Category

Planning & Strategy

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May 9, 2022

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.

May 2, 2022

Three Reasons to Hold Cash on the Family Business Balance Sheet

For one weekend a year, the spotlight of the financial world shifts from New York to Nebraska. The annual meeting of the Berkshire Hathaway company has developed a cult following among shareholders and financial journalists alike. A compound annual return of 20% over 55 years (!) will do that for you.

The consummate value investor, Warren Buffett, attributed the growing cash stockpile to an absence of compelling investment opportunities. Better to hold cash than make bad investments, after all.  Market volatility in the early months of 2022 did loosen the purse strings a bit as Berkshire made a large acquisition and built large positions in three publicly traded companies. All told, the first quarter investing activity drew cash down to approximately $105 billion, which is still enough to cover payroll for a while.

Mr. Buffett certainly doesn’t need us to remind him of the perils of “lazy capital” on the corporate balance sheet – the yearend cash stash represented approximately 20% of Berkshire’s overall market capitalization. Giving Mr. Buffett the benefit of the doubt (which he has probably earned at this point in his career), are there any good reasons for family businesses to hold some cash in reserve? In this week’s post, we share our view of the three potential benefits to keeping some cash on the balance sheet.

April 25, 2022

How to Approach a Target and Perform Initial Due Diligence

This post originally appeared as an article in a recent Mercer Capital publication, The Transaction Advisory Update, regarding buy-side considerations in transactions for middle market companies. In this post, we summarize some practical considerations for approaching and vetting an identified target.

March 28, 2022

Nine Characteristics of Successful Family Wealth Plans

Recently we had the opportunity to attend (virtually) the Johns Hopkins All Children’s Foundation 24th Annual Estate, Tax, Legal & Financial Planning Seminar.  This year’s keynote speaker was Pamela Lucina, Chief Fiduciary Officer and head of the Trust & Advisory practice for Northern Trust Wealth Management, one of the country’s largest trust companies.  Her keynote presentation highlighted the characteristics of successful families and provided practical strategies to avoid mistakes commonly seen in the administration of multigenerational wealth plans and trust structures. In this week’s post, we summarize Ms. Lucina’s nine key observations.

March 21, 2022

Identifying Acquisition Targets and Assessing Strategic Fit

This week, we welcome Tim Lee to the Family Business Director blog. This post originally appeared as an article in a recent Mercer Capital publication, The Transaction Advisory Update. Many family businesses will find the post interesting because it provides touch points and practicalities for identifying viable merger and acquisition targets and assessing strategic fit.

February 7, 2022

What Publix Supermarkets Can Teach Family Businesses

While there are likely dozens of lessons to be learned from Publix, family business owners and leaders should consider three areas key to Publix’s success over the last 90 years: long-term planning, smart diversification, and strong family culture.

January 24, 2022 Special Topics

2022 Credit Market Outlook for Family Businesses

Barring a change in the economic backdrop, the availability of debt financing for most family businesses in 2022 should be good; however, the cost of borrowing probably will rise in 2022. Market participants are highly certain the Fed will raise short-term policy rates to address high inflation that massive growth in monetary aggregates since March 2020 unleashed on financial markets initially and now the broader economy.

January 17, 2022 Taxes

2022 Tax Update for Estate Planners and Family Businesses

As 2022 kicks off, tax policy largely remains unchanged from a year ago. President Biden’s Build Back Better Act went through numerous iterations over the year and was politicked down from a headline program cost of $3.5 trillion to $1.7 trillion before ultimately being kiboshed by Senator Joe Manchin in late December.

But where does that leave estate planners and family businesses? There are three things estate planners and business advisors need to keep top of mind regarding tax policy in 2022.

January 4, 2022

Is Your Family Business READY for 2022?

Our family business clients naturally want to know what their business is worth today. But 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 a common framework to help our clients identify pathways for creating value.

We present key elements of this framework in this week’s blog post, to get your family business ready for 2022.

November 22, 2021

Family Business Director’s Top Ten Questions Not to Ask at Thanksgiving Dinner

For most of us, Thanksgiving is a time to disregard normal dietary restraint in the company of extended family members that one rarely sees.  For some enterprising families, however, Thanksgiving quickly devolves from a Rockwellian family gathering to a Costanza-style airing of grievances.  So, in the holiday spirit, we offer this list of the top ten questions not to ask at Thanksgiving dinner.  If you have trouble distinguishing between the board room and the dining room, this list is for you.

October 11, 2021 Special Topics Taxes

Looming Estate Plan Disruptions

Are You Prepared?

Numerous changes lurk in the current reconciliation bill snaking its way through Congress and it could have major ramifications to the estate plans you worked up just a few years ago.

In this post we briefly touch on planning vehicles and structures as well as valuation tools currently being debated in the reconciliation bill and why they are important to many family business owners and advisors.

