high. Exactly.

If you've started installing games on your phone or playing solitaire, you're ready for M&A.

Okay.

So let's look at this, this idea of being able to, you know, get into the M&A world and build a portfolio of companies without, without a lot of upfront capital and being able to do deals without a lot of money out of pocket. Some, you know, somehow it can sound a little bit like a pipe dream. And, you know, we've all seen a lot of advertisements, you know, build your real estate empire with no money out of pocket and so forth. And I think this stuff actually happens, but it tends to sound like a little too good to be true. So I wonder if you could give us what it's really all about and how it really works.

Yeah, look, we have a community called The Harbour Club. I started it in 2009 and we have 15 different no-money-down strategies. And honestly, when you're buying small to medium-sized businesses, the risk profile profile is such that you shouldn't really be putting lots of money into these transactions. These are very volatile assets, and if the business owner wants to get, you know, the sort of level of money out of this business that they want, it's going to have to be a collaborative exercise with a buyer in order to get them there. It's, uh, somebody's not going to write a million-dollar check or a $2 million check. They're going to have to work with the buyer over a period of time to extract that $2 million from from the transaction. Now, there are some really clever deal structures that we have, including, you know, like a listed bond structure that we use. But the simplest one, I guess, to explain is one that we call a WIBO, which is a work-in-buy-out strategy. And you can also use this for building groups of companies in the same sector. But ultimately, if you approached a retiring baby boomer, and said, you know, who said they wanted, uh, you know, $2 million for their business, and you said, give me your business and I will pay you from your own profits over the next 4, 5 years, they're probably going to say no. There's not really any redeeming features to that deal structure. They don't know who you are, they don't trust you, you know, why not give it to their key employee in their business instead, or whatever. Um, so what a Waibo does is We solve a problem in exchange for an equity stake. And this is partic— this is normally done through some sort of consulting project for them. And there's lots of different ways you can approach this. If you have specific skills, you can bring those skills in exchange for equity. So if you're a marketing expert, sales expert, finance expert, whatever, you can bring those skills and take a percentage. Quite a common one that the Harvard Clubbers do is actually getting the business sale ready. So you take them through what's needed to sell their business, having a data room, having their audited, having all these systems and processes put into a document, you know, documented form, having an information memorandum, all of those things. The business owner doesn't have those, and they're overwhelmed at the idea of creating them. And so typically you would say, okay, well, it will cost X amount to create this, but how about you give me Y amount, which is a much smaller amount of cash paid over the next 6 months while I do this, and you give me some equity in the business so that our goals are aligned when I've created all this additional value and we we can sell the business, I'll get some of the sale value. So you're putting your money where your mouth is. So typically the deals that I see might be, you know, anywhere between $2,000 and $5,000 a month and anywhere around sort of 20-30% of the equity of the company in exchange for solving some problem or improving the value in the business in some way. So for the next 6 months, you're getting a job, you're getting paid. Um, so this is great for people that are starting out in this, uh, in this industry and want to have an income stream um, but also, um, they're making the— they're doing the best due diligence you could ever do because they're in the business on a regular basis or liaising with the team in the business on a regular basis in order to put together the virtual data room and all of the assets necessary to sell the business. And then at the end of that process, you put the business up for sale. The first 2 or 3 offers they're going to get are going to be somebody saying, I'm going to pay you $2 million over the next 5 which of course the business owner will turn down just like they would have if you were the one proposing that in the first place. However, now if you say, well, look, Dave, I'm already 30% shareholder, why don't I buy the other 70% off you for that $2 million and I'll pay you over the next 5 years? You now have the trust and empathy and rapport with them that they're more likely to take that option. You've built the trust, they now know you, they know who you are. So by buying a little bit of it first and then buying the rest of it, and by the way, the first step is 3 to 6 months and the second step is normally another 3 to 6 months after that. If you tried to do a leveraged buyout with that deal, if you wanted to go to the SBA and get a $5 million or $2 million loan to buy that business, it would take you 12 months to do that, you know, to get that done. And you'd have a whole bunch of legal fees and a whole bunch of debt and a personal guarantee on that debt. So the, the time to complete the acquisition is about the same. You get paid through the process success, um, and you still end up owning the company and paying for it entirely out of its own, uh, profits. So that's called a WIPO strategy, a work-in-buyout strategy. It's very popular in our community. We have— I've done hundreds of interviews with, um, my members who have done exactly those kind of deals, and there's so many variations and nuances people have added to it or tried or whatever. You can really, you know, come up with your own creative way of doing it, but fundamentally it's a sweat equity position and then an agreement to buy the balance of it at the end of the process. And it's—

