Building a Hold Co. Deeper: Often Overlooked expenses involved in an acquisition
This Week On How2Exit, Chatting With Two Hold Co Leaders, One Successful, One Just Getting Started - DEEPER -Often Overlooked expenses involved in an acquisition
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This week on How2Exit:
About The Guest(s): Trish Higgins is a partner at Chinmark Holdings, a family-run business that specializes in acquiring and managing small to medium-sized businesses. With a background in finance, Trish and her team have successfully acquired and grown multiple companies across various industries.
Summary: Trish Higgins, partner at Chinmark Holdings, shares her journey in the world of mergers and acquisitions (M&A) and holding companies. She discusses the importance of building a diverse portfolio of businesses with steady cash flows to provide long-term stability and resilience. Trish emphasizes the challenges of finding the right operators for acquired businesses, highlighting the need for values alignment, trust, and analytical capabilities. She also delves into the psychology of emotional sellers and the importance of approaching negotiations with empathy and understanding. Additionally, Trish emphasizes the significance of creating a positive company culture and the role of talent pipelines and training programs in ensuring a smooth transition and cultivating potential leaders for acquired businesses.
Building a diverse portfolio of businesses with steady cash flows can provide long-term stability and resilience.
Finding the right operators for acquired businesses requires time, patience, and a focus on shared values and analytical capabilities.
Emotional sellers may have difficulty letting go of their businesses, so it's important to approach negotiations with empathy and understanding.
Having a talent pipeline and training program can help ensure a smooth transition and provide a pool of potential leaders for acquired businesses.
"The more uncorrelated the cash flows of your portfolio, the more durable and valuable it becomes." - Trish Higgins
"When hiring operators, values alignment and trust are key, followed by analytical capabilities." - Trish Higgins
"Understanding the psychology of sellers and being patient can lead to better outcomes in deal negotiations." - Trish Higgins
How to Build a Successful Holding Company: Lessons from Chenmark Holdings
In today's rapidly changing business landscape, many entrepreneurs and business owners are looking for new ways to grow and expand their companies. One strategy that has gained popularity in recent years is the creation of a holding company. A holding company is a type of business structure that allows for the ownership and control of multiple subsidiary companies. This structure offers several advantages, including increased diversification, improved financial management, and enhanced growth opportunities.
In this article, we will explore the world of holding companies and delve into the insights and experiences of Trish Higgins, a partner at Chenmark Holdings. Chenmark Holdings is a family-run business that specializes in acquiring and managing small to medium-sized businesses. Trish will share her journey in the mergers and acquisitions (M&A) space, discuss the importance of finding the right people to run acquired businesses, and provide valuable lessons learned from her experience.
The Journey to Chenmark Holdings
Trish Higgins and her partners started Chenmark Holdings in 2015 with a vision to buy and manage multiple small businesses. Coming from backgrounds in finance, they were drawn to the idea of acquiring established businesses with steady cash flows. They wanted to build a portfolio of enduring businesses that could generate consistent returns over the long term.
Their journey began with extensive research and learning about the process of buying a business. They spent their weekends and evenings exploring websites like BizBuySell and immersing themselves in the world of small business M&A. As they delved deeper into the process, their interest grew, and they realized that this was the path they wanted to pursue.
In 2015, they made their first acquisition, despite having no prior experience in M&A. They learned by doing and faced the challenges of managing a company and leading a team for the first time. Over the years, they refined their approach and developed a unique strategy for building a successful holding company.
The Evolution of Chenmark Holdings
When Chenmark Holdings started, they operated as a single-entity LLC. However, as they acquired more businesses, they realized the need for a more flexible and efficient structure. They converted to a C Corp and established a holding company that owned multiple subsidiary LLCs. This structure allowed them to freely move cash flows between the companies and facilitated future acquisitions.
"While the core of their strategy remained the same - using the cash flows from one business to acquire another - the technical structure and implementation evolved over time," Trish explains.
The Importance of Finding the Right People
One of the key challenges in building a successful holding company is finding the right people to run the acquired businesses. Trish emphasizes the importance of aligning values and building trust with potential operators. They look for individuals who share their long-term vision and are committed to the enduring success of the businesses they acquire.
