For the last few weeks, I’ve been writing a lot about why I am building my personal holdings company.
Understanding why I am doing this is important, because by now I hope you see the value in building a holdings company and building equity in multiple income streams.
But this week, I will teach you HOW to start building your portfolio. What are the steps to take?
If you also dream of building a personal holdings company, this article will give you a step by step breakdown of how to proceed. This process worked for me and it will work for you.
Let’s do this.
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Step 1 – Generate Cashflow
This step is the most important and also the most discouraging step in the entire process.
You must understand something.
Personal holdings companies have become trendy. Now that individuals are becoming media companies, there are more “influencers” talking about this than ever before.
As such, the rhetoric around building a personal holdings company makes it seem like it’s something you can simply start, like bootstrapping a company or planting a garden.
It’s not like that. A PHC is something that happens over time as a result of past success. In order to truly create a PHC, you first need to have a cash-flowing business. This is true for two reasons.
1. Without cashflow, you have nothing to invest.
It’s self explanatory, but easy to miss.
For me, Stodzy Internet Marketing is my cashflow machine. Without the profits that Stodzy has generated over the last 10 years, I wouldn’t have had the capital to put into other investments.
The money has got to come from somewhere.
2. Without a reputation, no one will work with you.
In order to generate influence, you first need to create a reputation. You create a reputation by doing good work and showing your competence.
No one will want you involved in their companies as an investor or a strategic partner if you don’t have a track record of success. You must actually build something valuable.
Generating cashflow is a process.
It will take you years to get to a point where you own an independent enterprise that is a successful business within it’s own right. Before you start writing checks and posting on Twitter about your investments, please remain humble and stay focused on what matters.
What matters most is cashflow. In order to get cashflow, you have to build something worth paying for.
This comes before anything else, please take this step seriously.
In the beginning, you’re better off focusing 100% of your efforts into growing one company than you are pretending like you can split your time and attention into many different places.
Focus wins. Before you even try to build a PHC or diversify your portfolio, you need to first build something that matters.
Step 2 – Invest In Operators
Many people think that building a PHC means building more than one business.
This could not be further from the truth. Building two companies at a time is nearly impossible. It’s a bad strategy and it’s ineffective.
Once you’re generating cashflow, you want to keep the majority of your focus on the core business.
80% of my time is still spent working on Stodzy Internet Marketing. Stodzy is the core of my entire operation, because as I said before, it’s the cashflow mechanism.
Once you are at a point where you’re ready to build your portfolio, you want to find talented operators and form partnerships to start new companies or to buy equity in current companies.
The last thing you want to do is start a new company from scratch. It’s hard enough to build one successful company, and the probability of you starting and operating two companies is very low.
This was the biggest mistake I made in building my PHC.
When I bought Copyblogger, what I really bought was a media asset.
Copyblogger as a company had no revenue, it was simply a website with a lot of traffic and a large email list. So the first step was obviously to start generating revenue.
Building Copyblogger into a successful business was very difficult. I made so many mistakes along the way. As is the case with everything in life, it took twice as long and was twice as expensive as I wanted it to be.
I gave myself no other option other than to build two companies.
Out of stubbornness and stupidity, I made it happen. But it was a huge mistake and I put the entire enterprise in jeopardy. I’ll never make that mistake again.
The truth is that if it weren’t for Covid, I doubt I would have had the time or focus to make Copyblogger as successful as it is today.
I worked hard, but I also had some good luck. Knowing what I know now, I would have done it differently.
The Operator Is The Asset
Even with the endless hard work I put into Copyblogger, it didn’t become successful until I was fully able to remove myself from the equation and add operators to grow the business.
Now, my team manages the entire thing. Megan is the most talented SEO I’ve ever worked with, and she completely manages the blog. Charles is the best and he runs the social media marketing and manages The Copyblogger Academy.
Once the right people were put in place, Copyblogger became a successful and profitable addition to my portfolio.
