A Holding Company is a business that owns other operating companies. 

Many people know the most famous HoldCo --

Warren Buffet's Berkshire Hathaway.

But there are actually 4 types of holding companies.

And they're each useful in different situations.

Here are the 4 types of HoldCos:

1) HoldCo (ex: Berkshire Hathaway)
2) Accumulator (ex: @dura_software)
3) Platform (ex: Roper)
4) Roll-up (ex: Waste Management)

These are shown here (h/t @willschoebs and Scott Management):

The main difference between each type of HoldCo is:

How alike are the businesses are you holding?

The more similar, the more you should centralize services or activities.

And get efficiencies/cost savings by doing so.

Let's say, for example, you're rolling up Doggie Daycares.

This would be a Type 4 (Roll-up).

You can centralize things like HR, brand, equipment, and marketing since all assets need the same thing.

So, roll-ups often have big HQ staff to do these things.

Another example:

Let's say you want to own a fireworks company, a coffee business, do some PE deals and incubate companies.

This must be a Type 1 (Holding Company).

You have zero centralization.

Your interaction model with subsidiaries is board seats+P&L statements.

(cont'd)

Obviously, the "cost" of this model gives up the benefits of centralization.

You have redundant accounting and HR teams, for example.

BUT...

This is the most flexible and scalable. 

Berkshire Hathaway has this model and so does @xavierhelgesen's Enduring Ventures.

Moving on...

Types 2 and 3 are the "Accumulator" and "Platform" models.

Unlike roll-ups, these structures centralize fewer functions since the assets they hold vary.

The more alike the businesses you hold, the more it makes sense to centralize.

"Platforms" and "Accumulators" differ in the types of assets they hold. 

Accumulators stick to a category (say B2B software as our @dura_software does). You can centralize things like sales or dev.

Platforms have multiple categories and group them together (like Roper does).

One final point I find very interesting:

These structures can "nest".

By that, I mean, you can have a Berkshire-style pure HoldCo that owns equity in an Accumulator-style HoldCo.

In fact, that's what I've done with Girdley Enterprises (my Type 1 HoldCo) and @dura_software.

In the end, I believe that picking the right HoldCo structure matters a ton.

Getting it right will set you up for growth and resiliency.

And win versus other potential acquirers.

But, do it wrong and you can end up limiting your chances.

This conference by @brentbeshore, @patrick_oshag, and the team has a well-deserved good reputation.

As I drove back to the St Louis airport, I wrote down some takeaways/learnings.

Here they are:

1/ Many betting on the “Silver Tsunami.”

This (observed by @tylertringas) is (paraphrasing):

“Almost everyone here seems to have an investment thesis dependent on many Boomers selling SMBs at reasonable prices.”

Made me wonder what we’re all getting wrong (if anything)?

2/ Democratization of doing cool stuff

This was the first investing conference where people didn’t look at me funny when I said “I’m from San Antonio.”

I’d routinely be in a group talking to high-powered attendees from 100% random places.

Pretty awesome.

3/ Figuring out what’s next in life

Many 25-35 year-olds attended to get exposure to possibilities.

So many in the “I’ve had some success, what do I do now?” category.

I think a perfect use case for @capitalcamp with a highly curated attendee base.

4/ HoldCos are hot

Everyone seemed to be doing a “HoldCo of x” flavor.

(It’s the “new self-storage”, I guess!)

Some seemed genuinely doing a HoldCo for the right reasons.

Some aspiring HoldCo people (sad to say) seemed just interested in not working that hard.

We’ll see!

5/ Best stuff comes from the peers

I loved that focus was placed on peer interactions.

@capitalcamp did the roundtable format for curated small group discussion from Collision/Web Summit that I like so much. 

It's the only real-world replication of Twitter's magic I've seen.

6/ People are trying crazy stuff

Hearing flavors of experimentation inspires me.

Some seemed great bets.

Others seemed like questionable strategies -- 95% leveraged LBOs with personal guarantees, anyone?

7/ Marketing a firm

With lots of people managing money there, many were struggling to “find the firm’s voice.”

Many want to speak it “old school” with an anon voice from the firm.

While others let the CEO/managing partner be the voice.

The latter, I think, is the future.

That's it. 

If you were there, what do you learn?

What did I miss?

I posted my life goals on the internet. 

And it scared the sh*t out of me. 

But it all started with a system that fits on 1 piece of paper. 

Here's how to set goals and avoid mistakes that cost me years:

(1/x)

The harsh truth: 

We waste most of our lives checking off meaningless to-dos that we call "goals".

But they are really just glorified distractions. 

So I built a system to change that...

Start with SMART 

A framework for effective goal-setting: 

S=Specific

M=Measurable

A=Achievable

R=Realistic

T=Time-bound 

So, "I will make $1 million this year" works. 

But that is just the start...

Set your 10-year goal

The Rules: 

• Must be 1 number like net worth or a life state like "retired" 

• Scary but possible 

• Measurable Mine: Net-worth of $X in 2032

Write your 3-year vision

Sit down with a blank piece of paper and write a "vivid vision" of your desired life in 3 years if on track for the 10-year goal.

It can include

• Earnings
• Cash flow
• Vacations
• Relationships
• Living situation

Define each with a number.

Set your 1-year goal

The only question to ask:

"If I want to achieve the 3-year vision and be on track for the 10-year, what do I need to accomplish this year?"