having built that, both built value for the owner and built the rapport and the trust there, right? Exactly.

So once you deliver on something, you're in the top 1% of humanity. How many people have you had in your life promise you something and then do nothing? So if you promise them something and do it, wow, you're like God. So it's so much easier to get something done. After that.

So, um, I have one question about it. It would seem to be this could be pivotal in many cases. Uh, you may work out lots of different types of deal structures like the one you're talking about, uh, uh, to, to be able to purchase a company with little money out of pocket. But for that owner, uh, founder-owner, uh, maybe they're motivated, but, but for them to walk— sign that deal and not walk away with any check. I mean, and I know there are strategies to where you could fund it so they can at least walk away with something, even if it doesn't come out of your pocket. But I would think it's going to be a lot easier to swallow for most owners if they walk away with something rather than they walk away only with a promise of an earnout or, or seller financing deal and so forth.

Yeah, it really comes down to what they want versus what's available. So if there were a queue of people with checks, then of course a check could be an alternative. Now, of course, they would just want you to pay everything upfront. And if I'm selling a business, I want them to pay everything upfront. But that doesn't mean that that's available to them.

Yeah.

So just the fact that they want it isn't enough to make it happen. And if they want to get— the other thing is that if they take cash upfront, the overall transaction value will be a lot smaller. So the person that's going to give them the cash upfront is probably going to have a much smaller amount of deferred payment. So you might find that that $2 million business, they only get $800 grand if they get like 300 grand upfront and the rest later. So they can more or less double the amount they receive in total because it's being self-financed from the business. So, you know, the comment that's used a lot in my community is, you name the price, I'll name the terms. So it helps people get to their headline, which is an enormously powerful negotiating technique.

So how does one work with, you know, coaching an owner, especially if it's a founder and maybe they're approaching retirement, whatever, they have some motivation, but coaching them in that space because they may have worked with a broker, they may have had people telling them they're gonna get this multiple of SDE or if they're actually a better organized company, they may be getting a multiple of EBITDA and then they start hearing numbers that are less. So they're saying, well, if you want all your money, money, you know, if you want any money up front, that's going to lower the deal a whole lot. And they're just like their head spinning. And, you know, they're— and to coach them into reality, because I think probably a lot of people getting ready to sell their company are not really in that reality space. They have a lot of ideas that they've gotten. And what, you know, it can be a painful process for them to adjust to the reality of what they're going to be able to realize from their company.

Yeah. So there's a universe of businesses for sale. Let's say it's like this long. You'll have this third at the end here who have have tried to sell their company, have not been able to, and they'll be open to this sort of a discussion because they've— that the, the rubber's met the road when it comes to reality, and they, they understand. So the brokers told them they'll get $2 million, they've realized that's just not true. And then you have the other third at the beginning who just don't see why anybody would want this business. It's too small, it's a pain in the ass, um, you know, um, I don't think we could sell it because we're, you know, we've only got 20 staff and $3 million of revenue, who's going to want that? Um, and those are very easy to do business with. The third in the middle, yeah, it's going to be a bit harder, and it may be that you put your best offer on the table and you come back to them later. I actually— the Zoom call I had just before this was with a Harbour Clubber who did a deal a few months ago that he'd first spoken to 5 years ago. So he'd spoken to this business 5 years ago, and basically at that time, the guy was— he was on with the broker, he was speaking to everybody about getting the maximum he he could for the, for the business. And at the end of that period, he realized he's not going to be able to sell it for this, so he just needs to think, who of all the people I met over the last 5 years, who was the nicest? So he picked up the phone to this guy Ross, who I was just speaking to, and pretty much said that. After 5 years, I've realized I'm not going to get what I want, so I figured I'd just speak to the one who was the nicest. And you were always the, you know, you're always the nicest to me, so let's, let's have that conversation again.

