Title: I'm Buying The Whole Business Publication: Compounding Quality (Substack, paid post) Author: Pieter Slegers Date: 2026-09-08 URL: https://www.compoundingquality.net/p/im-buying-the-whole-business Audience: only_paid Note: text captured verbatim from the paid post via a logged-in browser session (custom-domain SSO warm-up via /account first). Written post — no timestamps. Charts and tables are published as images; the ones carrying figures are transcribed inline below as [Table image — ...] blocks (Buffett's Berkshire entry multiple, the 1964-1974 Berkshire textile income statement, Berkshire's float chart, the acquisition-model assumptions tab, and the EBITDA- and P/E-framing summary tabs). Note the post writes some numbers in European convention (14,86 = $14.86; 1.337 pages = 1,337 pages; EUR54.600.000 = EUR 54,600,000) and there are two internal inconsistencies flagged in the analysis: the prose says "$5 million business generating $1 million of FCF, recouped in 5 years" while the model uses far larger absolute figures (EUR 54.6m EBITDA / EUR 32.2m net earnings) for the same SNFCA example, and the "Situation 1 / Situation 2" figures quoted in the text ($54.2m vs $171.0m over 25 years) are a separate illustration from the model's 20-year outputs. I'm Buying The Whole Business Hi Partner Most of you know that I love to read books. Since I returned from the Berkshire AGM, I went into a big loophole. Why? The only thing I could think about during the Berkshire weekend was the following: What if you would buy a majority stake in a (small) listed company yourself, just like Warren Buffett did with Berkshire? And then you compound from there? [Image — photo: the Berkshire Hathaway AGM.] I couldn't get that thought out of my head. And while we all know that Warren Buffett did this, this time it 'clicked' for me. So that's why I went deep. Really deep. I started with reading the following (again): Adam Mead's book 'The Complete Financial History of Berkshire Hathaway: A Chronological Analysis of Warren Buffett and Charlie Munger's Conglomerate Masterpiece' (1,337 pages) All the shareholder letters + public transcripts of Warren Buffett (5,012 pages) All shareholder letters of Prem Watsa of Fairfax (772 pages) That's 7,121 pages in total. Luckily you don't have to as I did so for you. I'm sharing the main takeaways in this article. [Image — Charlie Munger quote card: "In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time -- none, zero. You'd be amazed at how much Warren reads--and at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out."] Berkshire Hathaway At the age of 35, Warren Buffett bought a majority stake in Berkhire Hathaway. Many people consider this investment of Warren Buffett a mistake. Berkshire Hathaway was a struggling textile company back then. [Image — period engraving of the Berkshire Hathaway textile mill.] Here's what Warren Buffett said about it in 2010: "The dumbest stock I ever bought was - drum roll here - Berkshire Hathaway." But was it actually? I'm quite convinced that without this investment, Buffett wouldn't have become as successful as he is today. Warren Buffett accumulated his stake in Berkshire between 1962 and 1965. The first time at an average price of $7.6 per share. But he kept accumulating shares. The average purchase price equaled $14.86 per share. Berkshire Hathaway was a classic cigar butt stock. The value of Berkshire's working capital alone equaled $19 per share. On top of that, the value of all cash, receivables, and inventories was $20.8 million,. A back-on-the-napkin valuation looks as follows: [Table image — Buffett's entry multiple on Berkshire Hathaway] Price paid $ 14.86 Value assets $ 32.30 Multiple paid 0.46 Warren Buffett paid less than half of the book value of the company. Over the next 10 years (1965-1974), here's how much revenue and operating profit the textile business generated: [Table image — Adam Mead, Table 3.16: Berkshire Hathaway consolidated income statements, 1964-1974 ($ thousands). The two highlighted lines are the textile business; columns run newest-to-oldest 12/28/74, 12/29/73, 12/30/72, 12/31/71, 12/31/70, 01/03/70, 12/28/68, 09/30/67, 10/01/66, 10/02/65, 10/03/64.] Textile revenues: 32,592 | 33,411 | 27,742 | 26,011 | 24,569 | 40,427 | 46,002 | 39,056 | 49,372 | 49,301 | 49,983 Operating profit/(loss), textiles: 2,660 | 2,837 | 1,697 | 233 | 107 | 1,455 | 1,567 | 56 | 4,849 | 4,687 | 528 (Other lines on the same table, for context: insurance premiums earned $60,574 / 52,929 / 59,627 in the last three years; net income $7,043 | 12,860 | 12,126 | 7,686 | 4,565 | 7,953 | 4,662 | 1,107 | 2,763 | 2,279 | 176.) Source: Adam Mead's book The Complete Financial History of Berkshire Hathaway: A Chronological Analysis of Warren Buffett and Charlie Munger's