Family Business Director

Corporate Finance & Planning Insights for Multi-Generational Family Businesses


Planning & Strategy

The 84 Lumber King

Succession Planning and How to Find Your Next Leader

84 Lumber is a family-owned private company. It operates more than 260 stores, component manufacturing plants, custom door shops, custom millwork shops, and engineered wood product centers in 35 states. Joseph A. Hardy III, the founder of 84 Lumber, lived an interesting and flamboyant life. The business is run now by Hardy’s youngest daughter, Maggie Hardy, who serves as president. A Wall Street Journal article on Mr. Hardy detailed his life and, given his recent death, also reminded us about the “next man (or woman) up” dilemma for many businesses. Who will ultimately take the reigns—especially following a larger-than-life founder?

Capital Structure

Southwest Airlines Meltdown and Your Investment Decision

Come Fly With Me (Soon?)

Last week, Southwest Airlines experienced significant disruptions and canceled thousands of flights following a winter blast smacking a large swath of the country. Underinvestment in system-critical operations was a key culprit, and it reminded me of the “Invest or Not to Invest” decision that faces family businesses. What investment decisions could Southwest have made before the crisis? And, what about your business? How do you make rational investment and capital expenditure decisions? Do you acquire a new business or modernize? What is a good investment?

In this post, we discuss two key areas to address these questions: how to identify investments available to your business and how to evaluate your available investment opportunities.

And, if you traveled during the storm, we hope you made it to your destination and home.

Performance Measurement

What Is on Your Family Business Box Score?

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.

Special Topics

Is Your Family Business Ready for the Next Recession?

A Look Ahead to 2023

As we begin to put a bow on 2022 and turn our attention to 2023, we suspect that the dreaded “R word” is on the mind of many of our readers as they contemplate the myriad challenges and obstacles their businesses will face in 2023. As a family business owner or director, now is the time to think critically about how your family business is positioned for a potential economic slowdown.  This post offers a few practical steps family business owners and directors can take to ensure their business continues to thrive even if Santa brings us a recession this year.

Dividend Policy Shareholder Engagement

Double Down or Cash Out: The Reinvestment or Distribution Decision

I recently got back from the AICPA’s Forensic and Valuation Services conference in Las Vegas.  While I came back richer in experience and CPE credit, the green felt of the blackjack table was less kind to my wallet. Matching your family shareholders’ growth objectives with their relative risk tolerance is a key directive for family business directors and one that is tied directly to what your family business means to you.  We highlight two corollary questions relating to growth, risk, and business meaning: investing decisions and distribution policy.

Special Topics

Something to Chew on This Thanksgiving

We have traditionally advised you about what not to talk about at the Thanksgiving dinner table, but this year, we thought we would highlight a more positive family business conversation that you might want to have with your family shareholders.

Special Topics

Review of Key Economic Indicators for Family Businesses

With economic data for 3Q22 beginning to trickle in, we look at a few key trends that developed during the quarter.  The tale of the tape in the third quarter was the same as it has been for virtually all of 2022—volatile equity markets, ongoing inflationary concerns, and rising interest rates.  In this post, we provide a concise and unbiased look at some of the manifested trends.

Special Topics Taxes

What Do the Midterm Elections Mean for You & Your Family Business?

The 2022 midterm elections are here, and, as usual, one of the most significant differences between Democrats and Republicans is tax policy. While voters are contemplating significant issues ranging from inflation, immigration, and gun control, the election outcome will also influence which tax priorities Democratic and Republican lawmakers will pursue over the next few years.

Unfriended? Long-Term Planning and Facebook’s Stock Collapse

Meta Platforms (NASDAQ: META), formerly known as “Facebook,” recently released its third-quarter earnings and guidance for 2023. Let’s just say the market was less than pleased. Meta’s stock fell over 20% in after-hours trading, which is down over 65% year-to-date. But so what? We think the current sell-off presents two lessons to family businesses: Maintain a long-term perspective even in rough weather, and understand the season your business is in.

Capital Budgeting

Storms Ahead? Best Practices for Forecasting Performance

How do you approach your family business budget? Do you ask your managers to “reach” or to create targets you expect to meet? Do you measure your forecasting accuracy? What is your process? In our post this week we share three forecast reminders that may help you make better budgets: Measure yourself regularly, remember the law of averages, and adapt your roadmaps when needed.

From Antler Motel to the House of Representatives

Clarene Law was a mother and a hotel bookkeeper in Wyoming’s Jackson Hole valley in the 1960s.  After hearing the Antler Motel was for sale, she borrowed money from her parents and put a down payment on the $125,000 asking price. Fast forward some years later and what started as a little-known town blossomed into a luxurious year-round hiking and skiing destination for visitors all over the country. While right place, right time played a part, it does not tell the whole story of how Clarene Law became one of the best-known entrepreneurs in Jackson Hole. Inspired by her story and the family business she built, we highlight three themes that can help build your family business: growth, diversification, and family business leverage. 

