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Special Topics

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February 4, 2025 Planning & Strategy

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 Planning & Strategy

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.

November 25, 2024 Capital Budgeting Planning & Strategy

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!

October 22, 2024 Planning & Strategy

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 8, 2024 Planning & Strategy

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 17, 2024

“Buy-Sell Agreements: Valuation Handbook for Attorneys” Now Available

We are excited to share the release of Z. Christopher Mercer’s latest book, Buy-Sell Agreements: Valuation Handbook for Attorneys published by the American Bar Association. This week, we share an excerpt from the book and what you can expect to find in the full copy.

September 9, 2024

Wishful Thinking and the Time Value of Money

Since 2017, the Nordstrom family has made multiple attempts to take the company private but has been rebuffed by the board. Nordstrom was in the news again this week, with the company disclosing that the members of the Nordstrom family were once again offering to take the company private, this time $23 per share (compared to $50 share six years ago). The Nordstrom board has formed an independent committee to evaluate the offer. In this week’s post, we identify three lessons for family business directors from the unfolding saga.

August 20, 2024 Performance Measurement Planning & Strategy

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.

July 30, 2024 Planning & Strategy

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 Planning & Strategy

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 Planning & Strategy

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.

June 24, 2024 M&A Planning & Strategy

How Does a Quality of Earnings Report Differ from an Audit?

A quality of earnings (“QoE”) report and an audit are both essential tools in the business world, but they serve distinct purposes and offer varying insights.  Audits are broader and regulatory in nature, whereas QoE analyses are more focused and strategic, catering to the needs of investors and decision-makers who require a deeper understanding of a family business’s true financial health and future potential.

June 10, 2024 M&A Planning & Strategy

What to Look for in a Quality of Earnings Provider

The cost of M&A failures is high for both buyers and sellers of family businesses. For buyers, overpaying for a target can hamper returns and crowd out other more attractive investment opportunities for years to come. Sellers only get one chance to sell their businesses. Failing to maximize proceeds represents a missed opportunity they can never get back. These high stakes mean that thorough and high-quality due diligence is critical. A Quality of Earnings (or QofE) analysis is an essential component of transaction diligence for both buyers and sellers. Optimizing your transaction diligence requires assembling the right team.

May 14, 2024 Capital Budgeting Planning & Strategy

Review of Key Economic Indicators for Family Businesses

This week we look at recent economic data and the implications of this data regarding the Fed’s upcoming monetary policy actions.  GDP growth in the U.S. economy slowed to 1.6% in the first quarter of 2024, lagging measures of 4.9% and 3.4% recorded in the final two quarters of 2023.  Leading economic indicators point to a further slowdown on the horizon in 2024, as The Conference Board’s Leading Economic Index, fell 2.2% in the six months ended March 2024.  We take a brief look at these trends and more. 

April 23, 2024 Planning & Strategy

Navigating Change in the Family Business

2024 Transitions Conference Recap

We’re back from Family Business Magazine’s 2024 Transitions Spring Conference, held this year in Tampa, Florida. The theme of this year’s conference was change and transition in your family business. The conference speakers and sessions struck a good balance of effectively facilitating organizational change while maintaining your family’s values and identity. We discuss three transitional forces facing you and your family business, inspired by the conversations we had at the conference.

March 18, 2024 Planning & Strategy Taxes

Now Could Be a Great Time to Transfer Stock to Heirs

Rising inflation and higher interest rates have significantly affected business values and the broader economy, with some industries managing to navigate the higher-rate environment while others struggle. The Federal Reserve has indicated potential rate cuts later this year, which could have widespread implications for businesses and the economy. Now is the time to explore favorable opportunities for transferring business value to future generations and consult with estate planning advisors.

March 11, 2024 M&A Planning & Strategy

5 Reasons Sellers Need a Quality of Earnings Report

In a recovering M&A market, sellers must be prepared to present their value proposition effectively. A Quality of Earnings (QofE) report is essential for sellers to maximize their asset’s value and navigate the negotiation process with confidence. The report not only helps in presenting adjusted and future sustainable profitability but also equips sellers with crucial information for clear decision-making, fostering transparency, and ensuring a favorable transaction outcome.

February 7, 2024 Planning & Strategy Valuation

A Matter of Life (Insurance) and Death

Life Insurance as a Funding Mechanism for Shareholder Buyouts

In the case of Connelly v. United States, a family-owned roofing and siding materials company, Crown C Supply Company, Inc., faces a complex legal and financial challenge following the death of one of its major shareholders. The dispute centers on whether life insurance proceeds should be included in the company’s equity value for buyout purposes, a decision with significant implications for the valuation of shares and the financial future of the company. This case, now headed to the Supreme Court, highlights the critical importance of clear buy-sell agreements and the role of life insurance in shareholder buyouts, offering essential insights for family businesses navigating similar transitions.

January 29, 2024 M&A Planning & Strategy

5 Reasons Buyers Need a Quality of Earnings Report

In 2024, as the prospect of Fed rate cuts begins to attract buyers back into the market after a period of caution in 2022 and 2023, the importance of thorough due diligence cannot be overstated. Family businesses, in particular, should pay close attention to the crucial role that a Quality of Earnings (“QofE”) report can play in their acquisition decisions. From uncovering sustainable earnings and identifying cost-saving potentials to understanding revenue synergies and assessing capital needs, a comprehensive QofE report emerges as an indispensable tool for family business directors aiming to navigate the complexities of acquisitions with confidence and strategic insight.

December 4, 2023

Memorable Mungerisms

As a tribute to the late Charlie Munger, we reflect on his unique perspectives on investment strategies, highlighting his candid views on cryptocurrencies, diversification, and reliance on projections. We explore a few quotes that showcase Munger’s legacy in rational investing and his influential philosophies that continue to shape prudent financial decision-making.

November 21, 2023

Review of Key Economic Indicators for Family Businesses

In the latest economic update, the U.S. GDP showed a resilient 4.9% growth in Q3 2023, surpassing expectations and driven primarily by personal consumption and exports. However, leading indicators suggest a potential slowdown, with economists predicting reduced GDP growth in the upcoming quarters. This week’s post delves into these trends, inflation rates, and the Federal Reserve’s monetary policies, offering useful insights for family businesses.

October 30, 2023

The Scariest Thing That Faces Family Business Directors

Happy Halloween!  This week, we have four frightening guests who share their most terror-inducing family business challenges.

October 3, 2023 Planning & Strategy

Why ROIC Matters for Family Business Directors

New Video Released on Family Business On Demand Resource Center

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.

August 29, 2023

Review of Key Economic Indicators for Family Businesses

The U.S. economy defied expectations by growing at an annualized rate of 2.4% in the second quarter of 2023, outperforming consensus estimates and showing resilience against the Federal Reserve’s ongoing rate hikes. While inflation rates have moderately stabilized, economists forecast a potential slowdown in GDP growth for the upcoming quarters. Explore this delicate economic balancing act, including insights from the Fed’s latest meetings and how these developments could influence both consumer and investor behavior.