Many well-established family firms are seeking ways to generate new streams of income independent of the core business. Despite the longevity or success of the family enterprise, inherent risk is typically tied to the legacy business—which also happens to be where most of the family's wealth resides. What is there is a catastrophic business interruption? What if the supply shuts down? What if new technology or global competitors upend a once-defensible position?
There are many benefits to diversifying a legacy business and providing alternative streams of cash flow. Risk management is typically the driving force, but there are other reasons, too: preservation of long-term wealth, offsetting a cyclical industry, extending the enterprising legacy of the family, capitalizing of the family's unique ability to innovate.
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