"Anything we could do, anybody else can," Trish states. "We can't buy businesses unless we have good people to run them."
However, finding the right operators is not always easy. Trish acknowledges that they have made mistakes in the past by rushing to fill leadership roles without thoroughly evaluating candidates. They have learned the importance of taking the time to get to know potential operators and assess their values and analytical capabilities.
To address this challenge, Chenmark Holdings established a leadership development program. This program allows individuals to gain experience and work alongside the Chenmark team before taking on full leadership roles. It provides a pipeline of potential CEOs who are already familiar with the company's values and operations.
Lessons Learned in Talent Acquisition
Trish shares some valuable lessons learned in talent acquisition. She emphasizes the need to give oneself time to evaluate potential operators and ensure alignment with the company's values. Rushing to fill leadership roles can lead to compromises and poor fits, which can ultimately harm the business.
She also highlights the importance of understanding the emotional component of deals. Small business owners often have strong emotional ties to their businesses, and the process of selling can be challenging for them. It is crucial to be patient and empathetic, recognizing that emotions can influence decision-making and behavior.
Trish advises against taking things personally and instead focusing on the long-term goals of the business. By maintaining open lines of communication and addressing concerns, it is possible to navigate through the emotional volatility of the deal process.
The Implications and Potential Impact
The lessons learned from Chenmark Holdings' journey have significant implications for entrepreneurs and business owners considering the creation of a holding company. By prioritizing values alignment and taking the time to evaluate potential operators, it is possible to build a strong and cohesive team.
The establishment of a leadership development program can provide a pipeline of talent and ensure a smooth transition of leadership within the acquired businesses. This approach allows for the retention of institutional knowledge and fosters a culture of growth and development.
Furthermore, understanding the emotional component of deals and managing expectations can lead to more successful transactions. By recognizing the challenges and uncertainties that sellers may face, it is possible to navigate through difficult situations and maintain positive relationships.
Conclusion and Future Outlook
In conclusion, building a successful holding company requires careful consideration of the people and processes involved. Chenmark Holdings' journey provides valuable insights into the importance of finding the right operators, managing the emotional aspects of deals, and investing in talent development.
As Chenmark Holdings continues to grow and acquire businesses, their focus remains on long-term success and the enduring value of their portfolio. By staying true to their values and maintaining strong relationships with operators, they are well-positioned for future growth and expansion.
The lessons learned from their experiences can serve as a guide for entrepreneurs and business owners looking to build their own successful holding companies. By prioritizing values alignment, investing in talent development, and navigating the emotional complexities of deals, it is possible to create a thriving and resilient business portfolio.
As Trish Higgins says, "We can't buy businesses unless we have good people to run them." So, if you're interested in selling your business or becoming part of Chenmark Holdings' leadership development program, reach out to them. Together, we can build successful holding companies and create lasting value in the business world.
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We are Back to doing two shows per week: Here is our other show of this week:
E133: Krystof Bartos Shares His Journey From Financial Advisory And Real Estate To The World Of M&A: (56:56)
About The Guest(s): Krystof Bartos is an experienced investor and entrepreneur with a background in financial advisory and real estate. Originally from the Czech Republic, Christoph has a global perspective and has focused his business ventures in the United States. He is currently involved in the marketing agency space, acquiring and growing businesses in the sector.
Summary: Krystof Bartos shares his journey from financial advisory and real estate to the world of mergers and acquisitions (M&A). He discusses his interest in business and investment, his decision to focus on the US market, and his realization that he is better suited to acquiring existing businesses rather than starting from scratch. Christoph explains his current focus on marketing agencies and the challenges and opportunities in the industry. He also discusses his plans for the future, including the possibility of starting a fund and taking companies public.
Krystof Bartos transitioned from financial advisory and real estate to the world of mergers and acquisitions (M&A).
He realized that he is better suited to acquiring existing businesses rather than starting from scratch.
Marketing agencies are ripe for mergers and acquisitions due to the artificial glass ceiling and the potential for growth and consolidation.
Many marketing agencies are lifestyle businesses and lack strong financial management.
