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Planning & Strategy

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March 18, 2025 Capital Budgeting Dividend Policy M&A Special Topics Valuation

Crown Castle’s Lessons for Family Businesses

Last week’s news that the publicly traded REIT Crown Castle (ticker: CCI) had agreed to divest its Fiber segment was a bit of a perfect storm of the issues we focus on here at Family Business Director: capital allocation and strategy, return on invested capital, valuation, and dividend policy. After years of underperformance and stagnating dividends, Crown announced a “strategic review” of its fiber business in December 2023, which culminated in Thursday’s announcement that CCI’s fiber segment would be sold to two buyers for an aggregate purchase price of $8.5 billion. In this week’s post, we review how Crown Castle’s divestiture of its Fiber segment highlights the need for an integrated framework for family business directors to evaluate and monitor the key strategic finance decisions that influence family shareholder returns for the years and decades to come.

March 12, 2025 Valuation

Why the Value of Your Family Business Matters

In last week’s edition of the Family Business Director, we reviewed six valuation principles for family business directors to keep in mind when developing valuation estimates. As family business directors, it is important to understand not just the “how” of maintaining an accurate estimate of the value of your family business but also the “why.” In this week’s post, we have compiled a list of reasons why it is essential for both family shareholders and family business directors to know what the family business is worth (even if the family has no intention of selling).

February 24, 2025 Special Topics

The Most Efficient Way to Increase the Value of Your Family Business

In last week’s post, we reviewed what EBITDA is and why not all EBITDA is created equal. In case you missed it, we ended that post with the following statement: “…improving EBITDA margins can have a multiplicative impact on your family business’s value by both providing more EBITDA and justifying a higher multiple.” So, is it really true that a higher EBITDA margin will also bring a higher multiple, or were we just getting carried away with our own thesis? For this week’s post, we pull some market data to test our assertion.

February 4, 2025 Special Topics

Tariff Talk and Adaptive Forecasting

How Family Business Directors Can Stay Ahead of Unpredictable Times

Over the weekend, President Donald Trump signed an executive order that imposed an additional 25% tariff on Canadian and Mexican imports and an additional 10% tariff on imports from China. As the socio-political atmosphere is continuously changing, it is critical for family business directors to keep a pulse on current developments and understand the different implications that may impact or change their industry moving forward. Maintaining an adaptive forecast is one of the best practices for being able to pivot during unpredictable times. As family business managers and directors re-evaluate their projections, we revisit some of the mental biases that can potentially skew forecasts.

January 27, 2025 Special Topics

A New Approach for Business Succession Planning

Family Business Director attended the 59th Annual Heckerling Institute on Estate Planning earlier this month. In one of the standout sessions, we reviewed purpose trusts and how companies like Patagonia are employing them for succession planning. Even if your family business is unlikely to follow suit, Patagonia’s novel business succession strategy provides important lessons and reminders for family directors. Your family business may not have a purpose as lofty as “protecting the planet,” but you and your shareholders will benefit if the purpose is clearly articulated, protected by thoughtful governance structures, and visible through disciplined and transparent reporting.

January 14, 2025 Capital Budgeting

Three Considerations for Capital Projects

Capital budgeting tools are ideal for answering the question: Is the proposed capital project financially feasible? Too often, however, we see these tools being used to answer what seems to be a related question, but one that the tools are simply not designed to answer: Should we undertake the proposed capital project? The first question opens the door to the second, but the tools of capital budgeting — no matter how sophisticated or quantitatively precise — cannot answer the second. To answer the second question, family business directors need to consider three qualitative questions identified in this post.

January 8, 2025

For the Love of the Game?

What Can the San Diego Padres Teach Us About Succession Planning?

What happens when family dynamics collide with billion-dollar stakes? The unfolding legal battle over control of the San Diego Padres serves as a reminder of the importance of clear succession planning. Whether your family business is a sports franchise or something closer to home, having a plan in place can mean the difference between harmony and heartbreak. Here’s what you need to know to safeguard your family business.

