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

At a glance

• The main takeaway: The key to ensuring long-term success for a family business lies in reassessing and reinvesting in the market, model, and management. This involves upgrading technology, developing employees, expanding marketing efforts, developing new products, and improving infrastructure.
• Assess the Impact: Transitioning from a loyalty-based inner circle to a performance-driven one is crucial. This shift can significantly predict whether a lifestyle business becomes a legacy. Effective reinvestment strategies can help address challenges and create a lasting impact for the family and team members.
• Next Steps: Evaluate your business needs with a performance-driven team and be strategic about meeting challenges. Consider starting with options like upgrading technology, offering employee development programs, expanding marketing efforts, developing new products, and improving infrastructure to ensure your legacy is fueled by effective reinvestment.

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The full story:

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.

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. 

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.

A final word

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.

*This article was previously published in the Roots & Legacies Newsletter by the Family Enterprise Center at KSU.