Corporate holding is a type of organization that allows a company (and also its managers) to control and / or exert influence over other companies (or subsidiaries). That is, a majority company that has control and influences the other companies that are below it.
Running a business has not been, is not and will never be easy. There are many peculiarities and also challenges faced on a daily basis.
External and internal factors are decisive and can change the direction – even overnight – of a company.
If managing a company is challenging, what about managing multiple companies? Regardless of their size, the work needs to be even more assertive.
And you know that very well.
One way to manage the business correctly is through the corporate holding company. This form of organization allows for a long-term strategic focus that allows not only financial health but total control over business activities.
This, undoubtedly, is something you want and need for your business to thrive and become more and more a reference in your area.
In this article, we will talk not only about what a business holding company is and how it works. We will also address the role of technology in the management of these companies and how it greatly facilitates the lives of managers.
Let’s check it out?
What is a corporate holding company?
It is important to stress, from the beginning, that a business holding company is not a corporate type, like a limited liability company.
The word “holding”, incidentally, comes from English, “to hold” which, in a free translation, means: to control, to maintain or to insure.
That said, we can understand this method of organization as a company set up to control the assets of other companies, or even individuals and families.
However, a corporate holding company itself works when a company has a majority share of the other companies.
It has control and performs the administrative management of the whole and determines strategic planning and business policies.
However, in some cases, there are holding companies with quotas that are minority. The objective is to make investments.
In one way or another, it is essential to seek solidity in the market in which companies operate. And, more than that, build a link between all existing businesses.
Therefore, whoever wants to create a holding company, takes into account some items such as:
- Determine industries – look at the expanding markets and identify good opportunities in various types of segments;
- Develops the business plan – set goals and objectives for the coming years (3 to 5). Think about the number of employees, capital forecast and make the entire strategic and operational plan;
- Search for funding sources – There are cases where companies have sufficient capital. But those that do not have to present a business plan for the companies you intend to acquire to potential investors.
There are several classifications of corporate holding companies and we have separated 3 of them to comment better.
- Pure holding – is a company whose objective is to participate in the capital of other companies. In other words, it is a parent company that has a greater facility for making changes. In terms of revenue, they come from the profits and dividends from your other interests as a partner;
- Mixed holding company – not only participates in other companies but also explores other business activities. It is common to see this type in England providing civil and commercial services;
- Holding company – situation of minority participation but that, however, the interest in remaining in society is not abandoned.
There is yet another way to form a holding, although very specific:
- Family holding – the intention is to control the assets of one or more people from the same family who have assets and / or shareholdings in their name. Any decision-making about assets is made by a society (which may consist of family members), with democratic participation by all.
Why create a business holding company?
There are many reasons that motivate the creation of a business holding company. Seeking control of the operations of a business is undoubtedly one of the main ones.
Having cohesion and standard in the way of acting and managing is something that entrepreneurs seek and that this strategy provides.
However, this is not always the way to have an assertive financial management of companies or family assets.
Like any strategy or practice, there are strengths and weaknesses. Regardless of whether it will be successful or not, some factors motivate its adoption.
Some of them are:
Strengthen a group of companies
Structuring a holding company can be the path sought by many, many entrepreneurs to seek a cohesive and efficient management of their businesses.
This practice aims to strengthen a business group in several ways. One of them is to reduce conflicts between the companies that are part of the operation, concentrating efforts and resources on strategic decisions for the future of business.
Search lawful tax savings
The Englandian Corporate Law underpins the holding structure. Therefore, the tax benefits that involve this business control practice are lawful.
With very elaborate tax plans, the competitive differential of corporate holding companies is more evident.
Securitize assets and rights
Another motivation is to conserve assets (read: avoid distributing them to smaller investors), in the event of death or business succession.
The objective here is to hold shares in another company, whether it is majority or minority.
Benefits of a business holding company
Now that you understand what leads to the creation of a business holding company, we need to talk about the benefits of this instrument.
In fact, there is much to be gained from advantages. As we said earlier, one of them is to add more security to business management.
And this occurs especially when there is a legal risk through actions aimed at corporate assets.
Assertiveness in action, control and strategic vision. This is something that companies seek and that this strategy brings.
The tax benefits are also clear – and legal, as we mentioned earlier.
Below, we’ve selected some other benefits. Check out:
The focus on the customer is something that is necessary in all companies, right? For this reason, some actions of the holding are strategic to guarantee this.
One is to negotiate prices at the time of buying raw materials, which will add a higher quality of delivery.
If you get a good deal, this is reflected in the final delivery (quality will not drop) and there will be more money in the company’s cash.
The business holding company is largely responsible for negotiating and purchasing products and services. It is also she who chooses the suppliers that will supply the companies connected to the group.
Then again, the power of persuasion and bargaining is greater – and more resources are left to optimize other equally important processes.
The billing of other companies, as well as various investments are, in general, the source of income that the holding companies have.
In comparison with a business that operates alone, we can highlight a greater availability of working capital.
In this way, it is also possible to allow loans between related companies.
That is, the money circulating and coming from the most prosperous businesses can be passed on to those who profit less.
The funds circulate throughout the group and there is, at least in theory, no need to use third parties for capitalization.
Which, automatically, contributes to a balanced financial management of the entire group of companies.
A very clear function of the family business holding company is the prevention of conflicts between the people who compose it.
And this happens according to the rules of Corporate Law. They will settle conflicts that may occur in a company whose control is familiar.
No entrepreneur wants family conflicts to affect business, does he?
That is why the practice is so used as an instrument to prevent friction, with the rules mentioned above establishing the guidelines and presenting solutions that are proactive at all times.
When it comes to carrying out a heritage succession – something common in England – it is essential to surround yourself with care and follow a safe script at these times.
The administrator may, in his lifetime, give the guidelines that will constitute the process. The heirs will be aware of the advantages of this practice.
And, since there is no need for an inventory, the access time to this patrimony will be shorter, which will accelerate all the necessary path to be followed.
A group’s mission, vision and values have never been so clear and put into practice as in a corporate holding company.
This instrument, without a doubt, brings a feeling of unification, of belonging and gives unity to companies.
This, of course, increases the holding company’s image. Once you have more engaged people, this will be reflected in the quality of delivery and the success of the customer, who will see the company (ies) as a reference in what they do.
Technology helps in the management of corporate holding companies
Managing a holding company is not an easy task (and it never will be), but it does not have to be impossible or a huge headache for managers.
The digital transformation impacts business in all segments and brings, with it, solutions for ever greater demands on the part of customers.
Technology transforms society in ways that we often cannot keep up with. And literally overnight, what was believed or good practice is obsolete.
In this context, a sales system is essential in the management of several companies through a larger one.
Within a CRM, there is a feature called “holding”, for proactive monitoring of the activities of all companies involved in the group.
Registering them is quite easy – and it is done only by the account manager, who has full and real-time control of operations.
There, in addition to sales control and the entire business process, it is possible, for example, to distribute leads from your marketing strategies automatically.
Of course, it is enough to set up automatic action so that the teams of each company can work on their respective opportunities.
This eliminates rework in the distribution of leads and gives people the total condition to work focused on achieving the goals that the holding company and everyone within it have.
So, how can we help you?
If you are unsure about the content, or if you want to know more about the role of a CRM in managing your business, speak to a consultant whenever you want.
Enjoy and read two articles that will help you not only manage better, but sell more assertively.
The first talks about the importance of good budget planning: what types and how to do it?
The second covers how the application of the PDCA cycle improves processes and also the delivery that companies perform.
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