🔒 INTERNAL — negotiating position & owner figures. Greg + Dean only. Not for the broker, vendor, or any third party.
0 How we got to the goodwill number (~$135k)
$135k is an opening anchor, not "the value." Here's the working — and the band it sits in. (Pre-DD; the real number is set by verified SDE.)
The earnings base — verified from the Abacus P&L reconstruction:
• SDE ≈ $172k — what a hands-on owner takes out (FY24 ~$147k → FY25 ~$181k → FY26 ~$187k).
• Owner-independent EBITDA ≈ $95k — SDE after a ~$80k market-rate manager. The honest investor-grade base, since it values the business independent of your own labour.
Two valuation lenses
| Lens | Multiple | Range | Note |
|---|
| SDE multiple (owner-operator) | 1.0–1.5× $172k | $172k–$258k | Even 1.0× is above the $150k ask → why the deal looks cheap (the "0.81× SDE" hook) |
| Adjusted-EBITDA (investor) Anchor | 1.5–2.0× $95k | $142k–$190k | Discount hard for the risk register (6-week flip, Dyson concentration, aged stock, owner-dependence) → low $130s–$140s |
Where $135k lands
| Lens | Implied value | $135k = |
|---|
| SDE multiple | $172k–$258k | 0.78× SDE (cheap) |
| Adjusted-EBITDA, risk-discounted | $142k–$190k | ~1.4× EBITDA (low end) |
| Asking − risk haircut | $150k − ~10% | the round anchor used here |
Verdict: all three lenses converge in the $130k–$145k zone, so $135k is the buyer-favourable lower-middle — credible, not insulting. The real value is a band: ~$130k (hard risk-discount) to ~$150k (asking, if earnings fully verify). Don't over-fixate on the headline — the structure does the heavy lifting: with vendor finance + earnout you can hand the vendor up to the $150k headline while keeping your risk-adjusted price ~$110–135k. Play: anchor the offer ~$130k; only move toward $150k if more of it shifts into earnout/deferred — never into cash up front.
1 Three ways to structure the goodwill (~$135k — basis above)
| Option 1 — Full cash | Option 2 — Vendor finance (clean) | Option 3 — VF + earnout Rec |
|---|
| Up-front cash | $135,000 | ~$47,000 (35% deposit) | ~$47,000 (35% deposit) |
| Carried by vendor | $0 | $88,000 over 24 mo @ 7% | $48,000 deferred @ 7% + $40,000 earnout |
| Monthly payment | — | ~$3,940/mo (24 mo) | ~$2,150/mo + earnout when it crystallises |
| P&L expense from it | $0 | Interest only (~$4.8k yr1) | Interest only (~$2.6k yr1) + earnout when paid |
| Downside protection | None — you own all the risk | Low — still owe the full $135k | Best — ~$40k self-cancels if earnings don't show |
| Vendor's likely answer | Yes (they get cash) | Probably (price-for-terms) | Harder — but fair given the 6-week flip |
| Bootstrap fit | ✗ defeats it | ✓ good | ✓✓ best risk-adjusted |
Play: open with Option 3, be ready to trade the earnout away (→ Option 2) for a lower headline price or a longer/cheaper tail. Both keep day-one cash at ~$47k instead of $135k.
2 The recommended structure — actual figures (Option 2 base)
- Goodwill price: $135,000
- Deposit at settlement (35%): $47,000
- Vendor-financed balance: $88,000 over 24 months @ 7% p.a., secured by GSA (PPSR) + capped personal guarantee
~$3,940/month for 24 months. Total repaid $94,560 → $6,560 total interest.
| Cash paid | Interest | Principal | Balance (year-end) |
|---|
| Year 1 | $47,280 | $4,815 | $42,465 | $45,535 |
| Year 2 | $47,280 | $1,745 | $45,535 | $0 |
12-month alternative if you'd rather clear it faster: ~$7,610/mo, ~$3,370 total interest. 24 months is gentler on cash flow — modelled below.
3 The monthly payment — and the bit everyone gets wrong
That $3,940/month is NOT a $3,940 cost to the business. Only the interest is an expense; the principal is you buying the asset, paid out of profit/cash.
• Month 1: $513 interest + $3,427 principal · Across year 1: only ~$4,815 hits the P&L; the other ~$42,465 is balance-sheet (paying down what you owe).