August 23, 2021 Special Topics

Don’t Read This Book

Don’t read this book if you run a family business that is flush with cash, growing like a weed, regularly enjoys drama free family dinners, has their succession plan for your grandchildren in order, and do not foresee any disruption to your business over the next few generations.
Assuming the above does not describe you perfectly, the Harvard Business Review | Family Business Handbook by Josh Baron and Rob Lachenauer is a comprehensive and useful tool for anyone involved with or working in their family business.

April 27, 2021 Taxes

Capital Gains Taxes and Family Businesses

Don’t Let the Tax Tail Wag the Family Business Dog

It was “leaked” last week that the Biden administration is planning to nearly double the federal capital gains tax rate on taxpayers earning more than $1 million from 20% to 39.6%. In states with high taxes, the combined blended rate could top 50%. This week we discuss the capital gains tax and provide some helpful reminders for family business owners.

April 19, 2021 Performance Measurement

Getting to the Top

A Peek Inside the Family Capital 750

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.

March 22, 2021 Special Topics

Building the Future Family Business

Family Business Director is excited to be a sponsor of this week’s Transitions Spring 2021 conference produced by Family Business Magazine.  The theme for the conference is “Building the Future Family Business.”  The conference offers a wide range of sessions in support of that theme. Additionally, we are looking forward to leading a breakout session on Wednesday (12:10-12:50 EDT) on the role of diversification in the family business. 

March 15, 2021 Special Topics

Under Pressure: Managing Family Business Stress

Atticus Frank, senior financial analyst, worked in his family’s business for nearly three years prior to returning to Mercer Capital and joining the team’s Family Business Advisory Group. In this post, he writes about the stressful introduction to his family’s business and the steps he took to foster a healthy relationship with the business.

March 8, 2021 Capital Budgeting Special Topics

Five Economic Indicators for Family Businesses

Family business directors generally take the long view relative to their publicly traded counterparts, providing a reprieve to constant market updates and daily market volatility.  Successful family businesses plan for the next generation, not just the next quarter. However, family businesses cannot simply put their heads down and ignore economic trends outside their family’s industry.

February 22, 2021 Special Topics

Define Your Values: Aligning Your Family Goals with Business Objectives

How does someone align the goals of the family with their business? This post looks at a few practices I picked up in my family’s business, and ones we still practice.

February 15, 2021 Special Topics

Financing Options Abound for Family Businesses in 2021

Barring a change in the economic backdrop, as uncertain as it is, the availability of debt financing for most family businesses in 2021 is good. Further, the cost of credit will be low and most likely the terms will be lenient by historical standards.

December 21, 2020

Taking Stock: Thinking About the Pieces of Your Family Business

Returns, Growth & Risk

In this week’s post, we conclude our series on taking a year-end strategic inventory in your family business.  Family business directors and managers need to think like a chess player when thinking about different business units within the company.  What are they capable of individually, and how do they work together?

December 7, 2020 COVID-19 Coverage

Taking Stock: An Asset Class Checklist

Last week, we introduced a series of posts about taking a strategic inventory of the assets of your family business. As the calendar turns to December and 2020 (thankfully!) comes to an end, it is an appropriate time for family business directors and managers to take stock of just where their family business is at this stage in the pandemic. Doing so can help give needed context to discussions about where the family business should be headed.

We tend to think of a family business’s primary assets under seven broad headings. In this week’s post, we offer a checklist for directors and managers.

November 30, 2020

Taking Stock: Taking a Strategic Inventory of Your Family Business

As the year winds down, we recommend setting aside time to look beyond survival tactics and re-engage in some strategic thinking about your family business.  Much like an asset manager would review the portfolio they have constructed with their client, family business directors should review the current asset allocation in their family business.  Doing so can help uncover fresh insights and challenge conventional thinking that is due for an update.

November 23, 2020

Family Business Director’s Top Ten Questions Not to Ask at Thanksgiving Dinner

For most of us, Thanksgiving is a time to disregard normal dietary restraint in the company of extended family members that one rarely sees.  For some enterprising families, however, Thanksgiving quickly devolves from a Rockwellian family gathering to a Costanza-style airing of grievances.  So, in the holiday spirit, we offer this list of the top ten questions not to ask at Thanksgiving dinner.  If you have trouble distinguishing between the board room and the dining room, this list is for you.

October 12, 2020 Capital Structure

Managing the Family Business in an Era of Cheap Capital

For public companies, today’s almost endless supply of cheap capital (as evidenced by the proliferation of special purpose acquisition companies, or SPACs) is a boon. The low cost of capital makes it easier to justify investment opportunities financially, and investors are willing to provide capital in search of higher returns. For many family businesses, however, the era of cheap capital may not be an unqualified good.