Family Business Director

Corporate Finance & Planning Insights for Multi-Generational Family Businesses

Special Topics

Basics of Financial Statement Analysis

Part 2: The Income Statement

This post is the second of four installments from our Basics of Financial Statement Analysis whitepaper.  In this series of posts, our goal is to help readers develop an understanding of the basic contours of the three principal financial statements. The balance sheet, income statement, and statement of cash flows are each indispensable components of the “story” that the financial statements tell about a company.  This week, we focus on the income statement.

FAQ

Five Reasons Your Financial Projections Are Wrong

The good news – or maybe it’s the bad news, depending on your perspective – is that overly optimistic projections are not necessarily the result of intentional errors on the part of your family business managers.  Rather, behavioral economists tell us that humans are prone to overconfidence as a result of what they refer to as cognitive biases. In this post, we address five cognitive biases contributing to overly optimistic forecasts.

Shareholder Engagement

Preventing, or At Least De-Escalating, Family Feuds

The biggest threat to the sustainability of your family business may not come from competition or evolving technologies.  It may come from the family itself.  As a family business director, you should be attuned to this risk and take the steps necessary to help prevent, or at least de-escalate such situations. In this week’s post, we suggest a few paths forward.

Special Topics

Basics of Financial Statement Analysis

Part 1: The Balance Sheet

This post is the first of four installments from our Basics of Financial Statement Analysis whitepaper.  In this series of posts, our goal is to help readers develop an understanding of the basic contours of the three principal financial statements. The balance sheet, income statement, and statement of cash flows are each indispensable components of the “story” that the financial statements tell about a company.  This week, we focus on the balance sheet.

Special Topics

Shareholder Redemptions in Family Businesses

Are They Good or Bad?

Over the weekend, the New York Times published an opinion column by Chuck Schumer and Bernie Sanders in which the senators decried the increasing prevalence of stock buybacks among the country’s largest publicly traded companies. Reading the column made us think about shareholder redemptions for family businesses. Do shareholder redemptions hurt or help family businesses?  Of course, that question does not have a simple answer.  Not all shareholder redemptions are created equal, so in this post, we’ll outline three possible redemption scenarios and identify what attributes suggest whether a given shareholder redemption will help or hurt a family business and its relevant stakeholders.

Talking to the Numbers

How Much Money Does Your Family Business Really Make?

In our last post in this series, we focused on operating income, which is a critical measure for evaluating the performance of management since it is unaffected by financing and tax decisions made by the board of directors.  Net income, on the other hand, reveals how those board-level decisions influence your family business’s earnings and ability to pay dividends.  Everyone likes to talk about EBITDA and EBIT – and those are important metrics – but only net income measures the increase in the family’s wealth from owning the business.

Dividend Policy

Distribute or Reinvest?

Woolrich Case Study

A recent article in the Wall Street Journal chronicled the slow demise of the Woolrich Woolen Mill.  For the first time in the company’s 170 year history, it will no longer have any U.S. based production.  The Woolrich saga is a vivid reminder of how challenging the appropriate balance between dividends and reinvestment is for family business directors (and of the real-life consequences those decisions can have).  For this post, we asked two (hypothetical) colleagues with differing perspectives to review and comment on the recent story.

Consulting Services

Family Business Advisory Services

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