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

1. Why the holding company structure works wonders
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2. He bought a business and 24x'd his money
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3. Buying FedEx Routes for $2.3 million
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My director of finance is Nick Keene. He's a legend. When he swears by a product, I trust him.

Every morning Nick drinks a cup of coffee, lets his dog out in the yard, and then checks our dozens of bank accounts.

It takes him 30 minutes each morning to do this routine. Last year Nick started using Vesto.

Now checking all the banks accounts takes him 5 minutes, so he has more time to hang with his dog and work on more important projects for our business.

Vesto connects all of our banks into one simple dashboard. With real-time balances, transactions, and cash flow monitoring – we went from 50+ account logins to one.

Vesto is a no-brainer. Take Nick's word for it.

​Check out Vesto here​

(Vesto is sponsoring today's newsletter, thank you)

The Holding Company is the greatest structure for long-term compounding I’ve ever seen.

I’ll explain why in a moment.

But first, let’s answer this question: What exactly is a holding company?

Broadly speaking, a holding company is a company created to buy and possess controlling interests in other companies.

“A holding company is a parent company that owns and oversees other businesses. Instead of making products or providing services, it focuses on managing subsidiary businesses and brands while maintaining control through its voting stock. This allows the parent company to exercise control without participating in day-to-day operations.”
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​-Investopedia

One of the first companies ever, the Dutch East India Company, was a holding company in some sense because it held a wide variety of assets and subsidiaries when it was founded in 1602.

But the term “holding company” wasn’t used back then. The modern day holding company can be traced back to the mid-1800s, as the age of Industrialism and Corporate Law dawned.

The Pennsylvania Railroad, for instance, used holding structures in the mid-1800s to control subsidiary railroad lines and manage investments.

John D. Rockefeller used holding companies to consolidate power with his business, Standard Oil. By 1882, Standard Oil’s trust structure (a precursor to the modern holding company) allowed it to control numerous subsidiaries that the parent company didn’t directly operate.

However the structure caused legal problems for Rockefeller: The government scrutinized the antitrust nature of Standard Oil, culminating in the 1911 Supreme Court decision to break up Standard Oil under the Sherman Antitrust Act.

Why a holding company?

To me, the main purpose of a holding company is that it’s the perfect vehicle for long-term compounding.

Here’s why:

• Fund structures regularly siphon capital out via management fees, distributions and often have an end date
• Individual companies are constrained to their industry, creating some limits to their scale potential
• Holding companies have neither of the above restrictions; they can invest in whatever industries present the best opportunities, and their capital is retained in the holding company to continue compounding.

Rule number one of long-term investing: Never interrupt compounding.

How do we achieve that goal?

We keep compounding going by keeping capital in the business. Letting too much cash leak out of the holding company is a sure-fire way to interrupt compounding. Compound interest can be a double-edged sword. While compound interest is often represented as a proven long-term road to wealth, if we are not careful, it can also take a substantial bite out of our portfolios.
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​- ​Nasdaq blog​

With that in mind, we’ve created a strategy to keep capital in the business.

To do that, we:

• Don’t pay dividends
• Don’t charge management fees
• Limit the amount of taxes we pay in the short-term

Some basic requirements:

1- You need investors who are mission-aligned. They want to invest in the vehicle and hold for the long term allowing the manager time to compound returns for them.

2- You, the manager, need extreme patience. This is not the best structure to "get rich fast". If you want to fly in a private jet in 5-15 years from now, quit immediately. You are better suited for being a private equity manager, or Colombian drug dealer (not a recommendation)

3- Don't lose money. Losing money sets you backward on your journey. It's hard to imagine unless you do the math. And trust me, I've done the math. Don't make any investments where you may lose some of your precious capital

4- Remember everything compounds over time in this business. Your learnings. Your network. And, your capital. If you stay alive long enough and are diligent, you are guaranteed to get 10x better as an investor every 5 years or so. So don't make any decisions that will introduce risks that can kill your business!

🔑 He Bought a Small Business, Doubled Profits, and Sold for 24x

This business buyer purchased a "boring" flooring business in Steamboat Springs, Colorado, and turned it into a huge win.

He bought the business for $1.7 million, grew revenue by 50%, and doubled SDE (seller discretionary earnings).

He then exited the business after about 3 years, earning himself a 24X return on his invested capital (most of the deal was financed with SBA debt, so he was able to make a large return on his down payment).

If you want to buy a business, you absolutely must listen to this interview.

​Watch on YouTube​

​Listen on Spotify​

​Listen on Apple Podcasts

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