But until then, it was a complete grind.
It was stressful, emotional, hard, expensive, and dangerous. I wasn’t sleeping enough, I was having real issues with anxiety, and it was completely consuming me.
If you’re building a personal holdings company, you must understand that what you’re actually doing is building a network of talented people who can operate the investments that you’ve made.
The operator of the company is more important than the available market share, the slide deck, or even the valuation of the company.
Without a good operator, you are dead in the water.
Step 3 – Build Your Personal Brand
I admit, for most of my career, I thought the idea of building a personal brand was incredibly stupid.
Ever since I started taking it seriously, I have since changed my mind.
Creating a following around my ideas, my knowledge, and my experience has been one of the best business decisions I’ve ever made. Here’s why …
My personal brand has become my deal flow. It’s where all my opportunities come from.
In the past, being an investor meant you had to be part of a network. That’s why it was so important to move to Manhattan or Silicon Valley, because the lunch meetings, the dinners, and the quick trips to the office were how people found opportunities and found potential deals to invest in.
Now, all of that is done through your personal brand.
I don’t have any business objectives with my personal brand other than to make myself known. The more people who know who I am, the more opportunities I get.
But, before you start building your personal brand …
Understand that this brings us back to step 1, and the importance of first building something that ads value.
The mistake almost everyone makes is they think that creating a following is more important than building a reputation. The reason people take me seriously IS NOT because I have a lot of followers, it’s because I have a track record of success.
You build a personal brand by building a company. You don’t build a company by building a personal brand.
Everyone wants the dopamine. Everyone wants the notoriety and the thrill of likes, shares, and followers. But trust me, LinkedIn followers mean nothing if you don’t have a track record to back it up.
Without a track record, you’re just another desperate LinkedIn spammer, begging for attention.
Step 4 – Start Saying No
I first learned about the business importance of judgement by reading Naval’s great analogy. It’s so important to understand and cultivate your judgement, because as your portfolio grows and as your income increases, the consequences of making mistakes also increases.
Naval compares it to steering a bigger ship.
As you make more money, the cost and value of your payload goes up. The ship is bigger, slower, more expensive, and much more valuable. Making a turn requires a lot more care and attention than it did when you had a tiny motor boat.
But crashing your ship would be catastrophic, whereas crashing a tiny motor boat is par for the course.
This has been a challenging step for me, but a critical lesson none the less.
I’m the kind of person who gets excited about everything. I love new ideas, new industries, and new projects.
But, after many expensive failures, it became obvious to me that if I wanted to build a PHC worth tens of millions, then I needed to stop chasing shiny pennies and start focusing on my skillset.
That’s why I made the decision to start focusing my portfolio on healthcare companies, especially companies that specialize in behavioral health. That’s why we founded The Census and that’s why I am currently in talks with many other operators in the space.
Saying no is hard. You have to kill your darlings, (which is why I’m shutting down YourBoulder). But I want to build a portfolio of cash-flowing and profitable companies. In order to do that, I have to be discipline and I need to say no to most opportunities.
The Exception …
Saying no is not binary, it’s fluctual.
In the beginning, say yes to everything. Say yes to every meeting, every opportunity, every freelance job (even if you lose money), and every phone call.
When you’re first starting out, you want to meet as many people as possible. In addition, you want to WOW as many people as possible, because that’s how you build your reputation.
Saying yes is an investment in your future.
But once your ship gets big enough, that’s when you want to start saying no.
Personal holdings companies will become more and more common. As individuals become media companies, they will also become finance companies.
I am my own investment fund. I have a pool of cash that I can deploy and I don’t need any VC, bank, or seed investor to come in and save me.
I can do it all myself.
So can you.
If you want what I have, then I suggest you do what I did. It will be hard, stressful, and emotionally taxing, but the decision to reinvest my earnings into equity of other companies has been the most financially rewarding decision I’ve ever made.
It worked for me. It can work for you.