Family Business Director

Corporate Finance & Planning Insights for Multi-Generational Family Businesses

Performance Measurement

And Now You Know… The Rest of the Story

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.

Special Topics

The Buyer You Might Be Overlooking

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.

Special Topics

Bones of Contention

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.

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? 

Capital Structure Planning & Strategy

Managing the Family Business in an Era of Cheap Capital

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.

Planning & Strategy

Is There a Ticking Time Bomb Lurking in Your Family Business?

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?”

Planning & Strategy Shareholder Engagement

How to Communicate Risk to Family Shareholders

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.

Capital Structure

The Evolving Landscape for Family Capital

Two Developments That Will Affect Family Businesses

The rise of the family office as a source of investment capital for other businesses is the best evidence that families are comfortable looking outside the family business to generate returns on family capital. Just as liquid naturally flows to the lowest point, capital naturally flows to its highest and best use. The viscosity of family capital is high, so it may take longer to move, but it eventually will. In the context of this broader trend, we propose three things for family business directors to begin thinking about.

Consulting Services

Family Business Advisory Services

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