KENNESAW, Ga. | Nov 1, 2024

What Reinvestment Options Can Help Ensure Long-Term Success for my Family Business?

Eric Krucke, CFO Practice Leader, Aprio

During my career, I worked inside two family-owned businesses and then for Warren Buffett, who famously buys businesses and holds them forever. Now, I dedicate my time to serving family business owners who want to create a lasting legacy.

The #1 question I hear from business owners is, “How do I make sure that my family and team members are taken care of when I am gone?” My response is always the same: “80% of what got you here will not take you or your team forward.”

This truth can sometimes be painful, especially considering the blood, sweat, and tears that went into building the business. Over time, however, companies can outgrow their products, people, and technologies, necessitating a reassessment and reinvestment in the market, model, and management of your business.

Additionally, the degree to which a family business owner is willing to transition from an inner circle of loyalty to one also focused on performance significantly predicts whether their lifestyle business becomes a legacy. Surround yourself with a performance-driven inner circle, and don’t let today’s cash distributions detract from a reinvestment strategy that can benefit your company.

To ensure your legacy is fueled by effective reinvestment, look at the challenges you are facing and discuss with your team. You may want to start with one of these options:

1. Upgrade Technology: Invest in new software or hardware that improves efficiency, automates processes, or enhances customer experience. Modern technology can provide a competitive edge and streamline operations.
2. Employee Development: Offer training programs, workshops, or courses to upskill your team. This boosts productivity and employee satisfaction, creating a more engaged workforce committed to your vision.
3. Marketing Expansion: Allocate funds to broaden your marketing efforts through digital advertising, social media campaigns, or content marketing. Expanding your reach helps attract new customers and grow your brand.
4. Product Development: Use reinvested funds to research and develop new products or services, or enhance existing offerings based on customer feedback.
5. Improve Infrastructure: Invest in your physical or digital infrastructure, such as renovating your office space, enhancing your website, or improving logistics systems. A strong infrastructure supports better customer service and operational efficiency.

Choosing where to start depends on your specific business needs and goals. Spend some time evaluating your business with a performance-driven team, and be strategic about how to meet certain challenges. By doing so, you can create a lasting impact for your family and team members long after you’re gone.

Want to learn more directly from Eric Krucke? Join us at our upcoming Panel Discussion and Networking Event on November 7 where Eric will be sharing more about working with family businesses.

Honoring family traditions while embracing modern business practices is crucial for emerging family businesses. Reinvestment is a key strategy that helps newer companies respect their heritage while adapting to contemporary market dynamics.

For young family businesses, values such as integrity, quality, and community connection are often foundational. By reinvesting profits into initiatives that reflect these values, they can create a strong brand identity. For example, family-owned coffee grower and café Alma Coffee invests in sustainable sourcing practices, aligning their operations with modern consumer expectations while honoring their commitment to quality.

Training and development are also vital for these businesses. By reinvesting in employee education that combines traditional skills with modern techniques, emerging companies can preserve their family legacy while boosting innovation and productivity. This dual focus fosters a strong culture that respects the past and embraces the future.

Community engagement is essential for building a loyal customer base. New family businesses can reinvest in local initiatives, such as sponsoring community events or supporting local charities, thereby deepening their ties to the community and honoring their roots.

By strategically reinvesting in areas that reflect family traditions and contemporary practices, emerging family businesses can establish a resilient foundation. This approach ensures that their family values remain relevant and impactful as they navigate the challenges of today’s marketplace.

Want to learn more? 10 Things That Help Family Businesses Preserve Their Legacy

Reinvesting in an established family business can be a transformative strategy, especially when the focus is on innovation. While tradition and legacy are the cornerstones of family businesses, embracing innovation can ensure longevity and relevance in a rapidly changing market.

Family businesses can benefit by viewing innovation not just as a tool for growth but as one that drives new ideas and improvements. Established family businesses often have the advantage of a loyal customer base and a strong brand identity. However, these strengths can become weaknesses if the business becomes complacent. By reinvesting profits into innovative practices, products, or technologies, a family business can stay ahead of competitors and meet evolving customer needs.

For instance, consider eBryIT, a family-owned technology firm providing IT support and services nationwide to a diverse range of clients, including K-12 and higher education institutions, healthcare, government, and both public and private sector organizations. By consistently adopting advanced technologies, eBryIT is able to streamline its processes and remain innovative in their service offerings.

Trey Bryant, second generation President of eBryIT, shared recently that they change the layout of their warehouse about every six months to increase efficiency. "We may be doing imaging one way and find another way to do it by switching it up."

He goes on to share, "Someone walked by and said, 'I see a place where we can gain four seconds.' Four seconds may not seem like much, but four seconds over 400,000 units is A LOT." Listening to their employees and strategically reinvesting in their operations contributes to the continued success of eBryIT.

Fostering a culture of innovation within the family business can also inspire the next generation to take an active interest in its future. When younger family members see the business adapting and thriving, they are more likely to feel motivated to contribute their fresh ideas and perspectives.

Reinvesting in innovation is not just about keeping up with the times; it’s about ensuring that the family business remains a vibrant, competitive, and cherished part of the community for generations to come

Want to learn more? Join us November 7 at our Panel Discussion and Networking Event to learn directly from Trey Bryant about how eBryIT benefits from Reinvesting.

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