December 16, 2024 Capital Structure Shareholder Liquidity

The Rise of Staying Private

Shareholder Liquidity Strategies for Family Businesses

Cash-strapped early-stage companies have long relied on equity-based compensation to attract, motivate, and retain employees. But for a variety of reasons, the IPO is no longer the goal line for founders, many of whom are now content to remain private far longer than previously expected. While founders may be content with their illiquid billions, most employee-shareholders want to convert at least some of their illiquid thousands to spendable cash. Family businesses that identify creative strategies for satisfying shareholder liquidity preferences are less likely to fall victim to shareholder discontent that can derail the larger family’s desire to remain independent and private. While not providing a perfect roadmap, strategies devised by early-stage companies for satisfying the liquidity needs of their employee-shareholders may provide some timely inspiration for family business directors.

December 10, 2024 Taxes

Nvidia’s Jensen Huang Has an Estate Plan — Do You?

It’s Never Too Early for Family Business Directors to Establish an Estate Plan

Jensen Huang, the chief executive officer of Nvidia, and his family are on track to save north of $8 billion in estate and capital gains taxes. So, how has the tenth-wealthiest person in America managed to protect his wealth from the 40% estate tax? He has an estate plan. As a family business owner, it is never too early to establish or review your estate plan. While there are things that will certainly change over time, taking the pulse on your estate plans can have a major impact on the volume of wealth you pass to your heirs.

December 4, 2024

Is Your Family Business READY for 2025?

Family business owners don’t stay on top by having all the answers but by having the ability to ask the right questions. A natural question our family business clients want to know is what their business is worth today. However, an even better question asked by many of them is what they can do today to make their family business more valuable tomorrow. While the specifics of value creation are unique to each business, we like to use the READY framework coined by Chris Mercer to help our clients identify pathways for creating value. So, before the last-minute Christmas shopping becomes the main priority, we dive into his framework to ask whether your family business is READY for 2025.

November 25, 2024 Capital Budgeting Special Topics

Thanksgiving Resources for Family Business Directors

Over the years, we have used Thanksgiving as a time to remind family business directors that family is indeed the most important part of the family business. In this week’s post, we share some helpful resources before you sit down to eat some turkey with the family this Thursday. Happy Thanksgiving!

November 11, 2024 Capital Budgeting Capital Structure

A Framework for Ownership Strategy – Part II

In our last post, we introduced a simple yet effective framework for developing and managing an ownership strategy. We follow up with some further thoughts on the framework as we look at the implications of the various combinations of the three points of the framework below. Thinking about the combinations of growth, liquidity, and control can allow family business owners to further fine-tune an ownership strategy in that it forces ownership groups to consider the benefits and tradeoffs that come with developing a strategy. We examine these tradeoffs and benefits in this week’s post.   

October 28, 2024 Capital Budgeting Capital Structure

A Framework for Ownership Strategy – Part I

We recently attended a family business symposium where owners, board members, and consultants gathered to share strategies and insights. During one of the presentations, we saw a graphic that piqued our interest. It was a simple triangle that provides a framework for developing and managing an ownership strategy in a privately held family business. We offer some thoughts on developing a strategy through the lens of the graphic in this week’s post. 

October 22, 2024 Special Topics

ROIC for Family Businesses in 5 Minutes

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 if Paul Harvey was a financial analyst, but if he were, we suspect his favorite performance metric would have been return on invested capital (ROIC), because it tells you the Rest of the Story.

October 16, 2024 Shareholder Engagement

The Boar’s Head Family: Why Worry About Succession Planning?

Since 1905, Boar’s Head has built a multigenerational family enterprise selling deli meats, cheeses, and other delicious sundries. In the last several decades, the company has publicly handled various product contamination and recall situations while simultaneously dealing with internal ownership conflicts and legal battles behind closed doors. It is hard to imagine the founders of Boar’s Head envisioned this sort of conflict-ridden path for their family business. While avoiding shareholder conflict is never guaranteed, family business directors can add an additional layer of protection to their family legacy and long-term wealth through focused succession planning. In this week’s post, we address a few things to consider when developing your family business succession plan.  