Special Topics

Private Equity Wants Your Family Business

For many family business leaders we talk with, “private equity” is a four-letter word. In this post, we identify a couple of potential “pros” for private equity that family business directors should be aware of and also confirm a couple of the well-known “cons” to accepting private equity investment.

M&A Special Topics

Considerations in Merger Transactions

This week we welcome Nick Heinz, ASA to the Family Business Director Blog. Nick is a Senior Vice President at Mercer Capital and a member of the firm’s Transaction Advisory team. This article originally appeared as part of an ongoing series, Buy-Side Considerations, from Mercer Capital’s Transaction Advisory team and highlights key considerations for family businesses looking to engage in a merger.

Special Topics

What’s Lurking on Your Family’s Balance Sheet?

Any good CFO or Controller knows what’s on their business’ balance sheet, including cash, inventory, property, and debt. But for enterprising families, it is often necessary to go one step further and ask what’s on the family’s balance sheet? It may be your great uncle’s antique car collection, a ski chalet shared by you and your family, or rare art that adorns your office. Whatever it may be, there are three things we think you should consider regarding your more esoteric family balance sheet items: valuation, diversification, and allocation.

Special Topics Taxes

What Should We Do About Estate Taxes?

Most family business owners desire to provide financially for their family. Due to this, one of the widespread concerns of these owners is the ability to transfer ownership of the family business to the next generation in the most tax-efficient way. In this post, we explain the importance of understanding the concept of fair market value when evaluating an estate planning strategy and some potential next steps to take to ensure the estate plan accomplishes the desired goals.

Special Topics

What We’ve Been Reading

How to get a non-family CEO and a family ownership team on the same page regarding financial goals, dealing with a family member who needs to step down from leadership, and the turnaround story of family-owned Radio Flyer are some of what we’ve been reading about as fall approaches. In this week’s post, we share a few interesting articles you and your family board members may enjoy.

Shareholder Engagement

Stock Buybacks and Family Businesses

Stock buybacks were in the news last week as the newly-passed Inflation Reduction Act includes a provision levying a 1% excise tax on share repurchases by public companies. As we’ve noted in previous posts, we question Congress’s grasp of the basic economics of a stock buyback, but Congress is not our focus today. 

Privately held family businesses are exempt from the tax, but directors need to understand the real economics of stock buybacks (or, in the case of family businesses, shareholder redemptions).

These Loafers Are Made for Walkin’

Italian Shoemaker, Tod's, Opts Out of the Public Markets

Last week, Tod’s – the Italian maker of luxury shoes – announced plans by the founding Della Valle family to take the company private. We discuss the motive behind this transaction and two obligations of all family businesses (public or not) that we believe this transaction highlights.

Is Your Family Business Worthy of Its Name?

Unlike McDonald’s franchisees, directors and managers of family businesses are not required to undergo a renewal procedure to maintain access to the family’s human and financial resources. However, pretending that you had to is a good exercise for managers and directors. What evidence do you have to support your decision to continue managing the family’s wealth? Do you have a regular reporting procedure in place that takes those elements into account? In this week’s blog post, we provide some broad elements that should be considered for any stewardship reporting model.

Bear Market Silver Lining? An Estate Planning Opportunity

The risk of a recession is growing, and inflation in May reached a new four-decade high. Companies and consumers alike are feeling the pinch and battening down the hatches in anticipation of stormy weather, with markets reflecting less-than-optimistic expectations. Stocks are in the red outside of the energy sector. Lower broad market pricing translates to lower family business valuations. So, what? A market downturn, on the other hand, presents an opportunity for family businesses planning long-term intrafamily transfers and gifting plans to significantly reduce their estate and gift tax exposure. We’ll show you how in this post.

Recession, Expectations & Value

Corporate executives are considering how a recession would affect their businesses due to the current uncertainty in the macroeconomic environment. How will your family business fare in the event of a recession, and how are expectations for the future affecting the value of your family business right now? We discuss this impact in terms of value in this week’s blog post by categorizing expectations into three primary categories: cash flow, risk & return, and growth.

Your Family’s Guide for the Next 100 Years

How your family business thinks about success is important. James Hughes, author of Family Wealth: Keeping It in the Family poses a question early on in his book: Can a family successfully preserve its wealth for more than one hundred years or for at least four generations? It’s a compelling question and a compelling book.

Hughes is now a retired sixth-generation counselor-at-law, prolific author, and renowned multi-generation family meeting facilitator. He has advised numerous wealthy families on how to maintain and grow their wealth over time. Hughes views “shirtsleeves to shirtsleeves in three generations” plaguing family businesses not as destiny but as a cycle family businesses can overcome with thoughtful practices and patience over many years. In this week’s post, we review his very insightful and helpful book.

Consulting Services

Family Business Advisory Services

Mercer Capital provides financial education services and other strategic financial consulting to family businesses