Welcome to The Business Buying Academy with Sieva Kozinsky. Here's what we have in store for you today:

1. Anatomy of a Roll-Up Strategy
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2. How to Pay your Employees
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3. Get a Quality of Earnings Report

This made our lives so much easier

If you run a holding company like I do, then you know how difficult it can be to stay organized.

One of the biggest challenges: Managing dozens of different bank accounts across our portfolio of companies.

Our Director of Finance, Nick, used to spend hours logging into different bank portals just to keep track of our cash balances.

Then we found Vesto. It pulls in every account-across every bank-into one dashboard. Real-time balances, cash flow, transactions. No more jumping between logins.

Now Nick handles it all in under 5 minutes. That means more time spent on cash strategy, less on admin.

👉  Check out Vesto here​

(Thanks to Vesto for sponsoring this newsletter.)

🔑 How to take over an industry: A quick guide to roll-ups

If you follow the business buying space, you've likely heard the term "Roll-up".

I wanted to dive into a few real life examples and give you a breakdown of exactly how a roll-up should be executed (and how it can get botched).

Let's dive in:

A roll-up strategy involves acquiring and merging multiple smaller companies in the same industry to create a larger, more consolidated entity. This strategy aims to achieve economies of scale, reduce operational costs, and increase revenues by combining resources and leveraging the now larger company's market presence.

So you want to do a roll-up?

Let's assume you already know what industry you want to target. Here's the first step:

Step 1: Select a Platform Company

Every successful roll-up starts with a strong foundation - a “platform company” that serves as the operational and financial backbone. Target a business with the following traits:

• Strong local reputation (check reviews on Google and other sites)
• In business for a long time (ideally 10+ years)
• Revenue (more is better), but minimum of $5 Million: This size ensures stability but allows room for growth.
• Operational Infrastructure: Look for a company with a solid management team, established processes, and a fleet of vehicles/equipment to support expansion.

Not every successful roll-up starts with a larger business that acquires smaller ones. My friend Brian rolled up 3 software businesses in the marketing tech space, but started with a small business and worked his way up to larger ones.

You can listen to my interview with him here or watch it here.

Step 2: Identify Bolt-On Acquisitions

Once the platform is in place, pursue “bolt-on” acquisitions, or smaller companies that complement the platform’s strengths.

Here are

• Geographic Expansion: Acquire firms in adjacent markets (e.g., Orlando, Jacksonville to complement a Tampa base) to create a regional network.
• Complementary Services: Seek companies offering niche services. Example: Say you've acquired a fence installation company as your platform. Now you can buy a company that does automated gate installation to diversify your offerings.
• Vertical Integration: Example: You are a food brand, and you acquire your manufacturer to control costs and quality.
• National Scale Advantage: Example: Your customer is a nationwide brand of retailers. They prefer to have a single relationship to deal with all of the need for their retailers, including plumbing, electrical and HVAC. You can roll up those businesses nationwide and offer a single large contract to the nationwide brand.

Step 3: Conduct Rigorous Due Diligence

One of your biggest risks:

Failing to understand what exactly you're buying.

To avoid this, use due diligence to verify the following:

• Financial Health: Verify revenue streams (e.g., residential vs. commercial), profit margins (typically 10–20% in fencing), and debt levels. Ensure no hidden liabilities, like equipment leases. Get a Quality of Earnings Report (QoE)!! More on this below
• Customer Base: Assess customer retention rates and contract stability, especially for commercial clients like HOAs or property managers.
• Operational Fit: Evaluate the target’s processes (e.g., manual vs. software-based scheduling) and employee retention risks. Family-owned home service companies often rely on key technicians, similar to Terminix’s reliance on local expertise.
• Market Trends: Check market demographics and growth, but also for local competition or regulatory hurdles (e.g., permitting requirements).

Here is my list of everything I need to analyze a business I want to buy:

Step 4: Integrate

Integration is where many roll-ups falter.

It's difficult to take independent businesses and merge them into one.

Managers get upset when their systems are changed.

Employees feel stressed with a new management team watching over them closely.

