Corporate Finance & Planning Insights for Multi-Generational Family Businesses
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 if Paul Harvey was a financial analyst, but if he were, we suspect his favorite performance metric would have been return on invested capital (ROIC), because it tells you the Rest of the Story.
Recent data indicates a decline in middle-market transaction activity and deal multiples for private companies in the second quarter of 2023, influenced by rising interest rates and economic uncertainty. However, the data also shows that there are still transaction opportunities for quality businesses coming to market.
In the world of family-run businesses, the task of capital allocation poses unique challenges, especially with a diverse shareholder base that includes family members with varying financial needs. While some depend heavily on dividends to fund their lifestyle, others focus more on long-term capital appreciation. This article delves into how successful family businesses strike a crucial balance between fueling business growth and meeting shareholders’ liquidity needs, exploring the tough decisions that can make or break both family harmony and business success.
In this video, Atticus Frank breaks down the top five reasons why your family business should consider conducting a shareholder survey. He emphasizes how these surveys can provide critical insights into shareholder perspectives, facilitate informed business decisions, and enhance communication among family members involved in the business. From uncovering deeply held views to promoting educated and engaged shareholders, the video offers valuable guidance for multi-generational family businesses looking to align interests and build trust.
The U.S. economy defied expectations by growing at an annualized rate of 2.4% in the second quarter of 2023, outperforming consensus estimates and showing resilience against the Federal Reserve’s ongoing rate hikes. While inflation rates have moderately stabilized, economists forecast a potential slowdown in GDP growth for the upcoming quarters. Explore this delicate economic balancing act, including insights from the Fed’s latest meetings and how these developments could influence both consumer and investor behavior.
There is an urgency to consider a range of estate tax strategy options in order to maximize gifting family wealth rather than family drama. The options range from straightforward gifts to heirs, accelerated gifting, use of irrevocable trusts, and other estate freeze tactics to lock in assets at current value and transfer future appreciation to heirs without triggering additional taxes. Why? The current basic exclusion amount ($12.92 million per individual) is due to sunset to its pre-TCJA level of $5 million, as adjusted for inflation, at the end of 2025. Tax planners expect a spike in estate planning transactions between now and then. Don’t be caught unprepared. Read more in this week’s post.
Private equity and institutional investors have been increasingly targeting family-owned businesses for potential acquisition. Recent industry data shows that smaller deals account for over 61% of all private equity transactions in the first quarter of 2023, and founder-owned business purchases, especially those valued under $100 million, are rising. In this week’s post, we look at some of the pros and cons of private equity investment in your family business.
Everyone agrees that communication promotes positive shareholder engagement, but what does it look like to communicate financial results effectively? In this week’s blog we introduce a whitepaper that offers practical suggestions for presenting key financial data in ways that family shareholders find useful.
Travis Harms provides an insightful examination into the important topic of dividend policy in family businesses. He explains how to go about the decision-making process regarding distribution and why considering various shareholder characteristics and business attributes matters. He breaks it down into four types of dividend policies, highlighting the balance between shareholder certainty and board discretion, fostering a better understanding of maintaining the sustainability of the business, and promoting positive shareholder engagement.
The contrasting fates of shoe brands Hoka and Allbirds in recent years have provided a couple important lessons for family business directors. As part of its growth strategy, Hoka harnessed the value of scarcity. Allbirds, on the other hand, stumbled by losing sight of its core customer in the race to pursue continued topline growth. In this post, we review these contrasting narratives to help family business directors evaluate their own growth strategies.