That's great. Well, it points to the importance of rapport, obviously, in business. So, so thinking about, um, you know, building out a portfolio, especially someone who's, you know, not trying to add on to a company they already have, but they're just— so, uh, you know, you're, you're building a portfolio. Well, I mean, one, you may be building companies to hold for a certain period of time and then make a profit. It may be not quite immediate flipping, but there's some sense you're not intending to hold them for a long period of Or maybe you want to build a really nice portfolio that you can manage, that you think is a good long-term investment. And in that case, you know, how would you strategize that portfolio? Is it around diversity of industries and so forth? Or the other approach, if you're thinking about doing a roll-up of some kind and you want to buy a bunch of similar businesses and then roll them up into some overarching brand or all into one brand, I wonder if you could talk about some of these different strategies for building out a portfolio through M&A. M&A?

Yeah, absolutely. So one of the things I would, I would say, and this is a hard one lesson, is, um, the best time to sell a business is now. So I, I'm a big believer in exiting businesses because they don't work very well under management, um, and things change so much in the business landscape that owning a portfolio of disparate businesses is not as glamorous as it sounds. I've been there, I've done it, I've had a group of companies, and, uh, um, I used to joke the only thing worse than having one crappy company is having 12 crappy companies. So it was It was not the best. The problem was I had Warren Buffett's words ringing in my ears, which were, you know, the best time to sell a good company is never. And so I was like, right, I'm keeping all of these. But his idea of a good company is Coca-Cola or Apple, not an HVAC company in the wilds of rural England, you know. So I'd misunderstood the value of his words and, or reinterpreted his his words, to meet my expectations. So yeah, the best time to sell a business is now. Typically you'll find that you can make more money on the money than you can by owning the business. So if you have a business that's doing half a million of EBIT, you can probably sell it for 1.5 million. You can make more money from that 1.5 million deployed into income-generating assets than you'd probably be able to take out of that company in cash every day after you've paid tax, left some working capital in the business, etc., etc. So I would much rather sleep well at night and have that capital return than have to worry about staff, customers, you know, all of the stuff that goes with, with the constant—

that's a really important point you just made there. I want to follow up on that point because I think a lot of existing business owners with, you know, fairly legacy companies, they've been in there for a while. They may find themselves in a place where they— if they could take the value of their company and put it in reasonable investments, they'd be making more money without all the headaches of still running that business. And that could be a place where you have a motivated seller to begin with.

Hands down.

Yeah. Yeah.

So yeah, so that's, you know, like a really important point I think about building portfolios. Don't build them for the sake of it. Build, you know, build to sell. So it sounds like a book.

So what does that trajectory look like from, you know, getting a reasonable deal with a company? And obviously there may be some earnouts involved, some maybe some seller finance refinancing, which is going to take a bit of a time. So you may, you may need to hold it long enough for that to play out, or I guess you could sell it with some of that still involved.

