Minimum EBITDA when building a holdco?

July 01, 2022

by a searcher from Brigham Young University in Mesa, AZ, USA

I want to build a home services holdco in the Phoenix area. What's your recommendation for a minimum EBITDA for a search like this? HBR book min is 750K, but I'm wondering if it would be worth it to search lower as I may be able to consolidate some functions at the holdco level.

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Reply by a searcher
from Southern Methodist University in Dallas, TX, USA

Less than $750K, you won't have much middle management (if any). If a platform for a roll-up is what you are going for, i'd recommend sticking to the 750K minimum so you don't find yourself doing the backend functions for multiple companies that the owners of sub $750K companies usually do. If you plan on hiring a general manager for the holdco and paying them out of your own pocket, you can disregard this advice.

Reply by a professional
from University of Southern California in North Palm Beach, FL, USA

Warren Buffett says, “People who use EBITDA are either trying to con you or they’re conning themselves.” Charlie Munger, Buffett’s right-hand man, goes even further: “I think that, every time you see the word EBITDA, you should substitute the word ‘bullshit’" Strong words from some of the most successful businessmen on the planet.

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