Krystof Bartos's approach is to acquire marketing agencies and use them to support other businesses in his portfolio.
"Everybody wants to be creative, even employees that you don't want them to be creative." - Christoph Bartos
"The biggest myth in business is that growing revenue will solve all cash flow issues." - Christoph Bartos
"Most marketing companies don't market themselves well and lack strong financial management." - Christoph Bartos
How to Build and Grow a Successful Marketing Agency: Insights from Krystof Bartos
Note: The following article is based on a transcript of an interview with Krystof Bartos, an experienced investor in the marketing agency space. The article explores the key themes discussed in the interview and provides analysis and insights into the implications and potential impact of these themes.
In today's fast-paced business world, marketing agencies play a crucial role in helping businesses reach their target audience and achieve their goals. However, building and growing a successful marketing agency is no easy task. It requires a deep understanding of the industry, effective strategies, and the ability to adapt to changing market trends.
In this thought leadership article, we will delve into the insights shared by Krystof Bartos, an experienced investor in the marketing agency space. We will explore the key themes discussed in the interview and provide analysis and insights into the implications and potential impact of these themes.
The Power of Marketing Agencies
According to Krystof Bartos, marketing agencies have a unique position in the business world. They have the ability to support businesses in achieving their goals by providing expert marketing services. However, many marketing agencies struggle to reach their full potential due to various challenges.
Krystof emphasizes the importance of understanding the specific strengths of a marketing agency. He states, "Most marketing companies are good at something and not good at other things. It's important to identify what sets your agency apart and focus on leveraging those strengths."
Overcoming Challenges in the Marketing Agency Space
One of the main challenges faced by marketing agencies is the artificial glass ceiling that limits their growth potential. Krystof explains that many agencies excel in certain areas but struggle to break into larger markets due to their size. He suggests that one way to overcome this challenge is through mergers and acquisitions.
By merging with or acquiring other agencies, marketing companies can expand their capabilities and reach larger clients. Krystof Bartos states, "Creating a conglomerate of marketing agencies can help break the artificial glass ceiling and provide opportunities for agencies to work on bigger projects."
The Importance of Financial Intelligence
Another significant challenge faced by marketing agencies is the lack of financial intelligence. Krystof Bartos highlights the importance of understanding the financial aspects of a business and how it impacts the agency's growth and profitability.
He states, "Many marketing agencies focus on revenue growth as the solution to their financial challenges. However, it's essential to have a deep understanding of the financials and implement effective cash flow management strategies."
The Future of Marketing Agencies
Looking ahead, Krystof sees great potential for marketing agencies. He believes that by leveraging their expertise and focusing on specific niches, agencies can continue to thrive in the ever-evolving business landscape.
He also emphasizes the importance of flexibility and adaptability. Krystof states, "The key to success in the marketing agency space is to remain flexible and open to new opportunities. The industry is constantly changing, and agencies must be willing to evolve and embrace new strategies."
Building and growing a successful marketing agency requires a combination of industry knowledge, effective strategies, and adaptability. By understanding their unique strengths, overcoming challenges, and embracing new opportunities, marketing agencies can position themselves for long-term success.
The insights shared by Krystof Bartos provide valuable guidance for marketing agency owners and investors. By focusing on financial intelligence, exploring mergers and acquisitions, and staying flexible in a rapidly changing industry, marketing agencies can navigate the challenges and unlock their full potential.
As the marketing landscape continues to evolve, it is crucial for agencies to stay ahead of the curve and adapt to emerging trends. By doing so, they can continue to provide valuable services to businesses and drive their own growth and success. Watch Here: (56:56)
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This week’s “DEEPER” Dive: The Hidden Costs of M&A": Uncover the often-overlooked expenses involved in an acquisition
"Think you've got the costs of your next M&A deal all figured out? Think again. Our latest deep dive uncovers the hidden expenses that can make or break your acquisition—from Emotional Due Diligence to unexpected Regulatory Fees. We also explore the critical role of Talent Retention and why overlooking it could cost you more than just money. Don't let these hidden costs catch you off guard. Equip yourself with the insights you need for a financially sound and strategically successful acquisition. Unlock the full article now and make your next M&A move a masterstroke."
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