Conglomerate Masterpiece Total revenue generated: $418.5 million Total operating profit (loss) generated: $20.7 million As Berkshire Hathaway had 1,017,547 shares outstanding, this results in the following numbers per share: Cumulative revenue per share: $411.3 Cumulative operating profit per share: $20.3 This means that Warren Buffett: Paid $14.86 per share Got $20.3 back in 10 years It's definitely not the best investment in the world, but it's also not terrible. The Magic of the float What is float? Float is the money an insurance company holds between collecting your insurance premium and paying out a claim. Customers pay upfront but claims come later. This means the insurer gets to sit on a big pile of cash in the meantime. Smart insurers (like Berkshire Hathaway) invest that cash to earn returns. Often, they make more money from investing the float than from the insurance itself. Berkshire Hathaway uses its float to invest in bonds and stocks. You are not exactly sure what 'float' means yet? Let me give you an example. Just imagine you sign an insurance policy for your car today for $1,500 per year. Under normal circumstances, you will not have a car accident today. The average driver has a car accident once every 17-18 years. The average damage per car accident equals $8,000-$10,000. This means Berkshire Hathaway will receive $1,500 per year from you, but on average they will only pay out $8,000-$10,000 once every 17-18 years. Until the car accident takes place, Berkshire Hathaway can invest these premiums in stocks and bonds. That's the float and it's exactly what makes Berkshire so powerful. Here's the evolution of Berkshire's float: [Chart image — Berkshire Hathaway float, US$ billion (bars) and US$ float per A share (line), source Forbes. Categories: 2000, 2010, 2019, 2020, 2021, 2022, 2023, 1Q 2024, 2Q 2024, 3Q 2024, 4Q 2024, 1Q 2025, 2Q 2025, 3Q 2025, 4Q 2025. Float rises from approx. $26bn in 2000 to approx. $57bn in 2010, approx. $113bn in 2019, approx. $128bn in 2020, approx. $142bn in 2021, approx. $161bn in 2022, approx. $168bn in 2023, and then approx. $167-175bn across the eight quarters of 2024-2025, ending approx. $175bn in 4Q 2025. Float per A share (right axis) rises from approx. $18,000 in 2000 to approx. $46,000 in 2010, approx. $90,000 in 2019 and approx. $120,000-124,000 through 2024-2025. Values read off the chart are approximate.] Just think about it for a second... If you do well as an insurance company and you are profitable... You receive the float for free. It's free money that is not yours. You can use this money to invest in stocks and bonds. This accelerates the investment profits from companies like Berkshire. It also means the following: If Berkshire Hathaway would use it's operating profit and float to just copy the S&P 500, by definition it will outperform the index because they have 'free money' to invest in the index. That's exactly why I think Berkshire will keep outperforming going forward. [Chart image — "Share-price and index change" (WSJ style), 2000 to 2025: Berkshire Hathaway rising to roughly +1,000%+ by 2025 versus the S&P 500 at roughly +300%.] 10% versus 20% per year Just imagine you can buy an entire company that is relatively cheap. Let's just say you can buy a very stable boring company that generates $1 million in Free Cash Flow per year. You find yourself a bargain as you only need to pay $5 million for the entire business. Under the assumption that the company remains constant, you will recoup your entire investment in 5 years. And after that...? As it's a very stable company, the company remains stable and just grows in line with inflation. This would mean that from year 6, you will have an extra million to invest every single year (the cash flow of the business). If you can do this for 20 years, the difference gets ridiculous. Situation 1: Investing $5 million for 25 years at 10% per year Situation 2: Buying a company for $5 million, recouping your investment within 5 years and investing the yearly cash flows Here's what you would have in both situations: Situation 1: $54.2 million Situation 2: $171.0 million That's three times as much profit! It's the difference between compounding at 10% per year versus compounding at 20% per year. It's what made Warren Buffett so powerful. And if you can add insurance float to the equation, it gets even better. Some examples A perfect example to make this concept clear? Let's take the listed stock Security National Financial Corporation ($SNFCA). How does the company make money? Security National Financial Corporation is a Salt Lake City-based company founded in 1965 that operates in three areas: - Life insurance - Cemetery and mortuary services - Mortgages As you can see, it's a very boring business. And it's cheap: Price-to-book ratio: 0.6x