Changing the way you learn

What You Can Learn From Family Business

Family Business
1. focus on resilience more than performance
2. forgo the excess returns during good times
3. invest with a 10- or 20-year horizon
Seven differences in their approach
1. 1.- They’re frugal in good times and bad
  1. don’t have luxurious offices
  2. keep their expenses under control.
  3. have leaner cost structures
2. 2.- They keep the bar high for capital expenditures
  1. judicious when it comes to capex
    1. capex investments have a double hurdle to clear
      1. a project must provide a good return on its own merits
      2. judged against other potential projects,
  2. " we do not spend more than we earn"
3. 3.- They carry little debt
  1. associate debt with fragility and risk
  2. debt means being beholden to a nonfamily investor
4. 4.- They acquire fewer (and smaller) companies
  1. acquisitions worth 2% of revenues VS nonfamily businesses acquisitions worth 3.7%
  2. prefer organic growth (partnerships or joint ventures ) vs acquisitions
  3. favored smaller acquisitions
5. 5.- Many show a surprising level of diversification
  1. 46% highly diversified VS 20% of the comparison group
  2. diversification key to protect the family wealth
6. 6.- They are more international
  1. ambitious about their overseas expansion
  2. on average 49% of their revenues come from outside their home region
7. 7.- They retain better talent that their competitors do
  1. 9% of the workforce turned over annually VS 11% at nonfamily firms
  2. extol the benefits of longer employee tenures
  3. they create a culture of commitment and purpose

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What You Can Learn From Family Business

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	Created by iris221293 over 8 years ago