October 8, 2024 Special Topics

Dispatch from the Fed

Fed Chair Jerome Powell addressed the National Association of Business Economists conference in Nashville last week, and we — despite not being trained economists — were on hand.  In this week’s post, we provide a brief summary of our impressions and a few thoughts for family business directors.

September 23, 2024 Valuation

Is Your Buy-Sell Agreement a Ticking Time Bomb?

With the release of Chris Mercer’s new book, we’ve got buy-sell agreements top of mind, and you should, too. Buy-sell agreements don’t matter until they do. When written well and understood by all the parties, buy-sell agreements can minimize headaches when a family business hits one of life’s inevitable potholes. But far too many are written poorly and/or misunderstood. Directors are always eager to discuss best practices for buy-sell agreements. In this week’s post we revisit a blog where we talk to Chris and ask, “Is there a ticking time bomb lurking in your family business?”

September 3, 2024 Capital Structure Performance Measurement

Mind the Margin

Why Margins Are an Important Metric for Your Family Business

The current economic state is driving operating costs higher for many businesses and eating into profits. Employers are combating this by reevaluating their hiring strategies, which include resetting labor costs and reducing starting salaries. Margin analysis can be a beneficial tool for evaluating performance, and becoming familiar with the typical margins of your family business will provide a touchpoint for identifying opportunities to preserve and grow profits for your family business. Since ‘typical’ margins vary from industry to industry, being able to benchmark to similar companies can give family businesses a better idea of where they stack up.

August 26, 2024 Capital Structure Dividend Policy

A Private Equity Tactic to Consider for Your Family Business

We’ve recently observed private equity investors learning a lesson about liquidity risk, which family shareholders have always known. A couple of weeks ago, the Wall Street Journal noted that — amid a sluggish M&A market — PE-backed companies were increasingly turning to lenders to fund so-called dividend recapitalizations in a bid to provide liquidity to impatient investors. This week, we explore a PE strategy that might be worth considering for some family businesses: divided recapitalization.

August 20, 2024 Performance Measurement Special Topics

Review of Key Economic Indicators for Family Businesses

Coming off a run of economic data releases in the last few weeks, we take a look at the numbers and some of their implications for the broader economy in this week’s post. GDP growth in the U.S. economy measured 2.8% in the second quarter of 2024, outpacing growth of 1.4% in the first quarter. Following persistently elevated measures in the first quarter, recent inflation readings have cooled. The following sections provide a brief look at these economic trends and their implications, sourced from Mercer Capital’s National Economic Review.

August 7, 2024 Capital Budgeting Capital Structure

Heat Waves, Hurricanes, Selloffs, Oh My

Volatile times are never easy to navigate, but there are strategies family business directors can employ to keep their business on course. As the heat waves, hurricanes, and a potential recession loom, we wanted to take a step back and highlight three strategies family business directors can adhere to in these uncertain times.

July 30, 2024 Special Topics

Real Estate and the Family Business

As the pandemic recedes further into the rearview mirror, long-term business consequences continue to reverberate through the economy.  In addition to recalibrating expectations among domestic manufacturers, foreclosures on distressed commercial real estate are accelerating.  Since enterprising families often accumulate significant real estate holdings, the lingering pandemic-induced weakness in real estate values may encourage families to evaluate their real estate strategies. In this week’s post, we discuss three broad real estate strategies for families owning and operating businesses.

July 22, 2024 Special Topics

The Patience to Prevail

What Can Family Businesses Learn from the Open Championship?

Current economic uncertainties may have family businesses feeling more like they’re playing in an Open Championship than a routine PGA/LIV tour event.  While there are many ways to steer your family business through uneven times, these lessons are a good starting point.

July 17, 2024 Special Topics

Mild, Medium, or Hot

Will the Fed Cut Interest Rates This Year?

Last week, the consumer-price index decreased slightly from May, resulting in a year-over-year inflation measure of 3%. And as earnings season approaches, the broader stock market is eyeing new records. Last year, we discussed how family business leaders could use earnings season as an opportunity to discuss strategy and goals with their family board. Today, we focus on earnings season as a broader indication of inflation and investor sentiment in the months to come.