To succeed in integrating your new acquisitions:

• Preserve Local Brand Equity: Retain the target’s brand name and key employees to maintain customer trust. Don't pay a premium for a trusted local brand just to change the name a couple months later.
• Centralize Operations: Implement job management software (e.g., Jobber) to streamline scheduling, invoicing, and inventory across all acquired firms
• Retain Talent: Offer retention bonuses or profit-sharing to key employees (this is common when a PE firm buys out a home service business and wants to retain technicians).
• Cross-Selling Opportunities: Use the platform’s commercial contracts to introduce your bolt-on companies' niche services to existing clients.

Let's take a look at an example from the enterprise software world.

Thoma Bravo, a PE firm with over $180 billion in assets under management, is well-known for its software roll-up strategy. It has acquired and consolidated numerous enterprise software firms, including Dynatrace (carved out from Compuware in 2014), Qlik (acquired in 2016 for $3 billion), and ConnectWise (acquired in 2019).

Here's a big piece of their strategy:

Thoma Bravo actively seeks out software companies that require assistance in migrating their products and services to the cloud.

Step 5: Structure Deals Wisely

Here are the main points your financial structures should hit:

• Valuation: Target reasonable, ~3–7x EBITDA multiples, avoiding the 8–12x multiples common in overheated markets.
• Align incentives with earnouts and/or seller financing.
• Financing: Use a mix of debt and equity, but keep debt levels manageable so you can still fund expansion.
• Exit Strategy: Plan for a 5–7 year hold, aiming to sell the consolidated platform to a larger PE firm or strategic buyer, as Vista did with Marketo’s $4.75 billion sale.

Sounds simple, but it's a difficult strategy to pull off.

If you want an alternative strategy, check out this interview I did with my friend Aaron Harper. He's the CEO of Rolling Suds Power Washing and took an alternative strategy to growing a local service business nationally: Franchising. They went from one $2m/year local business to a 77-location national chain in just two years. It's a fascinating story and growth strategy plus I get to learn a lot about the franchise industry (it's awesome).

​Watch on YouTube​

​Listen on Spotify​

​Listen on Apple Podcasts

You're about to hire an elite executive who will take your company to the next level...

But you have one question.

How should you structure their compensation?

This is one of the trickiest parts of running a great business.

Incentives drive behavior...and if you don't have the right incentives in place, even the most talented employees won't produce great results.

In a couple weeks, Nick Huber and I are going to give our best tips for creating compensation plans, setting growth targets, and retaining your best employees for the long-term.

We'll also answer audience questions at the end. Make sure to reserve your spot below.

​Register Here

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🔑 I just mentioned the importance of a Quality of Earnings Report...

Buying a business without getting a quality of earnings report is like buying a house without a home inspection. You’re taking a big bet without knowing what you’re buying, and it could be a disaster.

Even if the seller gives you all their financial statements, they often have very bad bookkeeping. ​

So, what should be in your QOE and financial due diligence package? ​ Here's what today's sponsor ​Appletree​ says about their QOE reports: ​

✅ Proof of Cash ​

Are revenues real? We rebuild the last 1-2 years using bank statements to verify that reported earnings arrived in the bank account.

✅ Addbacks That Actually Make Sense ​

We normalize SDE or EBITDA with logic, not wishful thinking. The hand-waving. No “adjusting away” real costs just to make numbers look better.

✅ Working Capital Analysis ​

Avoid the “Post-Close Surprise” where you’re suddenly short $150k in working capital. We calculate what the business needs to operate smoothly.

✅ Forward Looking Projections

​We model post close cash flow and debt service coverage under flat, growth, and decline scenarios – so you know how risky the deal really is.

If you’re sending out LOI’s or nearing a deal, don’t go in blind. Talk to Appletree for a pragmatic, thorough Quality of Earnings report – built by people who’ve bought businesses themselves.

Have a great day,

Sieva

P.S. - Are you hiring? Get started with top global talent from Somewhere (I'm a customer and investor)

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Disclaimer: nothing here is investment advice. Please do your own research. The information above is just for information and learning.

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