Financial Planning and Analysis for Family-Owned Businesses

March 6, 2024


By Jarred Liscio, Senior Associate

In January, we published an article outlining the strategic value of financial planning and analysis (“FP&A”) for businesses (you can access that article here). The concepts covered in that article apply broadly to any company that has implemented or is considering implementing the FP&A function. In this post, however, we will delve deeper into some of the specific advantages a family-owned business could benefit from.

It is common for family-owned businesses to be focused on creating stability or growth for both current and future generations. They may already have a long multigenerational history of success that they want to continue to achieve. These companies can range from a domestic single-entity structure to numerous entities and currencies operating around the globe. And while they do not have substantial outside investment, whether from private equity or venture capital, they often utilize bank loans and a revolver/line of credit for their financing needs. 

Three specific areas where family-backed businesses can benefit from FP&A services are: 

  • Cash flow forecasting 
  • Bank financing 
  • Estate & succession planning 

In the current environment, cash flow forecasts have provided tremendous value for tactically managing the business. The cash flow forecast, which typically projects out on a 13-week horizon, shows the projected cash inflows and outflows of the business every week. This can be valuable for multiple reasons. It can be a key piece of data for planning a large disbursement, such as a capital expenditure, an acquisition, tax payment, or employee bonuses. The 13-week cash flow forecast allows the business to manage its cash balance in advance of the outlay.

Furthermore, it allows management to identify trends and quantify the impact on the business if they were to make operational changes such as negotiating vendor payment terms or taking action to improve customer collection patterns. Also, if the business is becoming slightly cash-sensitive, they can anticipate when and how much they may have to draw on a line of credit. These are just several of the numerous examples that exist. 

The next advantage of FP&A for family-owned businesses relates to bank financing, which can be used internally within a company and externally for the creditor. A skilled FP&A team can build out a financial projection, where the business can evaluate the impact of taking on debt, both in terms of capital deployment and managing the accompanying interest and principal payments. When it comes to creditors, banks will often put covenants into place to ensure the business is adequately meeting the debt requirements and maintaining a certain level of liquidity. The bank will often require a forecast to predict if the business will remain compliant with the requisite covenants prior to authorizing a loan and throughout the term of the loan. 

Lastly, a family-owned business is always concerned with ensuring they are on track to achieving their longer-term goals, such as managing the family estate and leaving a legacy by having future generations assume leadership roles and ownership within the company. A crucial part of estate planning also involves tax planning. A skilled FP&A team can work with the business’s tax advisor to map out the potential financial implications of various decisions and increase transparency within the ownership structure. Intelligent financial storytelling can also have a significant impact on succession planning. In their Harvard Business Review article on succession planning, Amy Castoro and Fred Krawchuk explain that 25% of business transitions fail due to the lack of a prepared heir. However, a skilled FP&A team is a key player in partnering with current and future management to ensure a detailed understanding of the past and present, as well as helping to build models to project potential future results. 

The above lists three advantages of the FP&A function that are acutely applicable to family-owned businesses, but there are countless other examples. An experienced team of professionals will consistently stay flexible and support the business in any way needed to help ensure continued operational and financial excellence in both the short and long term. 


Reach out to a Wiss team member for more information or assistance.

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