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Knowing the challenges faced by entrepreneurs and family businesses, especially around company growth, family governance and wealth transition, Credit Suisse started to cooperate with renown academic institutions in the area of entrepreneurship, family business and philanthropy. The outcome is a series of White Papers offering insights, case studies, interviews and guidelines along your entrepreneurial journey.
Family businesses
Over the past years, we have been experiencing a reformation of the traditional philanthropy landscape in Latin America. Traditionally, investment in measures to generate social impact lay within the competence of the State with help from other cooperation and charity institutions. However, in recent years, these actors have been losing ground to businesses and family businesses.
The White Paper provides an analytical framework on the social impact of philanthropy stemming from family businesses. It presents its main characteristics and its evolution, aiming to assess whether this new model is leading to a sustainable and inclusive socio-economic impact in the region. The analysis was carried out via 150 surveys to Latin American family businesses that engage in philanthropic activities and 20 in-depth interviews of families in the region that produce the most social impact.
Family offices have become a rich source of economic growth in Mexico. We are currently observing a global trend seeking to consolidate and improve their services. This study analyzes 32 family offices in Mexico with the help of a 25-question survey and qualitative interviews.
Generational succession, portfolio diversification, targeting new investment markets, philanthropy, and strategic planning with risk assessment are just some of the forecasted trends in this study. Family offices represent a growth opportunity in Mexico. Just as these companies become better structured and institutionalized, legacies will emerge in the form of prosperous businesses, whose success could be reflected in other socio-economic facets and sectors of the country.
Family-owned businesses are the cornerstone of most economies, but we still have much to learn about them as an economic phenomenon. Independent of the size of the organizations, these businesses set high performance standards and provide lessons to be learned for the broader business community.
As a bank with a strong focus on entrepreneurs through the last 160 years, Credit Suisse has been committed to redressing this apparent lack of analytical attention. In our 2018 report, we revisit the theme of family and founder-owned businesses and our analysis reconfirms last year’s conclusion that family-owned companies tend to outperform the broader equity markets.
The drivers are a combination of factors that stem largely from a focus on long-term revenue growth as well as a focus on innovation financed by organic cash flows. The surveys show that family-owned companies have a greater focus on long-term quality growth than non-family-owned companies. Greater family ownership also tends to increase the use of longer-term financial targets for management remuneration and family-owned companies prefer conservative funding structures for investments.
For the first time, we assess the best-performing family- and founder-owned companies by region on a three-year, five-year and 10-year basis. Since 2006, the best-performing family-owned companies can be found in Germany, Italy, China and India.
The updated dataset has allowed us to gain a clearer sense of the performance of familyowned businesses across generations too. For example, almost half of our Non-Japan Asian companies are first generation family- or founder-owned, whereas companies in Europe and the USA tend to be older.
This Family Office Guide attempts to create a road map for setting up a Family Office and provide guidance to help existing Family Offices achieve leading practices.
The Family Office Guide will answer fundamental questions such as:
- Why should a family set up a Family Office?
- What are the advantages and disadvantages of setting up a Family Office?
- What services should a Family Office provide internally and what should it outsource?
- What are the costs of running and staffing a Family Office?
- How can the Family Office address issues associated with the alignment of interest between the family and the non-family senior staff of the office?
This White Paper explains why many families fail to govern the family-business relationship and the impact this has on their enterprises and wealth; what best practices successful families in business and affluent families are deploying to build enterprises and wealth that last.
The White Paper Family Governance: How Leading Families Manage the Challenges of Wealth illuminates and challenges, but also illustrates, with several cases of enterprising families that are successfully applying governance best practices in Latin America, Europe, Asia, and the United States:
- How succession and the transfer of wealth across generations are likely to fail without governance-building initiatives by the incumbent generation?
- How to use a board?
- How to use a family council?
- How to make the family council the finance and stewardship education campus for next generation members?
- How to overcome common pitfalls in the use of governance structures?
- How to determine primary responsibilities of the board, the family council, and the Family Office?
- How outside directors can help?
- How to set family policies, like family constitutions, that govern key areas of family concern?
- How to encourage transgenerational entrepreneurial activity and preserve the continued spirit of enterprise?
- How to counteract affluenza and feelings of entitlement in the family?
- How to nurture stewardship and the family’s service and philanthropic initiatives?
- How to govern the family with a sense of purpose after a wealth creation event such as a company sale or an initial public offering (IPO)?
For this White Paper in-depth interviews were conducted with 13 exceptionally successful entrepreneurs in the US and across Latin America, representing a wide range of industries from software and consumer electronics to frozen yogurt franchises and beer. This paper provides an exclusive, candid look into the challenges and triumphs these entrepreneurs face as they build companies that create jobs, introduce innovations, and transform entire industries.
