Corporate Finance & Planning Insights for Multi-Generational Family Businesses
Everyone agrees that communication promotes positive shareholder engagement, but what does it look like to communicate financial results effectively? In this week’s blog we introduce a whitepaper that offers practical suggestions for presenting key financial data in ways that family shareholders find useful.
Family businesses are either growing or shrinking. Since shrinking is not an attractive option, we explore the three primary avenues of growth for family businesses in this week’s post, posing some key questions for your directors and managers to consider as they formulate growth strategies.
A question for you and your board, what is on your family business box score? When the lights are still on and things are stable, it can be easy to continue with business as usual and not look too closely at key return metrics. Creating a box score, and maybe more importantly, updating it consistently, can help prevent complacency. Establishing fundamental metrics important to your business and benchmarking your performance to peers or ‘opponents’ can help quickly convey how the family business is doing to you and your shareholders. In this week’s post, we consider three metrics for your family business box score.
With economic data for 2Q22 trickling in, we take a look at a few key trends that developed during the quarter. Volatile equity markets, ongoing inflationary concerns, and rising interest rates drove headlines in the second quarter of the year. The information in this post provides a concise and unbiased look at some of the trends that manifested themselves during the quarter.
Think back to March 2020. Many businesses and operations saw immediate stoppages and closures with no idea when they could restart. The fitness industry was no exception. Planet Fitness, the gym operator, completely shut down its locations and its stock plummeted. Peloton Interactive saw sales surge for its at-home exercise spin-bike and its stock soar. These two businesses entered very different seasons at the onset of the COVID-19 lockdowns and slowdown. Planet Fitness was facing a sudden and bitterly cold winter, while Peloton was spinning its way into summer.
We think there are three lessons that can prevent your family business from pedaling in place: understand what season your business is in, be prepared for slow-downs, and diversify prudently. Read more in this week’s post.
In this week’s post, we take a look at a few key macroeconomic trends that developed in the, shall we say, busy, first quarter of 2022. Between volatile equity markets, mounting global geopolitical tensions, raging inflation, and increasing interest rates, a lot went on in the year’s first quarter from a macro perspective.
We hope that this blog post cuts through some of the “noise” and provides our readers with a concise and unbiased look at economic trends from the first quarter of 2022.
Following Rivian’s recent IPO, the Ford Motor Company’s $1 billion investment in the electric vehicle startup is now worth about $18 billion. With this investment representing more than 20% of Ford’s total equity market capitalization, it raises some interesting questions for family business directors contemplating the role of diversification within their businesses and families. In this week’s post, we consider the what, who, and why of diversification.
Cargill is one of the largest family businesses in the world. Earlier this year, we analyzed the Family Capital list of the world’s 750 largest family businesses; Cargill checked in at number 15 on that list, with annual revenue reported to be in excess of $110 billion. Cargill made headlines earlier last week for its acquisition (together with another family business, Continental Grain) of Sanderson Farms, a publicly traded poultry business (ticker: SAFM). It is not every day that family businesses acquire publicly traded companies, so the transaction is worth exploring a bit further.
Late last month, Family Capital released its third annual ranking of the world’s largest family businesses, the Family Capital 750. As the name suggests, the list includes 750 global family businesses with 2019 revenue ranging from $2.7 billion to $514 billion. in this week’s post, we share what we found when we scrubbed the data.
Revenue growth and profitability are critical measures for the health of any family business, but by themselves, they tell only half of the story. As a family business director, you need the whole story. We’re not aware that Paul Harvey was a financial analyst, but if he were, we suspect his favorite performance metric would have been return on invested capital, because it tells you the rest of the story.
One thing in short supply thus far in the pandemic has been perspective. We know that GDP fell by more than 30% during the second quarter, but how does that translate into the actual financial performance of businesses? Family business directors have been flying blind over the past few months, with no reliable way to benchmark the performance of their businesses.
Earnings season for the second quarter of 2020 gives us the first opportunity to see how the COVID-19 pandemic is affecting businesses. In this post, we elaborate on four themes that emerge from the data.
To be sustainable, family businesses need to invest capital wisely. As directors, the investment decisions you make today can define the family business for future generations. Before making a significant investment decision that will be hard to reverse, it is a good idea to evaluate how other companies in your industry are investing their capital.
