#24 How to Build a HoldCo: A Practical Guide to Owning and Managing Multiple Businesses

Step-by-Step Insights on Acquiring, Incubating, and Scaling Businesses for Long-Term Success

In our previous article, we discussed what a HoldCo is and why you might want to build one. Today, we'll focus on the practical side: how to actually create a HoldCo.

I must confess that I ended up owning a HoldCo without consciously planning it. It was the natural result of my passion for starting and building companies—combined with all the advantages we highlighted in our previous post. Looking back, however, I can identify some key lessons that might be helpful for others embarking on this journey. In this article, I'll share all I know about how to get started.

1. Know Yourself. Laying the Groundwork

The foundation of building a successful HoldCo starts with self-reflection. Clarifying your vision and goals will guide your decisions and ensure alignment, especially if you have a business partner.

Here are some key questions to help define your direction:

• What are my areas of expertise?

• What industries or sectors excite me?

• Why am I doing this? Is it for wealth building, lifestyle optimization, impact, legacy, or a combination?

• What scale do I envision? A small Personal Holding Company (PHC) or a more ambitious multi-business portfolio?

Pro Tip: Some questions might be hard to answer by yourself. Asking your friends and colleagues might help you find the answers.

You should also identify your competitive advantage. This is crucial in shaping your strategy. Some guiding questions:

• Financial capital: How much can you invest upfront? Do you have access to external funding?

• Expertise: What skills or experience can you leverage?

• Network: Who can you rely on for advice, collaboration, or deal sourcing?

2. Building Your Portfolio

As previously discussed, a HoldCo is a company that owns and manages other companies. The question is: How do you build this portfolio?

There are two primary approaches:

1. Acquiring businesses

2. Building or incubating new businesses

Additionally, it’s helpful to distinguish between:

• Traditional businesses

• Tech businesses

This results in four broad paths: acquiring or incubating either tech-driven or traditional businesses, each with its own unique challenges and opportunities.

The lines between tech and traditional businesses are increasingly blurred, they still have distinct characteristics that can influence your strategy.

Comparing Tech and Traditional Businesses:

Tech Businesses: These are high-risk, high-reward ventures, focusing on technology-driven innovation and scalable growth, often through digital platforms and data. Valuations for tech businesses are typically 5-10x higher than traditional businesses, making them attractive to venture capital (VC) firms. If you're looking to operate in this space, you may need to focus on niches overlooked by VCs—such as businesses in markets that aren’t large enough to justify the substantial exits VCs are looking for.

Traditional Businesses: Whether based on physical assets or services, these are generally lower-risk and characterized by steady or incremental growth. Many traditional businesses are now integrating technology to improve efficiency and margins, which narrows the gap with tech businesses. Private equity (PE) firms often dominate this space, but there are opportunities in areas outside their focus—for instance, deals deemed "too small" for PE firms. The segment of traditional businesses that are too small for PE represent the vast majority of the small and medium enterprise (SME) market. This market is also undergoing a big generational handover from boomers who need someone to take over.

Lastly, one of the biggest opportunities I see today lies in leveraging technology—particularly AI—to transform traditional businesses. By adopting AI solutions, professional services businesses such as marketing agencies, real estate firms or consulting firms can significantly enhance profit margins. They can easily replace repetitive tasks with AI agents to reduce dependency on human labor, streamline operations, and unlock massive efficiencies. (We’ll explore this further in a future post.)

3. Acquiring vs. Incubating: Key Considerations

Incubating

• Capital: Generally requires less upfront capital than acquiring an established business.

• Time: It takes longer to achieve meaningful revenue.

• Alignment: You can shape the company’s culture and vision from the ground up to align with your HoldCo’s values.

• Risk: Higher risk due to the challenge of achieving product-market fit (going from 0 to 1).

Acquiring

• Capital: Requires significant upfront investment.

• Agility: Changing an established company’s culture and operations can be challenging.

• ROI: Offers faster returns, as you’re acquiring an existing revenue stream and product-market fit.

• Risk: Lower risk compared to starting from scratch.

Pro Tip: Finding the right CEO to manage each business is the most challenging part of this process. Keep in mind that if your goal is to build a portfolio of companies, your role isn’t to manage them directly but to identify and empower the right CEOs to do so.

If you are hesitating between the two paths, here is a quick decision guidance:

• If you have time and a higher risk tolerance, incubating might be the way to go.

• If you have capital but less time or risk tolerance, acquiring is likely the better option.

Ok, how do I start then?

If you are ready to embark on this journey I encourage you to open up a blank document and get started with the following:

1. Copy-paste the questions from point 1 above and answer them.

2. Make a list of business ideas

3. Make a list of people you could work with. For CEO candidates, it might be useful to rank them according to certain criteria. Key criteria might include:

   1. Previously worked together

   2. Entrepreneurship experience

   3. Integrity

   4. Humbleness

   5. Intelligence

   6. Resilience

If you are getting started, we would love to hear from you.

Good luck!

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Àlex & Marc