But you can sell it with some of that still in there. You can accelerate the repayments. There's, there's a few things you can do once, once you get there. But, but building groups is really important because as I pointed out, as you go up the pyramid, the audience widens and basic economics, if you have more buyers than sellers, then, uh, the price increases. So you have pricing power. At the bottom, there's no pricing power because there's not— there's less, uh, there's more companies available and less buyers. But as you move up the pyramid, there's more and more buyers, less and less sellers, and the— you, you start to get an exponential increase in price. So you'll find a small engineering company might sell for 1.5 times earnings, a $5 million revenue engineering company might sell for 4 or 5 times earnings, a $20 million engineering company might sell for 8 times earnings, and then a big public listed engineering company might be at 25 times earnings. So you've got a more than 10x increase in value by simply increasing the scale of the business. So moving up that scale thing is really important. When you do that strategy I was talking about, the minority acquisition, you know, this Weibo acquisition, what we found in our community is when people do the first one, so let's say the first one is a widget manufacturer. Et cetera, suddenly they're catnip to widget manufacturers. All the other ones are really interested because you've just done a deal in their sector, and they think you're now an expert in that sector. And the previous owner will also introduce you to lots of other friends who also have widget manufacturers. And so actually, that first deal is a catalyst to the second and the third one, typically. And then you start to build a group. So you can start to build a group of these minority holdings that are gradually turning into whole ownership. And that can be a really good way of doing a no-money-down roll-up in a sector-specific way. And we're seeing that happen quite a bit in the, in the Harvard Club community.

So one way or another, if you're, if you're buying businesses to eventually sell the businesses, you're not trying to build a long-term investment portfolio. And so then you got to increase the value somehow. So you talk about one way to increase. So one way to increase value is like a roll-up. So you now you have a bigger company with, with greater revenue and greater profit. And so forth, becomes a higher potential, higher multiple when you sell it. Another way would be to take an existing company and improve that company, to have it operating better, to improve its systems, its management and so forth, which is going to make it more valuable. I wonder if you could talk about those two different strategies. And if you are talking about a roll-up, inevitably, like you said, the only— the worst than owning one crappy company would be own 12 of right? So if you put together a bunch of roll-ups and they all have insufficient systems and there's management issues, I mean, somehow to make that thing really attractive, you're going to have to improve those companies or build an overarching culture or get some, some economies of scale because you're sharing systems and so forth. So I wonder how you really actually— whether you have one company to improve the value and sell it or whether you're building a portfolio or a roll-up up to, to really increase the value, what's the work you actually have to do to make that work?

Yeah, there's a 4-hour conversation in this because this is really getting, getting, getting into the weeds. But I'll give you some highlights. So one of the things is getting the internals, getting the internal people to rinse out the synergies. If you get a spreadsheet and decide where all the savings are and you go and implement that in small businesses, they'll rebel against that and often they'll sabotage it deliberately. So you don't end up with what you think you're going to end up with. So the thing I've learned is if it's your idea, it's terrible. If it's their idea, it's amazing. So you make it their idea. You ask them, how are you going to save a dollar or make a dollar by being in this, in the same group as this other company that does more or less the same thing as you? And you get them to collaborate together on, on that make a dollar or save a dollar. So don't— you don't have to plan and execute the synergies. They have to plan and execute the synergies because that's the only way it, it will tend to work. So that's number one. Number 2, there are huge improvements that you can normally make through simple financial engineering where you're not actually doing anything with sales, marketing, or costs, um, but simply the way the accounts are presented and, and delivered. So, um, all accountants on default setting aim to save you tax. Um, now the way to save tax is to make less profit, and when you make less profit, you decrease the value of the business. So simply by redressing the accounts in a profit-optimizing way, you can have a massive improvement to the same business. So it's simple things like, uh, capitalization of expenses into assets, um, the recognition of revenue and the recognition of costs and the way that you recognize those, um, in the, uh, in the P&L of the, of the company. So there's a bunch of stuff you can do there. And then on the joined-up picture, I would focus on the really low-hanging fruit. So the simple things that you can do that have the biggest bang buck. And it's typically things like the, you know, obvious cost reductions. So stripping out things that just are not needed or are cumbersome. And there's normally some really obvious ones of those kicking around and increasing prices. A 5% increase in prices in an average company is 40% more on the bottom line because that increase in price comes with no incremental cost associated with it. Adding 5% to the prices, you don't really lose any customers, or it's very rare that you lose customers, but you add significant amounts to the bottom line. If you think about it, if you just bought a company for 3 times earnings, and you've put it with another company, and that you can now get 5 times earnings because you're a bigger company, so you can now increase the earnings that you get, but you've just increased those earnings by 40% as well, well, um, you've actually got a really big uplift in shareholder value from just those two things— putting two companies together and adding 5% to their, uh, pricing. Um, so, but there's 50 things you can do, and like I say, there's a 4-hour discussion around how you do those. And also some of the common sense things. This is why I mentioned the synergies. You know, the first mistake I ever made when I put two companies together was I drew up the spreadsheet of all the savings we were going to make, and then I tried to implement it. And as you try and implement it, it's a fight. Every single step, every simple thing you want to do is a fight. And it's an unnecessary fight, uh, because if you just chill out and let them take care of it, it's actually— it's, it's kind of, um, born in ego and our own self-importance. And, uh, because if you have that ego and self-importance, you think everything you have is, is right and everything they're doing is wrong. And that's— if you come from that angle, it's, it's gonna be a disaster. Sorry, bless you.

