Corporate Finance & Planning Insights for Multi-Generational Family Businesses
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.
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.
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 that Paul Harvey was a financial analyst, but if he were, we suspect his favorite performance metric would have been return on invested capital, because it tells you the rest of the story.
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.
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.
It is harvest time in rural America. Farmers are working long hours gathering the crops that have been planted, fertilized, watered and worried over since springtime. While the cycle of planting and harvesting is an annual one on the farm, for family businesses, the cycle can span decades or even generations. There are many different ways to classify family businesses, but one simple distinction that we find ourselves coming back to often is that between planters and harvesters. So what time is it for your family business? Is it planting season or harvesting season?
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.
Buy-sell agreements don’t matter until they do. When written well and understood by all the parties, buy-sell agreements can minimize headaches when a family business hits one of life’s inevitable potholes. But far too many are written poorly and/or misunderstood. Directors are always eager to discuss best practices for buy-sell agreements.
Excerpted from our recent book, The 12 Questions That Keep Family Business Directors Awake at Night, we address this week the question, “Is there a ticking time bomb lurking in your family business?”
Communicating risk effectively is a challenge for all companies. Making too much of the risk can alienate customers and erode the credibility that might be critical when a threat actually materializes. On the other hand, insufficient risk disclosure can result in liability that threatens the company’s existence. A recent article in the Harvard Business Review addressed this challenge in customer communications. The authors of “The Art of Communicating Risk” offer three suggestions for communicating risk to customers more effectively. In this post, we will review those suggestions, and think about how they might apply to communicating risk to family shareholders.
