Family Business Director

November 18, 2019 Capital Budgeting

Family Businesses and Scarce Capital

Family Business Director was recently whiling away the hours scrolling through the archives of the Harvard Business Review when an article caught our eye.  “What You Can Learn from Family Business” was written by Nicolas Kachaner, George Stalk, Jr. and Alain Bloch, and appeared in the November 2012 issue.  The authors describe an empirical study they undertook to discern the ways family businesses are different from their non-family owned peers. In a series of posts over the next several weeks, we’ll take a closer look at some of the attributes identified by the authors, particularly from the perspective of privately-held family businesses.  This week, we’ll consider how family businesses make capital expenditure decisions.

November 11, 2019 Capital Budgeting

Build or Buy?

Is Your Family Business a Builder or a Buyer?

How should you and your fellow family business directors decide whether to build or buy? What will be the most effective form of capital investment for your family business? Since software developers think more about the build vs. buy decision than most of us do, we thought it would be interesting to apply a software-related decision framework to family business investment decisions. For purposes of this blog post, we follow the six step decision framework advocated by Justin Baker.

November 4, 2019 Capital Budgeting

What Time is it for Your Family Business?

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? 

October 28, 2019 Planning & Strategy

Lessons for the Long Haul

While public companies are planning for the next quarter, successful family businesses are planning for the next decade.  While private equity firms anticipate exit, successful family businesses anticipate transitioning to the leadership of the next generation.  A recent profile in the New York Times of Rumiano Cheese provides a great example of how family businesses persist and endure over generations.  Rumiano Cheese is celebrating its centenary this year, and the company’s story provides some great reminders for all family businesses that are in it for the long haul.

October 21, 2019 Planning & Strategy

Questioning Your Family Business Balance Sheet

If the income statement is a movie that records how your family business performed during a particular period, the balance sheet is a snapshot that records what your family business looked like at a particular date. The balance sheet answers two core questions: “What are the assets our family business owns?” and “How has our family business paid for those assets?”
We’ll flesh out the first question in this week’s post, and turn our attention to the second question in a subsequent post.

October 15, 2019 Shareholder Engagement

5 Reasons to Conduct a Shareholder Survey

An engaged and informed shareholder base is essential for the long-term health and success of any private company, and a periodic shareholder survey is a great tool for achieving that result. This week’s post includes a list of five good reasons for conducting a survey of your shareholders.

October 7, 2019 Capital Structure

Four Questions to Ask About Debt in Your Family Business

What’s the right capital structure for your family business? We find that the best answer to that question can be found after asking these four questions about the use of debt in your family business.

September 30, 2019 Shareholder Liquidity

The Family Business Director To-Do List

Share Redemption / Liquidity Programs

In last week’s post, we explored how family businesses can use periodic share redemptions or ongoing liquidity programs to promote shareholder engagement and satisfaction.  This week’s to-do list includes important tasks for family business directors to complete whether planning for a one-time share redemption or establishing a family shareholder liquidity program.

September 23, 2019 Shareholder Liquidity

Who’s In and Who’s Out?

There are many reasons family members may want to sell shares: desire for diversification, major life changes, funding for estate tax payments, starting a new business, or funding other major expenditures. What is the best way to provide liquidity to family shareholders on fair terms without sparking a run on the bank?

September 16, 2019 Capital Budgeting

FAQ: How Should Financing Affect Capital Budgeting Decisions?

Family business directors must properly distinguish between capital structure and capital budgeting decisions to make the best decisions.  In this week’s post, we answer a frequently asked question that leads us into a discussion of what is known as the “separation principle.”  In short, what are the relevant cash flows for capital budgeting analysis?  And, when is it appropriate to combine investing and financing decisions?  If you have ever struggled with these questions, this week’s post has the answers you need.