Nothing else matters.

And it can never be more than 7 goals or you will lose focus.

Define your Rocks

At the start of each quarter, set 3-7 SMART goals that are critical to achieving the 1-year vision.

If you could only accomplish 3-7 things over the next 3 months, what would you do?

Finally, Define your Questions

You should never have every answer.

So keep a list of open questions which define

• What you don't know
• What could go wrong

Some examples:

The recap:

1.  Start with SMART

2.  Set the 10-year goal

3.  Write the 3-year vivid vision

4.  Set 1-year building blocks

5.  Define your quarterly rocks

6.  Reflect with open questions

And it all can fit on 1 piece of paper:

I've hired and managed over 4,000 people. 

And I've made every mistake along the way. 

But I finally found a system that works. 

Here's a way to hire that makes your life easier and business better:

(1/x)

Let's break this into 6 counterintuitive steps I do:

1) What Makes Someone Great 

2) Test Like It's School 

3) The A-B-C Player 

4) Resumes are Bullsh*t 

5) Two on One Interview 

6) Write a Hiring Memo

1) What Makes Someone Great 

Great employees have these traits. 

• Intelligence = Smart enough? 

• Culture = Align with company values? 

• Skills • Grit = Your give-a-sh*t level 

• Personality traits = Accountants better be detail-oriented 

So how do you find this..


2) Test Like It's School 

Every person I hire takes 2 assessments. 

1. Criteria = Cognitive and skills-based tests
• Do they have the job skills? 
• Are they quick thinkers?

2. Culture Index = personality trait assessments 
• Are they "wired" right for the job?

You want detail-oriented accountants.

And people-loving salesmen.

As my grandpa used to say, the right personality in the right role is like bringing a Duck to Water.

3) Every Job has an A-B-C Player 

A: Top 10%
B: Middle 60%
C: Bottom 30% 

Now here's the thing.. 

A-players aren't just a little better. 

They can be 10X better than a B-player. 

Or 10 B-players are worth 1 A. 

But how do you tell? 

It's definitely not a fancy resume...

4) Resumes are Bullsh*t

2/3rds of resumes have lies in them.

At my local @Chilis, I bet my server's resume involves "orchestrating financial transactions for a multi-billion corporation". 

So how do you cut through the BS?

Reference Checks 

The secret is "Threat of Reference Check" 

Tell every candidate that you do up to 5 hours of them. 

What I've seen: 

Bad candidates drop out. 

Great candidates want the job more because businesses that call 6-8 references are filled with other A Players.

5) Two on One Interview

1 lead interviewer. 1 wing person. 

You spend 2 hrs in a row learning their life story. 

What makes them tick? 

Did they dominate prior jobs? 

Where are they strong? or weak? 

And remember: The best predictor of future success is past performance.

6) Write a Hiring Memo

Before you make an offer, write a  2-page memo. 

• Where are they strong?

• Where are they weak?

• How can we help them? 

• And why hire them. 

The best investors write investment memos and the best business owners write hiring memos.

Now, here's an example process: 

1) Advertise the role 
2) Collect Interest 
3) Candidates complete assessments 
4) Phone screen (30 mins) - sell them on you too! 
5) Review career history 
6) In-person interview (2-4 hrs)
7) Culture fit interviews 
8) Call references (5 hrs) 

And that's it!

I built this system from the book Topgrading and learned from others' mistakes and my own.

Imagine your company is a ship with oars.
 
Everyone is rowing in one direction.
 
But one of the people rows the other way.

This is a "Toxic Employee"

A thread...

(1/x)

Toxic Employees are tough to spot. 
 
Especially if you’re their boss or owner of the company. 
 
They often get work done and meet goals.

But, they *actively* undermine leadership and company culture. 
 
And they hide in plain sight.

They can be in any role in your organization, including c-level or managers.

Usual things like reviews or 360s often don’t find Toxic Employees. 
 
Why?
 
They often created alliances with others (multiplying their toxicity along the way).
 
Or they work so subtly that nobody notices. 
 
Or they intimidate others to not speak out.

Toxic Employees can degrade an entire organization.

Most think your culture is defined by engaged teammates.

That's wrong.

A few toxic people will ruin an entire culture if tolerated.

They will cause other people to be toxic.

So, how do you find these Toxic Employees?

It's not easy to do.
  
Here are some signs to watch for you that you have one around.

1/ Lots of drama and the Toxic Employee is always involved.
 
2/ Other employees drop hints they're scared of them. 
 
3/ They create enemies or drama to distract focus from them. 
 
4/ Good employees avoid working with them. 

5/ Toxic employees follow their own agenda rather than the company’s mission 
 
6/ They kiss up like crazy to make bosses think they’re great. 
 
7/ People thank you after the toxic employee resigns or leaves.   

8/ You notice the gossip level is high in the company. 
 
9/ You see good employees changing their performance or attitude. 
 
10/ The vibe of the organization feels “off.” People aren’t smiling and there’s a dark cloud.

Enough of these signs allows you to suspect Toxic Employees.

Even then, it's often not 100% clear until after they leave. 

Ideally, you either help make their work experience better 

Or, more likely, help them move on to a company where they’ll be happier.


Finally, toxic employees are a sign that an organization (or you personally) has problems. 

How did they go from good to toxic?

How was the person hired in the first place?

A thorough review of the company, you, leadership, and culture is justified. 


