A reader sent me a note after a recent newsletter asking me to explain something I’d mentioned only briefly: how our parent company costs don’t really scale with the number of businesses we own.
Actually, he already understood it, but he wanted me to talk about it more for everyone else’s benefit.
I realized I’d been referencing this idea without ever dedicating a full post to it. It deserves one, because this is the single most important structural advantage of the holding company model, and I think it’s the piece most investors miss when they look at our numbers.
What Are Parent Company Costs, Exactly?
When Onfolio acquires a business, that business comes with its own cost structure. Payroll. Software tools. Hosting. Freelancers. Those costs live inside the subsidiary. They’re already accounted for when we model the deal, and they’re part of what the business earned its valuation on.
The parent company is the public entity that sits on top of everything. It has a completely separate set of costs:
- Nasdaq listing and compliance fees
- SEC filing and reporting (10-Qs, 10-K, proxy, etc.)
- Annual audit
- Legal counsel (corporate, securities)
- D&O and general insurance
- Executive compensation
- Interest payments on acquisition financing
- Preferred share dividends
This is the infrastructure cost of being a publicly traded holding company. Every public company has some version of this, regardless of size.
Why These Costs Don’t Scale
Here’s the key insight: almost none of those line items change meaningfully when we add a new portfolio company.
The auditor doesn’t charge double because we added a subsidiary. The audit scope expands slightly, but the base engagement, the compliance framework, the filing infrastructure, all of that already exists.
Nasdaq’s listing fee doesn’t increase. SEC filing costs are driven by the complexity of the filings, not the number of subsidiaries. Legal retainers cover the corporate entity, not each subsidiary individually.
Insurance premiums go up marginally with portfolio size, but not linearly. Executive compensation is set by the board, not by headcount in the portfolio. My salary is the same whether we own three businesses or fifteen.
The only parent-level cost that has scaled with acquisitions is interest payments on deal financing. Every seller-financed acquisition adds a note with interest. But those notes amortize on fixed schedules, so the interest cost peaks at closing and declines from there. Over time, this line item shrinks as notes are paid off.
What This Looks Like in Practice
In 2024, Onfolio acquired three digital agencies, adding approximately $5.9 million in annual revenue to the portfolio. These were meaningful additions to the business.
The parent company’s operational costs didn’t meaningfully change. The same team managed the expanded portfolio. The same compliance infrastructure handled the new entities. The same audit framework absorbed them.
In fact, throughout 2025 our parent company costs were flat.
Meanwhile, portfolio cash distributions to the parent roughly tripled since 2023. The parent cost line stayed essentially flat on the operational side.
That’s the operating leverage in real numbers.
Why the Financials Can Be Misleading
One thing that obscures this dynamic: consolidation. Because Onfolio is a public holding company, its financial statements consolidate every subsidiary into a single set of numbers. When we add a new portfolio company, that company’s SG&A rolls into our consolidated SG&A. Its payroll becomes our payroll. Its software costs become our software costs.
If you’re scanning the income statement after an acquisition, it looks like expenses went up. They did. But revenue, operating profit, and net profit all went up by more, because the acquired business is profitable. The parent company’s own cost line barely moved. Consolidated financials make it difficult to see that distinction unless you know to look for it.
This is why I focus on parent-level cash flow rather than consolidated expense totals when explaining the operating leverage. The parent’s costs are the overhead that matters for the self-funding equation, and those are the costs that stay flat.
Why This Matters for the Path to Self-Funding
The self-funding equation for a holding company is straightforward: when cash flowing from the portfolio exceeds the cost of running the parent, the company generates enough internally to sustain itself.
Operating leverage is why that equation gets easier over time, not harder. Every new acquisition adds profit to the numerator without meaningfully changing the denominator. Organic growth within existing portfolio companies does the same.
You don’t need any single business to triple in size. You need the aggregate portfolio to generate enough cash to cover a cost line that isn’t growing. Patient math, but structural.
I like to think of it as being underwater (in more ways than one) and swimming up towards the surface. The surface of the water doesn’t get further away, and every acquisition we make just gets us closer to breaching through and taking a big gulp of air.
The Numbers to Watch
Three metrics tell you where this stands each quarter:
1. Cash distributed from portfolio to parent. This is the aggregate number, all subsidiaries combined. It tells you the actual cash arriving at the parent level.
2. Parent company cash burn. The fixed-ish overhead. Watch for operational costs staying flat and interest declining as notes amortize.
3. Portfolio revenue and gross margin. The growth lever. Revenue and gross profit growth, whether organic or through acquisitions, is a key part of the journey.
These numbers don’t show up in our financials, but we will update it via the blog and newsletter. I report these every quarter. The convergence of the first two numbers is the story.
If this was useful to you, it would probably be useful to someone you know. Feel free to share it or forward it to a friend. One of the hardest things about being a small public company is simply being discovered, and word of mouth goes further than anything else.
Disclaimer: This discusses Onfolio’s financial performance and holding company structure using data from publicly filed reports with the SEC. It is not financial advice and should not be taken as a solicitation to buy or sell any security. For complete financial information, refer to our SEC filings at sec.gov.