No Synergies Here

A business it seems should be as self-contained as possible. If your look at Berkshire Hathaway, Constellation Software. Tiny Capital you see companies that are setup and completely independently run with their own P&L. I wondered why this was the case.

By avoiding synergies it is easier to see how a business is doing and allows for the reduction of cost while increasing revenue. If synergies are used then it is harder to quickly understand how a business is functioning as you tend to have different diverting revenue streams and costs which can be harder to track.

Essentially one QuickBooks account per business with each business optimizing its P&L, Cash Flow, and Balance Sheet.

Lastly, by not having synergies a company can run completely independently and use its own set of resources however it wants. A company A can be in a different stage where it is matured and has a set of processes and we don’t have to change the software that company uses. A company B can start and we can use completely different set of tools if it makes sense.

As the goal of the company is to deliver value faster and cheaper updating existing software for new situations may not make sense as it may disrupt the delivery of the value. However, creating new businesses and optimizing those workflows may work better.

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