Diversifying your family business helps to insulate you from risks

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 if there is a catastrophic business interruption? What if the supply shuts down? What if new technology or global competitors upend a once-defensible position? Your family may very well run a tight ship, but there are many real-world possibilities for disruption that are simply beyond anyone's control.

This is a common conversation among successful family businesses, especially from those who are thinking several generations ahead. 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 on the family's unique ability to innovate.

Already a subscriber? Sign In

About the Author(s)

Related Articles

KEEP IT IN THE FAMILY

The Family Business newsletter. Weekly insight for family business leaders and owners to improve their family dynamics and their businesses.