Family Business Director

Corporate Finance & Planning Insights for Multi-Generational Family Businesses

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Would Elon Musk Want to Buy Your Family Business?

Who said: “Twitter has extraordinary potential. I will unlock it”?

If you answered “Elon Musk,” you’d be right. His potential acquisition of Twitter has been all over the financial press of late.

In this week’s Family Business Director post, we ask “What can your family business learn from the Elon Musk/Twitter saga”? There are at least two lessons to be learned. Read more in this week’s post.

Practical Considerations for Operating in an Inflationary Environment

In recent months, inflation has overtaken labor market measures as the most headline-grabbing macroeconomic indicator in the financial press. Inflation typically moves the needle more than other economic measures because of its effects not only on businesses of all sizes but also on consumers. The current inflationary environment has contributed to shifts in consumer behavior thus far in 2022, and it is important that family businesses build responses to changing consumer behavior into their budgeting and forecasting processes. In this week’s post, we take a look at key considerations family businesses should be thinking about in their response to the current inflationary environment.

The Perils and Pleasures of Forecasting in Family Businesses

The list of forecasting cliches is long (thanks, Yogi Berra!), but we were recently reminded of a good one: there are only two kinds of forecasts – lucky and wrong.  That reminder came from an article by Joachim Klement 10 Rules for Forecasting.

Klement’s list is focused on macro level economic forecasting, but several of his rules apply equally well to the micro level of individual family businesses.  In this post, we will consider four of Klement’s rules in the context of family businesses.

Family Business Director’s Reading Roundup

Here at Family Business Director, we are focused on the numbers of family business: measuring and assessing financial performance, establishing dividend policy, setting capital structure, making capital budgeting decisions, and structuring shareholder redemptions. All that said, we also recognize that family business leaders face many other critical challenges. So, in this week’s post, we provide a quick roundup of some of the best pieces we’ve come across recently dealing with management succession, governance, attitudes toward wealth, family relationships, board dynamics, and more.

Review of Key Economic Indicators for Family Businesses

Family business directors are often afforded a luxury that their publicly traded counterparts are not: the ability to focus on and plan for the long term rather than solely the next quarter’s earnings report. While family businesses may not have the in-house economists and research departments of the larger public, it is crucial for the management and boards of family businesses to keep tabs on the overall economic environment in which they operate, as an understanding of the metrics and trends driving or hampering growth in the economy can inform effective and relevant strategic, tactical, and operational planning and decision making aimed at maximizing long-term shareholder returns.  With that, we take a look at a few of the broad trends that bore themselves out in the U.S. economy through the end of 2021 and the first months of 2022. 

Planning & Strategy

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.

A 2021 Review of Family Business Director

We hope you had a great Christmas and a happy holiday season. To end the year, we summarize some themes and most read pieces from Family Business Director you may have missed throughout the year. Enjoy!

Charlie Munger, Elon Musk, Kenny Rogers and Your Family Business

Where does your family business find itself during the current planning cycle? Are there investing convictions that your family business should double down on like Elon Musk, or is it time to follow the Gambler’s advice and take some chips off the table? And what does Charlie Munger have to do with this? Check out this week’s post to find out.

5 Questions with Dennis Hinton

An Interview with the Managing Director of a Private Investment Firm Focused on Non-Controlling Equity Investments in Family Businesses

In this post, Travis Harms sat down with Dennis Hinton, Managing Director at North River Group, to speak about some common reasons family businesses seek non-family equity and how family business owners can achieve liquidity and diversification.

Dividend Policy

Family Business Dividend Survey Results

This summer, we partnered with Family Business Magazine to conduct our inaugural survey of dividend practices at family-owned businesses.  This week, we feature an article that we wrote for the magazine summarizing the survey results.  We hope you enjoy and gain some insights that can help you and your family evaluate your current policy and make plans for the future.

