Holdco Success Requires Distance

Michael Girdley shares insights about running a holding company (holdco), emphasizing that success requires a fundamentally different approach from traditional business operations. His experience spans multiple businesses including fireworks, software, and education, totaling over $100M in revenue.

Key Points:

• Holdco Operation Fundamentals:

  • Must resist the urge to rush in and fix problems
  • Requires living at "80,000 feet" with big ideas and strategy
  • Success depends on finding the right operators rather than being the operator

• Common Misconceptions:

  • Many people wrongly think running a holdco is easy
  • Most operators aren't wired to be holdco people
  • The skills that make you successful as a CEO are often counterproductive in a holdco

• Partnership Structure:

  • Typically owns 30-40% of each business
  • Businesses usually run 15-20% EBITDA margins
  • Prefers to put substantial personal money into deals before raising external capital

• Operating Philosophy:

  • Focuses on being flexible with strategy
  • Some businesses are "compounders" (reinvesting profits for growth)
  • Others are cash-flowing entities
  • Maintains partnerships with operators who run day-to-day operations

• Value Add to Partners:

  • Provides strategy insights
  • Shares best practices
  • Offers connections
  • Contributes substantial capital ($50K to several million)
  • Acts as board member rather than operator

• Personal Approach:

  • Acknowledges being "precisely the wrong person" to run operations
  • Finds optimization, accounting, and HR "incredibly boring"
  • Prefers living in "idea space" and high-level strategy
  • Maintains 100% success rate with partnerships