Our family business advisory practice is focused on three strategic financial questions that weigh on family business directors and can keep them awake at night: 1. What is the right dividend policy for our family business?, 2. What is the right family business capital structure?, and 3. What is the right asset mix for our family business?
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.
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.
EBITDA promotes comparability across firms by “normalizing” for structural features of how those companies are organized, financed, and assembled. This is best seen by considering the various adjustments to net income that are made to arrive at EBITDA.
A Family Business Journey
Getting bad business news from a third party or professional colleague often stings. Hearing the same thing from your mother? Well, we’ll leave that to the imagination. Trusted third parties or intermediaries often can blunt other complex familial layers and limit the discussion to the business at hand, making tough conversations manageable. Not easy, but manageable.
The Family Business Director To-Do List
The tyranny of the urgent imposes itself on family business directors just as it does on everyone else. In this series of posts, we offer various to-do lists for family business directors. Each list will relate to a particular family business topic. The items offered for consideration will not necessarily help your family business survive the next week, but instead reflect priorities for the long-term sustainability of your family business.
While we are not political prognosticators, the recent Senate runoff results appear to have given new life to the Biden Administration’s tax policy goals. Numerous publications have written about the Biden Administration’s tax plan and do not want to duplicate them here. However, we want to take the opportunity to highlight other thought leaders we are reading and what family business owners should be thinking about given recent political developments.
Considering the Role of an ESOP in Your Family Business
One obstacle many families face when it comes to selling the family business is the potential loss of identity, culture, and jobs that such transactions often leave in their wake. A recent article, however, in the New York Times highlighted an option available to family shareholders: selling the family business to the employees. In this post, we highlight three potential benefits and drawbacks to ESOP transactions for family shareholders.
How do investment returns for family businesses compare to other enterprises? Does having a female CEO make a difference in returns? In this post, we find out.
The Complicated Dynamics of Family Redemptions
Earlier this month, Christie’s auctioned off a 40-foot long T-Rex named Stan for $32 million. That’s remarkable enough, but our interest in the story was piqued upon learning why and how Stan was sold. Your family business probably doesn’t own a T-Rex, but the potential need to redeem a family shareholder still exists. In this week’s post, we explore the potential outcomes from major shareholder redemptions, and help directors be ready when the need for a redemption arises.
Accumulating real estate seems to be a natural strategy for many family business owners. After all, real estate is generally assumed to be less risky than the operating business of the family. Further, so long as the properties have a reasonable range of alternative future uses, the returns to the real estate portfolio often have a low correlation to the returns from the operating business. However, the market data we review in this week’s posts suggests that these assumptions may not hold as well in a pandemic.
While it may be difficult to think past the day-to-day of operating in the current environment, acquisition opportunities are likely to be on the horizon over the next few years, most likely at attractive valuations for acquirers.
From time to time, Family Business Director will interview family business leaders or experienced advisors to get their perspective on important questions common to family businesses. In this installment, we talk with Ralph Jones, Executive Chairman of Jones Family of Companies. Ralph offers great insight that we know our readers will profit from.
Managing Family Wealth Since 27 BC
Educating your family about how your wealth and/or family business is managed is essential for the preservation of your family legacy. In this week’s post, we discuss family offices. Private investment office… Family business advisor… Single-family office… The name differs and the definition varies greatly depending on whom you ask. But the concept remains the same. Wealthy families often seek assistance to manage their accumulated wealth, organize family affairs, and preserve capital for future generations.
Over the past several weeks, we have seen a lot of great content from folks we respect and admire on leading a family business through turbulence, and thought that we would compile a sampling for the benefit of our readers this week.
As family business leaders continue to make hard decisions in real-time against the ever-changing backdrop of the pandemic, their legal and tax advisors would do well to consider whether this is an opportune time for intra-family ownership transfers. For many family businesses, the current economic uncertainty presents a unique, and perhaps fleeting, opportunity for more tax-efficient estate planning.
The official end of the bull market for public stocks signals that Coronavirus-induced disruptions to the global economy are real and are expected to persist. The stock market tends to be the best leading economic indicator, so family business directors would do well to think about how best to position their businesses to weather the slowdown.
Family Culture and Dividend Policy
Family Business Director attended the Transitions Spring 2020 conference in sunny Tampa last week. In this post, we discuss a few recurring themes from the conference.
The Cartiers: The Untold Story of the Family Behind the Jewelry Empire, by Francesca Cartier Brickell
In this week’s post we discuss, The Cartiers: The Untold Story of the Family Behind the Jewelry Empire written by Francesca Cartier Brickell.
Regardless of how much debt a family business operates with, access to credit when it is needed is essential. In this week’s post, Andy Gibbs describes the key factors affecting banks’ willingness to loan money to family businesses, and provides an overview of what the credit outlook looks like for 2020.
Listing the best books one has read over the preceding twelve months is commonplace. Family Business Director eschews the humble-bragging endemic to such lists. Instead, we offer a list of four books that we plan to read in 2020. We confess to reading far more book reviews than actual books, and we selected these books, in large measure, on the basis of generally glowing reviews. Upon completing each book, we will report back in future posts with our own impressions and takeaways for family business directors.
This week’s post is a part of a periodic series called “Family Business Industry Spotlights.” In these posts, we will share conversations with our family business advisory professionals who have deep experience working with family businesses in a particular industry. We think the conversations promise to be of interest to family business directors regardless of their industry. This week, we talk with Scott A. Womack about the challenges and industry trends facing families in the Auto Dealer Industry.
Addressing topics such as share redemption programs to the role of non-family directors in a family business, Family Business Director speaks with board member Edward Jackson of H.G. Hill Realty Company for his insights on questions common to family businesses. This post is part of a series of interviews with family business leaders and experienced advisors.
Family Business Director is off enjoying 4th of July festivities this week. For our readers that are looking for some beach reading, we thought we would direct your attention to some of our more popular posts in case you missed them the first time around.