KPMG Private Enterprise have launched a new report that considers the diversification of the family businesses financial, human and social capital entitled ‘Redefining Wealth in Family Businesses.’
Family businesses the world over are well known for their patient capital strategies and a focus on long-term value creation, the concept of ‘capital’ and how it is allocated is evolving, and with the idea of patient capital becoming more expansive and inclusive. Indeed, the idea of patient capital now commonly includes less tangible sources of social and human capital that are typically reflected in the family’s purpose and values.
The report finds that many business families are facing a new reality from a wealth creation and capital allocation perspective. After a lifetime of having the family wealth almost entirely bound up in their business, the need to de-risk and diversify their wealth is becoming apparent.
And it is a key driver for families that are seeking more independent wealth — especially tech savvy next-generation family members who are eager to set out on their own entrepreneurial journeys.
The report explores three key issues:
- The need for greater diversification of their assets – both inside and outside the business (De-risking and diversifying the family’s wealth)
- The impact of generational shifts in business and family wealth transitions (Protecting and growing the business family’s assets)
- Patient capital – Ensuring that the family’s purpose and values continue to be aligned with their long-term capital allocation strategies with respect to their company’s financial, human and social capital assets (Adopting a world view of the family’s strategic assets)
“The report provides much food for thought for the family business community, especially in light of the past few years where businesses have had to deal with plenty of uncertainty surrounding the pandemic and continuing economic and business uncertainty. It is not surprising that family business owners are looking to remove elements of risk and to diversify the nature of the family’s wealth by branching out into new business areas using the core skills and strengths of the next generation either,” explains Paul Andrews, Founder & CEO of Family Business United.
“It is also good to note that family businesses are being recognised for their strategic thought and approach to the stewardship and governance of their firms with the report receiving more attention than anticipated outside of the family business arena. It is great to see that increasingly the family business space is providing lessons for the wider business community and that their innovative and entrepreneurial approach being recognised at the same time,” concludes Paul.redefining-wealth-in-business-families-pdf