A common belief in succession planning is that the second-in-command is the natural successor. TeamShares found this wasn't consistently true. Often, the operations-focused "number two" is not ready for the full financial and strategic responsibility of the CEO role, leading TeamShares to hire external presidents for most of its acquired businesses.
TeamShares initially focused on buying very small companies. They discovered this segment produced a "wide variance of outcomes," similar to a venture capital portfolio. To achieve their goal of predictable compounding, they shifted their focus to slightly larger, more stable businesses with $500k to $5M in EBITDA.
For TeamShares' portfolio of durable, "evergreen" small businesses, the primary impact of AI isn't a threat to their core revenue. Instead, AI is a massive efficiency lever in the back office, reducing tasks like audit-related bank reconciliations from a six-week process to mere minutes, dramatically cutting operational overhead.
TeamShares argues that the typical private equity model, which involves selling a company multiple times, is unhealthy. This means the company is perpetually "for sale" from the day a transaction closes, fostering short-term thinking and uncertainty. Their "buy and hold forever" model provides stability for the business, employees, and stakeholders.
TeamShares initially hired young, smart generalists from consulting and banking, mirroring their own backgrounds. They discovered this led to "very uneven" outcomes and a wide variance in performance. They pivoted to hiring experienced, local industry specialists for more consistent, predictable results in their portfolio companies.
TeamShares initially planned to source deals directly to avoid high broker fees. They quickly learned that, like the "For Sale By Owner" (FSBO) market in real estate, small business owners need and are willing to pay for the expertise brokers provide during a complex, infrequent transaction, making direct sourcing ineffective at scale.
While industry-specific roll-ups are common, TeamShares maintains a deliberately diversified acquisition strategy. This protects them from valuation bubbles that can inflate multiples in a hot sector, such as when HVAC companies bizarrely became an "AI play" and started trading at 12x EBITDA. They prefer to avoid these single-industry whims.
TeamShares employs a Berkshire Hathaway model: decentralized leadership with centralized capital allocation. All cash flow from their 92+ companies flows to the parent. Presidents of individual companies must then compete for reinvestment capital, ensuring it's allocated to the highest-return opportunities, whether for new acquisitions or organic growth.