In profit terms the deal costs you ~$4.8k in year 1, ~$1.7k in year 2 — the interest. The principal is real cash leaving the bank, but it's buying the business, not running it.
4 Where it all sits in your P&L
| Item | Annual | P&L treatment |
|---|
| Your salary / drawings | $80k | Wages — P&L expense, deductible (this is your income) |
| Warehouse rent (vs ~$28k storage) | ~$21k | P&L expense, deductible (≈ neutral vs current storage) |
| Vendor-finance interest | ~$4.8k / $1.7k | Finance cost — P&L expense, deductible |
| Vendor-finance principal | ~$42–45k | NOT a P&L expense — below-the-line, paid from after-tax profit |
| Goodwill ($135k) | — | Balance-sheet asset; not tax-deductible in NZ (only the loan interest is) |
| Consignment stock remittance | as sold | Sits in COGS — already inside the 46% gross margin. No separate expense line |
The headline: the only new things hitting your P&L are your salary + ~$4.8k interest. The big cash number (principal) is below the line.
5 Year-1 money picture — $80k salary, across four growth scenarios
This is the business's year-one P&L at four revenue-growth levels — but it's all built up from figures you already know. Here's where the numbers come from before you read the table.
Starting point (today, verified): ~$794k revenue · 46% gross margin · ~$172k SDE — what the business earns for a full-time owner. Behind that SDE sits ~$193k of running costs, and the way they split is what drives every column:
- ~$120k fixed costs — rent/warehouse, software, insurance, accounting, admin. They barely move when sales rise, so they're held flat in every column.
- ~6% of sales, variable — Trade Me & payment fees, packaging, shipping. These rise with revenue.
- ~$25k current marketing — which we increase per column to actually drive the growth (the "growth engine" line).
So each column just asks: grow revenue by X%, earn 46% gross profit on it, pay the variable + fixed + marketing costs, then pay yourself, the loan and tax — what's left in the business?
| Year 1 — revenue growth → | +15% | +30% | +45% | +60% |
|---|
| Revenue | $913k | $1.03m | $1.15m | $1.27m |
| Gross profit @ 46% | $420k | $475k | $530k | $584k |
| − Variable selling/fulfilment @ 6% | ($55k) | ($62k) | ($69k) | ($76k) |
| − Fixed opex (held flat) | ($120k) | ($120k) | ($120k) | ($120k) |
| − Marketing (the growth engine) | ($40k) | ($65k) | ($90k) | ($115k) |
| = Operating profit before owner | $205k | $228k | $251k | $273k |
| − Your salary (your income) | ($80k) | ($80k) | ($80k) | ($80k) |
| − Vendor-finance interest (yr1) | ($4.8k) | ($4.8k) | ($4.8k) | ($4.8k) |
| = Pre-tax profit | $120k | $143k | $166k | $188k |
| − Tax @ 28% | ($34k) | ($40k) | ($46k) | ($53k) |
| = After-tax profit | $87k | $103k | $119k | $136k |
| − VF principal (yr1, below line) | ($42k) | ($42k) | ($42k) | ($42k) |
| = Net cash retained | +$44k | +$61k | +$77k | +$93k |
What each line means
- Revenue — today's $794k grown by the column's %.
- Gross profit @ 46% — what's left after the cost of the goods themselves (the verified margin). For consigned stock, the vendor's share is that cost — covered below.
- − Variable selling/fulfilment (6%) — Trade Me & payment fees, packaging, shipping; rises with sales.
- − Fixed opex ($120k) — rent, software, insurance, admin; held flat (see caveat below).
- − Marketing — the ad spend to win the growth. The dial: more growth needs more.
- = Operating profit before owner — what the business earns before you pay yourself. At 0% growth, this line is the $172k SDE you already know.
- − Your salary ($80k) — your income, taken as wages.
- − Vendor-finance interest — the only part of the loan that's a P&L cost.
- − Tax (28%) — company tax on the pre-tax profit.
- − VF principal — repaying the loan balance; not a tax expense, paid out of after-tax cash.
- = Net cash retained — what's left in the business after you've drawn your $80k and the year's loan is fully paid off.
Sanity-check it yourself: set growth to 0% and the table collapses to numbers you already know — $172k SDE, less your $80k salary, the $4.8k interest and ~$24k tax, less the $42.5k loan principal = ~$20k left in the business. Every column just stacks revenue growth on top of that same base. (That ~$20k flat baseline is why even modest growth moves the needle so much — incremental sales come in at ~40% contribution once the fixed costs are already covered.)