While each entrepreneur’s story and each company’s growth trajectory is unique, the case studies uncovered four overarching themes in the types of challenges that high-growth entrepreneurs face and how the entrepreneurs approach these challenges:
- People
- Financial resources
- Business networks
- Environmental jolts
This White Paper fills a gap in the writings on major liquidity events and the specific issues that entrepreneurs face following the sale of their business. It provides entrepreneurs with perspective on two kinds of challenges after a sale: those they will face as they move on to the next phase of their lives, and those they will face as they learn to manage their new wealth.
The research is based upon extensive interviews with 22 entrepreneurs who have sold businesses that resulted in at least 10 million dollars of liquidity. Nine entrepreneurs were selected as the subjects of detailed case studies. In the course of these interviews, seven themes emerged as common threads:
- Loss of identity and community
- How best to use the new freedom and how to define the legacy?
- Finding sources for “unfiltered” input
- Identifying the right wealth management strategy, advisor, and firm
- Learning the principles of successful wealth management
- Financial analysis and planning before and immediately after a sale of a venture
- Analyzing the true importance of the company in supplying identity to oneself and one’s family
Wealth transition
The impetus for this White Paper is the importance of business families in Latin America and the complexity of their markets, and it is intended as a guide for any business families that hope to be successful in highly uncertain environments.
The White Paper concludes that the families that have best managed to increase their equity value in this region are the ones that have been able to balance the creation of financial value with preserving the families' socioemotional aspects that provide the companies with a competitive advantage. As such, this White Paper proposes that achieving this "dual balance" is the key challenge for business families nowadays.
By classifying the types of business families, this study enables any family to readily identify its challenges when it comes to achieving this dual balance based on the type of family that it identifies with the most. Once these challenges have been identified, the study provides several recommendations on how to successfully tackle them.
Through surveys and interviews with over 200 members of business families, the first part of this White Paper analyzes the challenges faced by business families when it comes to the generational transition process. The greatest challenge is how to pass on not only wealth, but also the family legacy and the ability to continue creating value over the generations. The second part proposes solutions for business families so that they can achieve this objective.
Transferring wealth without destroying ambition involves:
- Establishing the ground rules for managing shared wealth
- Consolidating family assets for more effective management
- Transferring family assets from a Family Foundation
- Creating a transgenerational vision by drawing up a roadmap for family wealth
- Establishing integrated wealth management through the creation of a Family Office
The White Paper not only describes how each of these mechanisms works in detail, but also explains to what extent each of them can help business families overcome the challenges of generational transition.
Philanthropy
This White Paper offers a comprehensive review of the terminology, approaches, and applications of evaluation for the grantmaking community. The objective is to provide greater context and clarity around evaluation. The paper is an introduction to the topic of evaluation.
Drawing from a review of best practices, interviews conducted by Rockefeller Philanthropy Advisors and examples from a variety of case studies, it addresses why philanthropists think about evaluation, gives an overview of the major trends and practices in evaluation, and provides suggestions on how philanthropists can make evaluation effective for their work.
In addition to specific evaluation methodologies, this paper covers the challenges to assessing a grant program and using evaluation as a tool for learning. It includes four issue briefs that illustrate how evaluation has been used for different program areas, as well as case studies of how different philanthropists have chosen to incorporate evaluation in their work.
This White Paper aims to provide you with answers on how to best use your wealth to ensure it drives social change. Enterprises and social organizations based around business principles have the potential to produce more significant and long-lasting returns on investment than those that are not.
The paper illustrates how current trends in philanthropy —the trend of adopting a more business-like approach focused on positive societal impacts and the trend towards local philanthropy in emerging markets — match very well the potential that lies in stimulating entrepreneurship and small business growth in developing countries. It highlights a number of approaches that may guide you in choosing your investments and in encouraging entrepreneurship. Alongside these examples, the paper features a series of case studies, showing how philanthropists around the world invest their wealth, their experience, and their skills in order to unlock entrepreneurial potential.
Behavioral Finance
This report aims to provide you with insight on the emotional and psychological influence that can impact our financial decisions, and how it can result in irrational behavior. It further explores ways to avoid the pitfalls that investors commonly face.
Behavioral finance has managed to bridge the gap between theory and practice by scientifically recording human behavior. To date, research has focused on the ideal scenario of thoroughly rational investors in efficient markets, while reality is dealing with day-to-day irrational investor behaviors and inefficient markets. Combining theory and practice allows us to use the findings from behavioral finance as fundamental elements of advisory services, asset management, and financial product development.