Enterprise Value/Sales: 0.6x EV/EBITDA: 3.3x P/E: 6.5x P/FCF: 3.1x Let's just say that we could acquire the company for 5x it's cash flow. In that case we could recoup our investment within 5 years and use the cash flows after year 5 to keep buying other companies or to just invest in the stock market. I made an Excel sheet to help us do the calculations. You can grab it yourself here*: Download the model *You need to download the Google Spreadsheet in Excel before the formulas work First, we need to give the Excel some input in the tab 'Assumptions'. I filled in the numbers for SNFCA. They look as follows: [Table image — the model's 'Assumptions' tab] Shared inputs Market return - investing & reinvested cash 10.0% (Long-run equity return) Interest rate on acquisition debt 5.0% Debt as % of purchase price 50.0% (0% = all equity, 80% = max leverage) Operating / earnings growth of business 5.0% (Negative = slowly dying business) Tax rate (interest is deductible) 25.0% Holding period (years) 20 (Model runs to year 20 max) Debt strategy: 1 = keep debt, 2 = pay down first 2 (Toggle between the two modes) EBITDA framing inputs EBITDA (EUR) EUR 54,600,000 Entry multiple (x EBITDA = Enterprise Value) 3.3x (The cheaper, the bigger the edge) P/E framing inputs Net earnings (EUR) EUR 32,200,000 Price / earnings paid 6.5x Stress scenario Apply stress shock? 1 = yes, 0 = no 1 (Turn the shock on/off) Shock year 7 (Year the bad thing happens) Earnings/EBITDA multiplier in shock year 50.0% (0.5 = halves that year) Interest rate after shock (refi) 9.0% (Rate resets from shock year on) So what results can you now expect? I did the calculations for you. If you have the Excel in front of you, you can look at them in the tab 'Summary'. There are two ways the calculations are made: Based on the EBITDA multiple you paid (3.3x for SNFCA) Based on the P/E multiple you paid (6.5x for SNFCA) EBITDA Multiple [Table image — the model's 'Summary' tab, EBITDA framing] Strategy @ 20y EUR 4,219,897,217 Just investing EUR 606,080,470 Edge 6.96x Strategy CAGR 21.2% Equity invested EUR 90,090,000 Earnings yield 30.3% If you would just invest in stocks, you would have $606 million after 20 years. And if you bought SNFCA at a 3.3x EBITDA multiple using 50% debt? In that case you would have $4.2 billion (!). That's almost 7 times as much. P/E Multiple [Table image — the model's 'Summary' tab, P/E framing] Strategy @ 20y EUR 2,458,392,436 Just investing EUR 704,032,870 Edge 3.49x Strategy CAGR 17.1% Equity invested EUR 104,650,000 Earnings yield 15.4% If you would just invest in stocks, you would have $704 million after 20 years*. And if you bought SNFCA at a 6.5x earnings multiple using 50% debt? In that case you would have $2.5 billion (!). That's almost four (!) times as much! Why is there a difference? You see a difference between the outcome in the EBITDA versus P/E Multiple approach. The reason for this is that the multiple you pay differs. But in general, the concept is clear: buying entire businesses and then using the cash flows to invest yields higher returns. It can be the difference between compounding at 10% per year or 20% per year. That's exactly how Warren Buffett became so successful. Conclusion Here's what you should remember from today's article: Buffett's "biggest mistake" became one of his greatest investments ever thanks to the power of long-term compounding. The secret of Warren Buffett? Insurance float + buying entire companies Buying an entire cash-generating business can create much higher returns than simply investing in the stock market. Strong cash flows can be reinvested into new acquisitions, creating a powerful compounding machine over time. Finding one undervalued business with recurring cash flows can be enough to build exceptional long-term wealth. Is this something that interests you? And do you want to learn more or even acquire a business together? I would highly appreciate it if you could fill in the survey below. Please note that the minimal amount to participate would be $250.000. [Form image — Google Form, "Warren Buffett's Secret": "Are you interested in buying an entire company together? Or in investing in a fund that does this for you? Let us know here." Fields: Email (required); "I am interested in" - (a) Buying a company together, (b) Investing in a fund that does this for me; "Any remarks/ideas?" (required, short answer). Signed "Everything In Life Compounds - Pieter".] I want to stay up-to-date Everything in life compounds Team Compounding Quality Book Order your copy of The Art of Quality Investing here Used sources Interactive Brokers: Portfolio data and executing all transactions Fiscal.ai: Financial data Disclaimer As a reader of Compounding Quality, you agree with our disclaimer. You can read the full disclaimer here.