Can You Hear Me Now? Lessons from a $20 Billion Family Business Fight

The recent turmoil engulfing the Rogers family, controlling shareholders of the $20 billion Canadian wireless communications and media conglomerate Rogers Communication, piqued our interest. What can public family strife affecting the Rogers family teach us? Well, quite a bit. In this post, we summarize the family drama and provide three strategies to keep in mind to stave off harsh family infighting that can, ultimately, bleed over into your company’s ability to operate effectively.

Capital Structure

How Stable Is Your Family Business Stool?

My family and I have been out at the Broadmoor in Colorado Springs for a work conference. Since we were going to a nice resort and conference center, we decided to parlay the weekend into a family business meeting. The meaning of the family business impacts the three key legs of the family business stool: dividend policy, capital investment, and financing decisions. In this post, we detail how we thought about each of the three legs.

Planning & Strategy 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.

Should Your Family Consider a Family Office?

If you are in the fortunate position to be the owner of a profitable family business you might consider hiring an expert to help manage your wealth. If so, you should be familiar with two primary business models available to assist in wealth management: traditional wealth management firms and family offices.

In this post, we discuss some key differences in deciding which financial solution is best for an ultra-high net worth individual or family.

Taxes

Tax Changes Remain Murky: A(nother) Tax Update

The U.S. House Ways and Means markup of the $3.5 trillion reconciliation bill is here and we’ve discovered surprises both big and small.

In this post, we summarize some of the key proposals that you and your family board need to keep an especially close eye on.

How Long Will It Take to Sell My Family Business?

That Depends on the Type of Transaction …

In this week’s Family Business Director, Tim Lee, ASA, Managing Director of Corporate Valuation and John T. (Tripp) Crews, III, Senior Financial Analyst, discuss expectations around the timeline for your business transition or sale and summarize key points to keep in mind when driving towards an internal or external sale.

Planning & Strategy

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.

Performance Measurement

Sanderson Farms Case Study

Cargill is one of the largest family businesses in the world. Earlier this year, we analyzed the Family Capital list of the world’s 750 largest family businesses; Cargill checked in at number 15 on that list, with annual revenue reported to be in excess of $110 billion. Cargill made headlines earlier last week for its acquisition (together with another family business, Continental Grain) of Sanderson Farms, a publicly traded poultry business (ticker: SAFM). It is not every day that family businesses acquire publicly traded companies, so the transaction is worth exploring a bit further.

The Potential Buyers of Your Family Business

An Overview of the Different Types of Buyers for Closely Held, Family Businesses

In this week’s Family Business Director, Tim Lee, ASA, Managing Director of Corporate Valuation and John T. (Tripp) Crews, III, Senior Financial Analyst, discuss internal and external exit options for you and your family business and summarize the possible buyers for your family enterprise.

Taxes

Estate Planning Changes Update

It’s been over six months since we last took inventory of where we stood in the face of tax changes (increases) affecting estate planning. While we currently have some ideas on what to expect regarding the tax policy changes, the full picture remains murky. In this post, we try to clear up some of the murkiness by sharing what we are reading, listening to, and learning regarding tax changes and other factors affecting family businesses and estate plans.

COVID-19 Coverage

5 Trends Facing Family Businesses Today

Back in the spring of this year, we discussed five broad economic indicators family businesses needed to keep their eye on. In this week’s post, we wanted to revisit those trends and see where we have come over the last four months, as well as what we are hearing from our clients on the ground.

A (Not So) Bold Prediction

The Rise of Non-Family Equity Capital in Family Businesses

In this post, we will take a quick look at the growing supply of capital seeking minority investments in family businesses, the sources of growing demand from family businesses for such investment capital, and how directors can best position their family businesses to thrive.

Customer Concentrations and the Value of Your Family Business

Does your family business have a significant customer concentration that is reducing the valuation multiple? If so, what steps are you and your fellow directors taking to mitigate this risk? In this post, we offer two strategies to mitigate the risk of customer concentration in your business.

Summer 2021 Reading

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.

Consulting Services

Family Business Advisory Services

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