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

1. Why he bought 9 businesses
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2. Don't buy a company without doing this​
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3. I got some free advice on how to run hotels
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🔑 "Why start a holding company?"

I get this question all the time.

I was chatting with my friend Rafael, who runs a holding company with 9 businesses.

Years ago, Rafael and his business partner were choosing between starting a:

• Vertical holding company (owning several businesses in the same industry)
• Horizontal holding company (owning several businesses in different industries).

Here's the difference:

Horizontal holding company (from Rafael's blog)

• Industry agnostic
• Diversified holdings (region, industry, etc)
• Expansive investment environment
• Difficult to centralize operations
• Necessary to delegate management

The horizontal holdco favors the investor: If one industry gets too overheated and businesses are too expensive to buy, they can move on to a better opportunity.

Vertical holding company:

• Industry Specific
• Concentrated holdings (region, industry, etc)
• Limited investment environment
• Easier to centralize operations
• Not necessary to delegate management

The vertical holdco favors the operator: If you're skilled at operating in one specific industry, you should build a horizontal holdco.

Here's why Rafael ultimately chose the horizontal structure:

I chose the horizontal holdco structure for the same reason.

We have the freedom to invest in whatever is most interesting at the time.

If you're deciding which route to go down, ask yourself: Am I an operator or an investor?

An operator knows how to run a business well. Your expertise is likely in one specific industry. If that sounds like you, start a vertical holding company.

An investor understands how to allocate capital and analyze companies, but won't manage the day-to-day operations of the companies they invest in. If that sounds like you, then start a horizontal holding company.

Here's another question I get a lot: Why start a holding company instead of just one business?

Here are a few of the common reasons:

1. Risk Diversification: By holding stakes in multiple businesses across industries, holding companies spread risk. If one subsidiary struggles, others may offset losses.
2. Tax Efficiency: Holding companies can optimize tax strategies, such as deferring taxes on dividends or capital gains within the corporate structure, depending on jurisdiction. I wrote about this here.
3. Operational Autonomy: Subsidiaries operate independently, allowing specialized management while the holding company focuses on strategy and capital allocation.
4. Flexibility in Acquisitions: Holding companies can easily acquire, sell, or restructure subsidiaries, making them ideal for investors seeking to build diversified portfolios.

Here's a less technical answer:

Because sometimes I get bored.

I'm a business nerd. I like to explore new businesses and invest in new opportunities that I otherwise wouldn't have.

If you're interested in hearing my full conversation with Rafael about how to start a holding company, listen to it here.

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🔑 Don't make this mistake when buying a business

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.

🔑 How to invest $1 billion in hotels

I chatted with Jake Wurzak, CEO of DoveHill, a business that develops and invests in hotels.

He's invested over $1 billion into hotels and knows the industry better than anyone I know.

Jake told me about how he invests in hotels, a joint venture that almost went terribly wrong, and he even gave me some free advice on how to run my hotel in Montauk better.

​Watch on YouTube​

​Listen on Spotify​

​Listen on Apple Podcasts​

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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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