Read it as: at every growth level — even a modest +15% — you draw your $80k salary, fully clear the year's vendor-finance payments, and still retain $44k–$93k of cash in the business. Your total year-1 benefit is $80k income + $44–93k retained. The deal isn't just affordable — growth makes it comfortably cash-generative.
The two things that make this look rosy — be honest about them:
1. Marketing. The +60% case assumes ~$115k of spend pulling a ~$476k revenue lift — strong but achievable ROAS for an in-house operator switching Google on from zero. The higher tiers need genuinely good ROAS. Treat the marketing row as the dial.
2. Fixed costs held flat. Realistic to ~$1m, but going from $794k to $1.27m you'd add some fixed cost — fulfilment labour (the picker we removed), more space, systems. So read the +45% / +60% columns as "before added overhead" — knock maybe $20–40k off those two and they still clear $40k+ retained. The +15% / +30% columns are the safe ones.
What about paying the vendor for the stock? It's already inside these numbers — not a missing line. Under consignment you never buy the stock, so the vendor's share is its cost of goods (it creates the margin, it doesn't sit on top of it). At the proposed terms — remit ~55% of each net sale, keep ~45% — consigned stock runs at ~45% gross margin, essentially the 46% in the table. Two caveats: (1) the consigned stock is a finite ~12-month pool — your growth comes from new stock you buy at normal margin, so consignment mainly affects the base, not the growth increment; (2) if you keep less than ~45% (or a chunk of the pool is dead stock cleared at $1), year-1 blended margin dips a few points. Sensitivity — at a 42% blended margin instead of 46%, net cash retained is still +$18k / +$31k / +$44k / +$57k across the four tiers (positive everywhere). Exact split to be confirmed (% of sale vs % of stock cost, and whose share) — then the margin locks precisely.
The bigger stock question these growth numbers expose (council v2): the consigned pool is finite — ~12 months. Year 1 largely sells their stock — but to grow revenue, and to keep selling once the pool runs down from ~month 6, you must buy replacement stock. Two things this table doesn't yet price: (1) a working-capital line for replacement inventory (illustrative ~$50–100k ramp, sized off the stock list), and (2) sourcing capability — the vendor's personal, undocumented skill that walks out the door. Sourcing, not marketing, is the real throughput constraint. Mitigate in the offer: a sourcing earnout, documented sourcing SOPs, replacement-supplier introductions, and bench-throughput data as DD conditions. Until the stock list + sourcing playbook land, treat the higher-growth tiers as demand-side potential, not committed — the supply side has to be inspected first.
6 What it does to your day-one cash need
| Bootstrap plan (cash goodwill) | With vendor finance |
|---|
| Goodwill up front | $120–150k | ~$47k deposit |
| Stock | $0 (consignment) | $0 (consignment) |
| Warehouse setup, picker runway, marketing, buffer | ~$45–55k | ~$45–55k |
| Total to get in the door | ~$165–200k | ~$90–105k |
Vendor finance roughly halves the cash you need to raise — directly shrinking what Dean has to bring, and a vendor carrying paper is a strong validation signal to any investor.
7 Assumptions & caveats
- Goodwill $135k illustrative — real number set by DD-verified SDE (could be lower).
- Base revenue ~$794k, SDE ~$172k (verified). Growth scenarios hold 46% gross margin, ~$120k fixed opex, ~6% variable selling/fulfilment; marketing scaled per tier ($40k→$115k) — the key sensitivity. Owner salary fixed at $80k; no separate picker modelled.
- Storage→warehouse treated cost-neutral (conservative; bootstrap plan projects ~$7–15k saving).
- Tax at 28% company rate, simplified; goodwill non-deductible, interest deductible — confirm with your accountant.
- Interest 7% p.a. illustrative; negotiate (interest-free short tail = valid sweetener-for-price trade).
- Security: GSA on PPSR + capped personal guarantee; if Dean raises senior debt, the vendor loan likely needs to be subordinated — flag early.
- Consignment needs proper retention-of-title clauses so unsold stock stays the vendor's asset.
🔒 Internal document. This page shows your negotiating position, deposit strategy and owner income. It lives behind the dossier URL — don't share that URL with the broker or vendor while this page is linked.
Illustrative pre-DD figures for internal planning only. Not financial, legal or tax advice — confirm all treatment with your accountant and solicitor before relying on it.
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