Managing the Family Business: Survival’s Secret Sauce
The secret sauce for surviving from generation to generation, says family-business expert John Davis, has three main ingredients: growth, talent and unity.I still haven't see anyone besides ourselves take on foundations, trusts and the NGO's they fund in a Piketty-ish anti-dynastic way but I'm sure it will come.
The secret sauce of long-term business success can't be captured in numbers. As the operations manager of a leading and fast-growing Brazilian business recently explained to a reporter, "There's a secret sauce in this business [but] it's almost impossible for a financial analyst to model." Agreed. But long-term success-even for a family company-can be explained in a rather simple, straightforward way. Here are some high points to consider.
GROW EVERY GENERATION In order to stay alive commercially as a family, you must grow your assets (what's left of your assets after taxes and inflation) faster than your family or business consumes them. Of course, growing families and businesses are both good at consuming assets. For many family companies we have researched, their sustainable real growth rate is 6 percent. That might seem easy to achieve but it isn't. 1
Returns on assets tend to wane over time as an industry matures and ultimately declines. To maintain high returns and keep your family company modern and competitive you need to make well-timed, significant bets in growth businesses. Some of these bets can regenerate your core business, but others might diversify your business activities, moving away from your original business. If you can't consider diversification and entrepreneurial efforts, you are probably not going to survive long-term....MORE
See also May 4ths:
Last Word on Piketty
The headline is probably a lie....
