Can you build a "Berkshire Hathaway for small businesses"?

What makes Berkshire Hathaway work?

Berkshire's own documents point to four things:

• Decentralization. The annual report says subsidiaries are run on an unusually decentralized basis. The 2025 CEO letter says managers never have to navigate layers of bureaucracy.
• Permanence. The same letter says Berkshire aims to hold for the long term, preferably forever. The owner's manual says it has no interest in selling good businesses it owns.
• Capital discipline. The CEO letter lists investing in businesses it thoroughly understands, partnering with high-integrity leaders and concentrating capital in a few high-conviction ideas. It says Berkshire will buy back its shares when they trade below a conservatively determined estimate of intrinsic value.
• Scale and funding. The 2025 annual report gives about 387,800 employees and insurance float of about $176 billion at year-end. The CEO letter, dated February 28, 2026, says cash and Treasuries exceed $370 billion.

The first three can be copied at any size. The fourth cannot.

Which parts can a small holding company copy?

• Buy what you understand. A buyer of $500,000-earnings businesses can apply the same test.
• Let managers run their units. A small head office and autonomous subsidiaries need no capital, only discipline.
• Issue stock only for fair value. The owner's manual says Berkshire issues common stock only when it receives as much business value as it gives up. A public holdco paying sellers in shares should hold itself to the same test. See how to avoid dilution in a public roll-up.
• Hold and reinvest. The owner's manual tests retained earnings by whether each $1 kept delivers at least $1 of market value over time, a test it later refined.

Which parts cannot be copied?

• Float. A small industrial or services holding company has no insurance float, so its growth capital is its own earnings, borrowing or new shares.
• A cash pile and brand. Berkshire's letter says it aims to act quickly. A small buyer usually needs financing, lender approval and time.
• Size of deal. My view is that Berkshire needs large deals to matter at its size. A small holdco's are far smaller, which means more deals, more diligence and more key-person risk for the same dollar of earnings.

There is also a legal point. An issuer that holds investment securities worth more than 40% of its total assets, excluding government securities and cash and measured on an unconsolidated basis, can be treated as an investment company under the Investment Company Act. Securities of majority-owned subsidiaries that are not investment companies generally do not count toward that figure. A holding company that mostly owns minority stakes needs legal advice before it calls itself one.

What does the compounding math look like?

Assumptions, not a forecast: a holding company owns subsidiaries earning $1,500,000 a year after tax. It keeps all of it and buys new businesses at 4 times after-tax earnings, so each dollar buys $0.25 of earnings. The multiple stays constant, there is no debt, and the existing businesses do not grow.

• Year 1 purchases add 25% x $1,500,000 = $375,000, so earnings become $1,875,000.
• Year 2 adds 25% x $1,875,000 = $468,750, making $2,343,750.
• Each year multiplies earnings by 1.25. After five years: $1,500,000 x 1.25^5 = $1,500,000 x 3.0518 = about $4,577,000.

This works only if the company can keep finding deals at 4 times earnings, and few buyers can do that for five years running. At 6 times, each dollar buys about $0.167 of earnings, and the five-year multiple falls to about 2.2. The lesson is that price paid and deal supply matter more than the template.

My view is that the small-company version of Berkshire is not smaller Berkshire. It is a patient, disciplined owner of a few good businesses that grows only as fast as it can buy well.

Where these numbers come from: Berkshire facts are from its 2025 annual report, 2025 CEO letter and owner's manual. The 40% test is in 15 U.S.C. 80a-3, as reproduced by Cornell LII. The compounding example is illustrative arithmetic with stated assumptions.

Related questions

Does Berkshire only buy large companies?

In my view its size means it needs large deals, but the template does not depend on that. The ideas of buying what you understand and letting managers run their units apply to a $500,000-earnings business too.

Can a small holding company use insurance float?

Only by owning an insurance business, which is a regulated activity with its own capital rules. It is a different company, not a feature you add.

Should a Berkshire-style holding company go public?

Not necessarily. A listing gives you shares to pay sellers with and a way for investors to exit, but costs and reporting rise. See should a holding company go public, and at what size?.

What comes next

To plan the structure itself, read how to build a holding company for acquisitions.

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Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.