What You Can Learn From Family Business

What You Can Learn From Family Business

1. Family Business

   • focus on resilience more than performance
   • forgo the excess returns during good times
   • invest with a 10- or 20-year horizon

2. Seven differences in their approach

   • 1.- They’re frugal in good times and bad
     • don’t have luxurious offices
     • keep their expenses under control.
     • have leaner cost structures
   • 2.- They keep the bar high for capital expenditures
     • judicious when it comes to capex
       • capex investments have a double hurdle to clear
         • a project must provide a good return on its own merits
         • judged against other potential projects,
     • " we do not spend more than we earn"
   • 3.- They carry little debt
     • associate debt with fragility and risk
     • debt means being beholden to a nonfamily investor
   • 4.- They acquire fewer (and smaller) companies
     • acquisitions worth 2% of revenues VS nonfamily businesses acquisitions worth 3.7%
     • prefer organic growth (partnerships or joint ventures ) vs acquisitions
     • favored smaller acquisitions
   • 5.- Many show a surprising level of diversification
     • 46% highly diversified VS 20% of the comparison group
     • diversification key to protect the family wealth
   • 6.- They are more international
     • ambitious about their overseas expansion
     • on average 49% of their revenues come from outside their home region
   • 7.- They retain better talent that their competitors do
     • 9% of the workforce turned over annually VS 11% at nonfamily firms
     • extol the benefits of longer employee tenures
     • they create a culture of commitment and purpose

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