Family Business Solutions - Types of Owners

Types of Owners

The governance of ownership in a family enterprise is enormously influenced by what the family or group who have ultimate power Intend for their investment. “Intention” as identified and pioneered by FBS, is where the owning family want to focus their time, passion and commitment. The different types of FBS Intention are Creating, Managing, Governing and Investing.

Creating

Being in control of building a new business or diversifying an existing business into new products or markets. Return on investment is a mixture of financial, personal lifestyle and opportunity.

Managing

Owning family dominates the main governing bodies and management in the enterprise. The enterprise is family owned and family run. The return on investment is financial balanced with other value-added returns such as job opportunities for the family and actively preserving a legacy.

Governing

Owning family actively oversees and monitors the enterprise and their family legacy. The enterprise is family owned but not family run. Return on investment is again financial and other value added returns but this time extending the legacy beyond activities that the family themselves can actively manage.

Investing

Owning family treats ownership of the relevant assets as an investment and would seek to sell if the investment didn’t perform. Return on investment is financial and about managing risk and return

Intention can change as the interests and abilities of the controlling family develop and transitions occur, which means that policies governing ownership need to be kept under review.

There are other distinctions that are useful to identify the Types of Owners in a family enterprise. Some families limit ownership to bloodline descendants of a founder, and others want spouses to be included as owners. Some families fear ownership fragmenting and diluting as it passes down through generations and use family trusts to consolidate and preserve ownership; others dislike the idea of trustees controlling the family enterprise and prefer to have a wide base of committed owners each of whom has scope to decide what to do with “their” investment.

It is important that each enterprising family decides where they stand on these issues. The FBS process reveals the Intention of family investors and ensures that a system of governance is in place that supports this Intention. Any ownership policies that assume too much are unlikely to succeed.