Yeah, thank you. So, yeah, there's a lot of sage advice in there and you're hitting on some core— I realize this could be a 4-hour discussion, but you're here.

We'll do it one day. I'm, I'm up for it, but I'm gonna put the kids to bed at some point today.

But you, you also pointed something very important there that this accounting perspective, right? And so a lot of founders, I actually just, you know, recently had a conversation with a founder trying to sell their company. Company and they've been structuring everything to avoid taxes, right? And so their company does not look very profitable and they're trying to assert, no, it's really actually quite profitable. It's just that I've been, you know—

I've just been lying to the tax man all these years.

Well, I think mostly legally, I don't know if all completely legally, but you know, but they've been really trying to minimize their tax bite. Well, Mr. Owner, in the process, you've actually made your company worth a lot less money.

Yeah, and often, you know, we find accountants don't even ask. It's just default. So, you know, things like when you recognize an invoice and when you recognize costs associated with delivering a service, the accountant will just look at all the options and choose the one that generates the least amount of profit. And they won't say to you, hey, did you know you could recognize this invoice now or when it's paid or when the service is delivered? And if we do it this way, it does this. And if we do it that way, it does that. I mean, I remember when I had my telecoms company, my financial director saying to me, hey, Jeremy, this year, would you like to make 300 grand, break even, or lose 300 grand. And I was just like, well, hang on a second, we have sales costs, you know, this is math, you know, you can't, you can't have 2 plus 2, what would you like the answer to be? And then he explained kind of accrual accounting to me. And I was like, shit, this is, this is insane. And I remember, I remember thinking like, you know, if you teach entrepreneurs accounting, this is why you have things like Enron. Because they just get super creative with all these opportunities that they have. Yeah.

And, you know, I think owners— another issue, especially small companies and founders, they may be running a lot of their life through that business, which somehow has to get separated out before you can really determine real seller discretionary income. Right. So they have to— it's more prevalent.

Yeah.

Yeah.

It's more prevalent in the US than almost anywhere else, actually, to have, you know, the nanny and everything kind of running through the books. In Europe, you see it a little bit. Australia and places like that. You see it a little bit in the US. It seems like it must be compulsory over there.

Mm-hmm.

So we're kind of coming near the end of our time. It's been really illuminating. There's so much to take action on here. What— I wonder if we could talk a little bit about two things. Being someone who's, you know, running an M&A business, okay, you're in the M&A business and you So how's that different than running a regular business? And, you know, what are the qualities of a leader who's doing that? That's one, the one question. And then also, what does success really look like post-exit, either for a founder or for someone in the M&A business? You're buying and selling companies. What are you looking for? What's, what's, how do you define success? And, and what makes a good leader in this business, the M&A business, as opposed to other industries and businesses?

