Where Have All the Assets Gone?

So how efficiently and effectively can you report on all the assets your family in business owns? We rely on a four-step process: Collect, Organize, Present and Advise.

“What is a filing cabinet asset?” most clients ask with a perplexed smile.

After twenty years of working with families in business, we have learned that they accumulate “things” that are filed away in those filing cabinets and—in many cases—these things are now worth a lot of money. Whether it is land, income-generating property (a mobile home park, apartment complex, office building, storage warehouse, or the like) a membership interest in a private company, private loans, a piece of artwork, a table (a funny story for another day), or the family farm, families in business often use their free cash flow to acquire other assets. In some cases, their “things” are now worth more than their business.

And this is where it gets complex. Accumulating things is different from inheriting things. Think of it like this: Accumulating things is like building a library by purchasing one book at a time, while inheriting things is like someone giving you a library of books at once and expecting you to know something about every book.

So how efficiently and effectively can you report on all the assets your family in business owns? Whether you are a family in transition, developing or educating your board, or simply tracking and reporting on the family’s assets we recommend a four-step process: Collect, Organize, Present and Advise.

Collect

As a family in business with assets (in the filing cabinet), you are in one of three categories: 1) the patriarch and/or matriarch is still alive and in control with their team, 2) your family is transitioning to either a family member(s) or a leadership team, either with or without a board, or 3) your family is several generations into this and now you are just tracking the performance of the family’s assets. In any one of these stages, collecting information—whether through a corporate librarian, a family CFO, or just a curious family member—by asking “how much?” (cost basis), “why this asset?”, timing of purchase (and/or sale), and “for what reasons?” is the starting point. Whether you are opening the proverbial filing cabinet, downloading bank (and securities) statements from a financial institution’s website, scouring tax returns, or talking to old business partners, the collection process is the key to building the foundation for a meaningful reporting matrix that tracks the family’s assets and their performance.