Family matters: financing family business growth through individual investors
Family matters: financing family business growth
While family businesses have the unique characteristics of a family, they, like other companies are often in search of financing to propel growth. As a family grows and changes, the family business must also evolve to accommodate changing family dynamics. The future of the family members, maintaining the independent nature of the family business and the preservation of family unity depend on the growth of the family business and its capacity to generate sufficient profit for all its members. The number of people who live off the family business revenue increases generation after generation. The future of the family and its unity are more likely to be key priorities of a family business in comparison to other companies, which brings additional pressure for growth that needs to be addressed.
Family businesses are a major force in the global economy
According to the Family Firm Institute, they create more than 70% of global GDP. Yet, they share a number of characteristics that set them apart from other companies. These attributes include a strong desire among family owners to retain control of the business, an emphasis on managing the company with longevity in mind (as a legacy to preserve for future generations); and a desire for business information to remain confidential. KPMG’s European Family Business Barometer, published in June 2014, found that 87% of businesses indicated maintaining control was a key success factor – an increase of 15% on the previous year.
As a result, many family businesses walk a fine line between successfully attracting funding, and monitoring the impact this may have on the family’s control of the business and its information.
The issue of maintaining control and independence imposes limits on the possible routes for family business financing, including private trade sales, initial public offerings (IPOs) and private equity (PE).(...)
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