The goal of “maximizing shareholder value” is fast assuming its rightful place in the dustbin of financial history as more families embrace a broader vision of relevant stakeholders for their enterprises. The freedom to develop a balanced scorecard of performance objectives that includes both financial and non-financial goals is one of the most rewarding aspects of family business.
Embracing non-financial objectives does not mean, however, that a family business can be unconcerned about their profitability. After all, operating efficiency helps to underwrite the various non-financial goals and values the family chooses. So, our first comparison when benchmarking performance for a family business is to evaluate profitability.
Managing a family business without benchmarking data is a bit like shopping for clothes in a store with no mirrors. Without context, financial performance is hard to interpret. Directors are responsible for making long-term decisions that can influence the course of a family business for decades. Access to relevant benchmarking data is essential for directors as they contemplate strategic financing, investment, and distribution decisions.
We have structured our 2020 Benchmarking Guide for Family Business Directors around seven questions designed to provide the necessary context for financial decision-making in family businesses.
Return on invested capital is not a silver bullet – it will not solve all of the challenges facing your family business. However, when we let the data speak for itself, the benefits of ROIC are undeniable. This week, we identify five reasons family businesses should focus on ROIC.
This month’s cover story in the Harvard Business Review takes aim at the misuse of metrics in businesses, highlighting the tendency of leaders to confuse numbers with strategy. In this post, we consider how to apply the authors’ suggestions in the context of family businesses.
The best performance metrics address not just “what” performance has been in the past, but reveal the “why” behind that performance and give direction for “how” to improve performance in the future. In last week’s post, we introduced return on invested capital (ROIC) as a comprehensive performance measure for family businesses. In this week’s post, we will dig a little deeper with ROIC, demonstrating how we can use ROIC to answer the “what,” “why,” and “how” questions for your family business.
Revenue growth and profitability are critical measures for the health of any family business, but by themselves, they tell only half of the story. As a family business director, you need the whole story. We’re not aware that Paul Harvey was a financial analyst, but if he were, we suspect his favorite performance metric would have been return on invested capital, because it tells you the rest of the story.
This post is the fourth installment from our Basics of Financial Statement Analysis whitepaper. In this series of posts, our goal is to help readers develop an understanding of the basic contours of the three principal financial statements. The balance sheet, income statement, and statement of cash flows are each indispensable components of the “story” that the financial statements tell about a company.
This post is the third of four installments from our Basics of Financial Statement Analysis whitepaper. In this series of posts, our goal is to help readers develop an understanding of the basic contours of the three principal financial statements. The balance sheet, income statement, and statement of cash flows are each indispensable components of the “story” that the financial statements tell about a company. This week, we focus on the statement of cash flows.
This post is the second of four installments from our Basics of Financial Statement Analysis whitepaper. In this series of posts, our goal is to help readers develop an understanding of the basic contours of the three principal financial statements. The balance sheet, income statement, and statement of cash flows are each indispensable components of the “story” that the financial statements tell about a company. This week, we focus on the income statement.
This post is the first of four installments from our Basics of Financial Statement Analysis whitepaper. In this series of posts, our goal is to help readers develop an understanding of the basic contours of the three principal financial statements. The balance sheet, income statement, and statement of cash flows are each indispensable components of the “story” that the financial statements tell about a company. This week, we focus on the balance sheet.
In our last post in this series, we focused on operating income, which is a critical measure for evaluating the performance of management since it is unaffected by financing and tax decisions made by the board of directors. Net income, on the other hand, reveals how those board-level decisions influence your family business’s earnings and ability to pay dividends. Everyone likes to talk about EBITDA and EBIT – and those are important metrics – but only net income measures the increase in the family’s wealth from owning the business.
When engaging in shop talk about a client project, our colleagues inevitably start by asking, “What business is the client in?” In nearly all cases, the appropriate response to the question is a brief description of the client’s industry. But for a small minority of clients whose financial performance is truly extraordinary, the correct response is that they are in the “money making” business. For these clients, the particular “it” of what they do is secondary to the fact that they make a lot of money doing it. Has your family business joined the exclusive club whose members are in the “money making” business?
