One of the most important topics we discuss with our family enterprise clients is how they measure their wealth. On the surface, this seems simple. The answer is just a matter of crunching some numbers. But when we dig deeper, there is truly so much more that defines a sense of wealth beyond the traditional balance sheet. Of course, we cannot exclude the quantitative measures of wealth in a Family Enterprise’s 100-year plan, but neither can we neglect the qualitative. After all, it is the diversification and nurturing of both sides that propels multi-generational growth.
So what are the 6 elements of wealth and how do they contribute to your enterprise’s 100-year plan?
The 6 Elements of Wealth
The wealth of a family business is generally based on factors like net worth, your financial balance sheet, and liquidity as well as the legal structures in place that hold the business together. These are the quantitative measures of a family’s wealth and comprise the first two elements of wealth:
- Financial: The financial element of wealth includes the resources that an enterprise has to invest along with the responsible management of those resources to sustain a long-term strategy.
- Structural: Structures, including business documents, a family constitution and regular meetings that help protect the assets, engage the beneficiaries, frame decisions, and advance the vision and purpose of the enterprise.
While these elements are inarguably important, there are four other elements that hold a lasting family enterprise together, and you may be surprised to learn that they are far more qualitative in nature.
- Heritage & Values: A combination of your family story and values, customs and practices, this form of wealth is often the foundation for decision-making.
- Community: The second of four qualitative assets, your contribution to society multiplies as you not only thrive as a business, but as a family who gives back to the community where your wealth was created.
- Human Talent: The most powerful investment and opportunity that any one family has to thrive and grow is the family talent pool. While it is hard to place a quantitative value on the potential of family members in contributing to the enterprise, this asset type may have the highest qualitative value.
- Family: This asset is about the inclusion of all members of the family enterprise, beyond just those who are currently active in the family business.
My History in Family Enterprise
I learned at an early age that numbers were only a fraction of the wealth equation. My parents, Wilfred and Catherine Kappenman, ran a second generation midwestern farming operation. Each day, they taught my siblings and I the importance of strengthening all elements of wealth, not just those that could be recorded in a ledger. Because of their commitment to building a fuller picture of how we defined our family’s success, their family enterprise still thrives today with the third and fourth generations. I grew up learning and living first-hand that wealth diversification is the key to success.
When we expand our view, then, to include these four other elements—Heritage, Societal & Community, Human Talent, and Family—we create a stronger, more powerful impact. Together, these six types of capital work to create the fullest value of your family’s wealth.
Choosing a Guide
Of course, some of the greatest challenges in this endeavor are aligning all six elements, organizing the family’s participation, and even seeing beyond your own personal biases or family relationships when making important decisions. This is where your WillKate advisor comes in.
With a distinct understanding of the competing needs and priorities of a family enterprise, we act as the coach and mentor for all involved. When tough questions need to be answered, we ask them. When there are successes to celebrate, we’re the first to raise a glass in your honor. Solving family problems can be complex, but the right partner can help your family—and your enterprise—thrive.
To learn more about how WillKate may be able to help your family enterprise, email Somer Schimke at firstname.lastname@example.org or call 605-275-9181 to schedule a first conversation.