Family Business Advisory Services

October 2, 2024

Communication Matters for Family Businesses

Last week, Mercer Capital conducted our annual firm-wide meeting at the Peabody Hotel in Memphis. It is a 14-year tradition where employees travel from all offices to get together and discuss the state of the business and the industry as a whole. It seems simple, but the gathering highlights something far more important: communication matters.

Communication determines the success of any relationship, and the relationships among shareholders of multi-generation family businesses are no exception. As the business and family grow, shareholder relationships become more complicated, and formal communication becomes more important. While families nearing a generational transfer have some very specific communication challenges, effective communication is essential regardless of where the family business is in the corporate life cycle.

How can family business leaders develop effective and sustainable communication programs? For family businesses, the goal is to communicate, not inundate. At some point, too much information can simply turn into noise. Family business leaders should focus on the following dimensions.

Frequency

The frequency of communication should correspond to the natural intervals over which (1) genuinely “new” information about the company’s results, competitive environment, and strategy is available, and (2) shareholders perceive that the most recent communication has become “stale.”  As a result, there is no one-size-fits-all frequency; what is most important is the discipline of a schedule. Positive engagement is enhanced when family shareholders receive regular communication.

Presentation

Family business leaders should assess what presentation of information is best to facilitate shareholder communications. If the goal is to communicate, the appropriate level of detail should be defined with reference to what is necessary to tell the company’s story. The detail needs to be presented to shareholders with sufficient supporting context regarding the company’s historical performance and conditions in the relevant industries and economy. A dashboard approach focusing on key metrics can be an effective tool for drawing attention to the measures that matter.

Transparency

Family Business Magazine discussed how family businesses and family members share information in a recent article.  One question they focused on was: how is feedback gathered from the family? Communication is a two-way street. How business information is shared with the family is essential, but listening to the family shareholders and taking their preferences and considerations as an integral component of decision-making is equally important. It is prudent for directors and managers to solicit feedback regarding the needs and preferences of quieter shareholders. Asking for input from all shareholders through a systematic survey process helps ensure directors and managers receive a balanced picture of the shareholder needs and preferences. A confidential survey administered by an independent third party can increase the likelihood of receiving frank (and therefore valuable and decision-useful) responses.

Emphasis

The goal of shareholder communication should be to help promote positive shareholder engagement. To that end, the emphasis of the communication should not simply be the bare reporting of historical results but should emphasize what the results mean for the business in terms of strategy and outlook. Shareholders do not need finance degrees to be able to understand the three basic decisions that every company faces: (1) how should we finance operations and growth investments (capital structure), (2) what investments should we be making (capital budgeting), and (3) what form should shareholder returns take (distribution policy). Educated shareholders can provide valuable input to directors and managers and will be more engaged in management’s long-term strategy.

Will conducting a shareholder survey help to understand the family shareholders? What is the best way to educate family shareholders moving forward? In our family business advisory services practice, we work with successful families facing questions like these every day. Give us a call to discuss your needs in confidence.

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Mercer Capital Sponsoring and Speaking at the 5th Annual It’s All Relative Family Business Symposium
Mercer Capital Sponsoring and Speaking at the 5th Annual It’s All Relative Family Business Symposium
Mercer Capital is pleased to sponsor the 5th annual It’s All Relative Family Business Symposium, hosted by the Ole Miss Center for Innovation and Entrepreneurship. The 2026 program will focus on governance and boards, with sessions designed to help family business leaders think more strategically about structure, stewardship, and long-term continuity.The Symposium takes place September 15-16, 2026, in Flowood, Mississippi. Travis Harms, Tripp Crews, and Zac Lange will represent the firm at the Symposium.In addition, Travis Harms and Tripp Crews are also leading the Tuesday afternoon session on “Dividend and Redemption Policies,” which explores how family businesses can balance shareholder liquidity needs with the capital required to support the long-term health of the business.Travis Harms, CFA, CPA, ABV, is President of Mercer Capital and leads the firm’s Family Business Advisory Services Group. He focuses on financial education, valuation, and strategic financial consulting for multigenerational family businesses.Tripp Crews, ABV, is a Vice President with Mercer Capital and serves on the firm’s Transaction Advisory Services team, the Agribusiness Industry team, and the Family Business Advisory Services Group. He works on valuation and transaction-related matters for closely held businesses and family enterprises, with particular experience in agribusiness and ownership transition issues.Zac Lange, CPA, ABV, is a Vice President with Mercer Capital and serves on the firm’s Family Business Advisory Services Group. He focuses on supporting family businesses and litigants with valuation, financial analysis, and dispute-related matters, including corporate planning and reorganizations, financial reporting, and fairness opinions.Mercer Capital regularly works with family business owners and advisors on valuation and strategic financial matters involving ownership, governance, succession, and long-term planning. The firm is proud to support programs that bring family business leaders together for practical discussion and shared learning.Mercer Capital looks forward to connecting with attendees in Flowood and participating in this year’s Symposium. To learn more about the symposium, visit the event's website: https://olemisscie.com/family-business-26/
When Was the Last Time Anyone Read the Buy-Sell Agreement?
When Was the Last Time Anyone Read the Buy-Sell Agreement?

You Asked. We Answer.

Periodic review of a family business’s buy-sell agreement can reveal whether its valuation, liquidity, and transfer provisions still align with current shareholder expectations and financial realities. Testing the agreement through a hypothetical triggering event can help identify potential conflicts before they become costly disputes.
What Happens If the Formula in Our Buy-Sell Agreement Is Wrong?
What Happens If the Formula in Our Buy-Sell Agreement Is Wrong?

You Asked. We Answer.

Buy-sell agreement formulas can become outdated as a family business evolves, potentially producing values that no longer align with shareholder expectations. Regularly testing the formula against a current valuation can help identify problems before a triggering event occurs.

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