The IM values stock at $275k liquidation / $550k retail — but the accounts carry stock at a book cost of just ~$228k (FY26 closing), so the IM's "liquidation" figure sits above cost, which is optimistic. If a meaningful chunk is 5–10 years old (obsolete electronics, dead SKUs), the real net realisable value is far below $228k — quite possibly $130–170k once the dead stock is marked to what it'll actually fetch.
Therefore: never pay cash up front for unverified, aging stock. Two principles drive the whole structure:
This also makes the bootstrap maths work: removing the ~$275k stock outlay cuts the up-front capital need from ~$525k (the funded scenario) to ~$170–190k, most of which is goodwill.
Nothing is finalised until we have a line-by-line stock list. Demand from the broker: per SKU — category, cost, acquisition/age date, last-sold date, quantity on hand, condition. Then triage into three bands:
| Band | Definition | % of SKUs (est. — confirm) | Treatment |
|---|---|---|---|
| A — Live | <2 yrs old, current models, sells now (Dyson, recent laptops/phones/audio) | ? | Keep & sell at margin. Value/consign at agreed price. |
| B — Slow | 2–5 yrs, moveable at a discount | ? | Consign; discount to clear; some to auction. |
| C — Dead | >5 yrs / obsolete / superseded | ? | $1 auctions — convert to cash & free the storage units. |
The A/B/C split is the single most important number in the whole deal — it sets what the stock is worth and how much (if anything) to pay for it. Until we have it, treat $275k as fiction.
Worked on illustrative numbers — refine once the stock list lands. Goodwill treated separately (see §6).
Pay $0 up front for stock. Sell the vendor's stock over 12 months; remit to the vendor a fixed share of each net sale (e.g. 55%), capped at an agreed ceiling (e.g. $150k). You keep ~45% to cover marketing, fulfilment and warehousing of their goods. Anything unsold at 12 months is $1-auctioned (proceeds to vendor, net of fees) or returned.
One cash payment of ~$90–120k for the entire stock holding, as-is, take-it-or-leave-it — framed as "you offload 4 storage units of aging inventory to someone who'll deal with the dead stock for you." You bet the Band A stock alone covers the price; everything else is upside.
Pay a small lump sum for independently-verified Band A stock only (e.g. ~$60–90k), and put Band B + C on consignment (Option A mechanics). Cleanest economic truth: you pay cash only for what's genuinely sellable now.
Like A, but no cap and a longer window (18–24 months) at a lower vendor share (e.g. 45%). Maximises vendor's theoretical upside while costing you nothing up front; good if the vendor genuinely believes in the stock and wants to ride the recovery.
Goal: turn Band C from a storage cost into cash + empty shelves.
A ~100 m² basic industrial unit in cheaper South/West Auckland runs ~$18,000–$24,000/yr gross (~$1,500–$2,000/mo ex-GST; ~$1,750–$2,300/mo incl. GST). Industrial rent has two layers: net rent (the advertised headline) + outgoings (rates/insurance/maintenance, ~$40–$50/m²/yr) — budget the gross.
| Area | Net $/m²/yr | ≈ Gross/yr (100 m²) |
|---|---|---|
| Secondary — Wiri, Papakura/Takanini, Henderson (target) | $135–$175 | ~$18k–$21k |
| Mid | ~$200 | ~$24k |
| Prime (Penrose, Mt Wellington, East Tāmaki) — avoid for back-of-house | $180–$230 | ~$26k |
Where to look: Wiri is the sweet spot (price + small-unit supply + motorway access); Papakura/Takanini cheapest. Anchor data point: a 138 m² Wiri unit listed at ~$200/m² net. Smallest units are often "POA" — phone 2–3 South Auckland commercial agents for live quotes (an afternoon of calls firms this up fast).
Lease terms (bootstrap-relevant): standard ADLS deed of lease, typical min term 2–3 yrs with renewal rights, bond 2–3 months' rent + rent in advance. Two ways to keep it flexible: negotiate a short initial term + rights of renewal, or take a licence to occupy (easier exit). Vacancy has loosened to ~3% (highest in a decade) — landlords are more open to incentives now: ask for a rent-free fit-out period to install shelving.
Vs the 4 storage units it replaces — and this is now confirmed by the accounts: storage actually costs ~$27–30k/yr (FY26 draft: $27,413 in 10 months ≈ $32.9k annualised; FY25 $29,717). So a ~100 m² warehouse at ~$18–24k/yr is CHEAPER — a saving of roughly $8–15k/yr — and buys 3–5× the usable floor area, one site instead of four, and a real pick-and-pack bench. The warehouse move pays for itself. Sequence it smart: run the $1-auction clear-out first, then right-size the unit to post-clearance stock, not today's hoard.
Pick & pack labour (for the cash-flow model):
| Item | Amount | Notes |
|---|---|---|
| Goodwill | $120–150k | Pay up front per your preference; recommend a $30–40k holdback/earnout against SDE verification |
| Stock | $0 | Consignment (Option A/C) — paid only as it sells |
| Warehouse setup + first month | ~$5–8k | Shelving, bond, first rent |
| Pick/pack runway (first 3 mo, part-time) | ~$8–10k | Until cash flow covers it |
| Initial marketing | ~$10–15k | Bootstrap-lean; scale from cash flow |
| Working-capital buffer | ~$20k | Contingency |
| Total up-front | ~$165–200k | vs ~$525k in the funded scenario |
| New line | Year 1 | Notes |
|---|---|---|
| Warehouse rent | ~$18–24k | ~$8–15k/yr LESS than the ~$27–30k/yr now spent on 4 storage units |
| Pick/pack wages | ~$28k | Part-time → ramps with volume |
| Stock remittance to vendor | as sold | ~55% of net sales on consigned stock, capped |
| Marketing | ~$30–50k | Bootstrap pace (lower than the $95k funded plan) |
Net effect: the deal becomes genuinely bootstrappable. Main up-front cash is the goodwill; stock self-funds via consignment; dead-stock auctions throw off early cash; the warehouse is a small step-up vs today; marketing scales out of operating cash flow rather than a raise.