Yeah, that's a really good question, and actually not, not one I've ever been asked before. So I'm kind of, uh, there's very few sentences that start that I don't know how they finish in these, in these kind of interviews. So it's, it's an unusual one to actually kind of, uh, come back to looking at it in those terms. I mean, what works really well for me is I'm, I'm the front end, I'm the, I'm the deal maker, I'm the person that sits with the business owner and constructs the, uh, the, the structure and the deal. And I guess a bit like an entrepreneur not being terribly useful after startup, phase. I'm not terribly useful after that point. And so they'll generally only wheel me back into a deal if it's going wrong, uh, effectively kind of needs to be resold, um, because it hasn't quite gone the way it's supposed to go. And I'm in WhatsApp communication with the business owner throughout the entire transaction, but all the legal and finance stuff is going on completely separate to me, and I often don't know what stage things are at or quite where they are. And I would say the difference between an M&A business So I guess an M&A business is a business because it has staff, it has customers, it has marketing, it has sales, you know, but the product are companies. And, you know, when we're busy, we're doing roughly a deal a month and it tends to be a bit feast or famine. So those deals don't come in nice and regularly every 4 weeks. You'll do nothing for 3 months and then do 2 at the same time and then do nothing for a month, then do 4 at the same time. Time. So it tends to go a little bit like that. And when you have a lot of transactions happening at the same time, it can be extremely busy. And I take a lot of vacations. If you look at my wife's Instagram, you'll see— I don't post this kind of stuff, but yeah, you'll see on her Instagram all the different places we're going off to all the time. And I always joke that the best way to get a deal closed is to take an expensive vacation, you know, so you go to the Cheval Blanc in the Maldives, and the day you arrive is the day everybody wants to complete. So it's, it's a great, it's a great way to make deals happen. It's a bit like going to the restaurant, the food always arrives, you know.

Yeah, exactly. When I'm doing interviews and a person hasn't arrived yet, all I got to do is start writing email and then they arrive.

Exactly. Yeah, yeah.

Timing, how that works, that's on a much bigger scale, of course. So this has been incredibly valuable, Jeremy. I really just appreciate this so much. There's so much to take action on on here. How can people find out more about your companies and the services and the programs you offer? And also know that you put together a wonderful free gift for our audience. So maybe you could tell us about how they can find you and how they can find that free gift.

Yeah, absolutely. So look, I'm on all the usual social media things. If you go to harbour.jeremy and it's the one with the blue tick, if they're trying to sell you crypto, it's not me. So go to harbour.jeremy with the blue tick. Blue Tick. We also have a Harbour Club Instagram account, and you can tell which, which one is the right one because I'm following it. It's the only one that I'm following that's called Harbour Club. We also publish loads of YouTube content and stuff, but when Fleet asked me to do something special for, for you guys, we actually have a 21-day email course. Now, we've been told that this is better than most of our competitors full-priced products. Um, we developed it during COVID because we were sitting at home with nothing to do and, uh, and we weren't running live events. So we put this course together, but it's, it's really good, it's really relevant. It teaches you how to source deals, how to put no-money-down deal structures together, how to optimize the value of a business, how to market it for sale, and also some wealth tactics that we use with the capital events in order to drive income after we've sold a business. And it takes you through it with a, with an email. It's multi, multimedia. So you've got some videos to watch, some stuff to read throughout that 21-day period. If you want, you can just save them all up. You'll get one a day. You can save them all up in one folder and do it in your own time. But, but yeah, entirely up to you. But all you need to do is just create, open an email, put HeartMind in the subject line and send it to Chrissy @harbourclubevents.com. Now, Chrissy is C-R-I-S-S-Y, unusual spelling, but C-R-I-S-S-Y, and then @harbourclubevents.com. And harbour, I'm British, so harbour's spelt funny, it's H-A-R-B-O-U-R, so H-A-R-B-O-U-R, clubevents.com. Send that message to Chrissy and she'll reply with the 21-day email course every day for the next 21 days.

Wonderful. Those links are right down below, so people, I encourage our audience to take action on right now. So again, thank you so much. Jeremy Harbour from Harbour Club, thank you so much.

Thank you for having me. It's been wonderful.

Be well.

Thank you for joining me on the Radical Responsibility Podcast. Remember, real change happens when we commit to our growth, face our challenges with compassion, and stay open to transformation. If you found this episode helpful, I encourage you to subscribe and help us spread the message of healing and personal empowerment. Until next time, stay grounded, stay presence and stay true to yourself. Take care.