Welcome to HLC Equity’s Family Enterprise Series
Welcome to HLC Equity’s Family Enterprise Series
The Family Enterprise Series is an educational resource designed to educate and empower family offices and enterprises with insights to fuel strategic growth. Whether you’re managing a long-established family business or building family wealth, this series will guide you through common challenges, offering practical steps toward long-term success.
Why HLC Equity?
With over 75+ years of experience, HLC Equity created this series to share insights gained from running our own family business. Many of our key partners are family enterprises that have successfully built wealth through business ventures and invested with HLC Equity. This series combines our deep expertise with practical knowledge to address the real-world challenges family businesses face.
What to Expect
The series will provide insights that span the entire spectrum of family enterprise subjects, from fundamentals like strategic planning and governance, to more intricate nuances of the growth process.
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Videos
Episode 1: Introduction to the Family Enterprise Series
In this introduction, CEO Daniel Farber shares why HLC Equity is positioned to offer a unique opinion on running family businesses and family offices. Leveraging our decades of experience, we aim to provide the insights needed to propel your enterprise forward.
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Hi, Daniel Farber, CEO of HLC Equity here. I’m excited to welcome you to a series we created called the Family Enterprise Series. In this series, we’ll be discussing a wide range of topics around family business and family offices.
Many of our investors own and run significant family businesses, and they’ve generated significant wealth through their family businesses. They frequently invest alongside us at HLC Equity because we have also built a family enterprise, and there’s a lot of alignment both in terms of investment goals and overall values.
Having been in the family business world now for several decades, we created this series and content to help many of our business-owner investors. It’s based on both our experience, hours spent paying family business consultants, and our own research.
Family businesses account for about 60% of total employment worldwide. They’re the backbone of our global economy, driving innovation, creating jobs, and research shows that family businesses outperform their non-family counterparts in terms of long-term success and resilience.
We hope that you enjoy and find the Family Enterprise Series valuable.
Episode 2 : The Importance of Trust
Daniel begins with one of the most critical components of any family business: trust. Building trust takes time, requiring strong communication and relationship-building. According to PwC, 78% of family businesses recognize trust as essential for success. How would you rank trust within your business?
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Today, for our Family Enterprise Series, we’re going to be discussing trust. Most of you know it is the cornerstone of any business. According to a recent PWC Family Business Survey, 78% of family businesses believe customer trust is essential. Yet, building trust takes time, which generally matches up well with family businesses because they are working on a much longer timeline than other businesses.
That gives a slight advantage to family businesses that are able to build that trust over a long period of time.
Episode 3: Innovation in Family Enterprises
While trust is foundational, only 19% of family businesses prioritize innovation. We explore how to balance innovation and stability, ensuring growth without falling prey to inefficiency or disruption.
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Today, for our Family Enterprise Series, we’re discussing innovation. According to a recent PWC Family Business Survey, only 19% of family businesses prioritize innovation.
On the one hand, this can be good, as it allows them to stay focused and not be distracted by bells and whistles. On the other hand, it presents a serious challenge, as it’s no secret that companies that innovate less are more prone to disruption.
Episode 4 : Embedded Family Office
In episode 4, Daniel Farber explores the concept of an Embedded Family Office. Designed to support both business operations and the unique needs of family members, an embedded family office offers services such as wealth management, financial planning, and administrative support under one roof. Discover how this structure can help build a strong foundation for your family enterprise.
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Today for our Family Enterprise series, we’re discussing an embedded family office.
Let’s start with the question, what is an embedded family office?
This term refers to a dedicated support system within a family business that caters to the unique needs of family members.It combines wealth management, financial planning, administrative support, and other services. Under one roof Essentially, it’s like having a personalized in house team that focuses on preserving family wealth, facilitating communication and addressing the multifaceted dynamics of running a family business and embedded family office is designed to streamline operations, enhance privacy and ensure the long term success of.
With the business and the family. It’s a powerful tool that helps maintain the legacy and values that make your family business thrive.
Embedded family offices offer cost effective solutions for managing family needs, but challenges can arise. Balancing business focus while supporting family members requires clear communication and defined boundaries. In the context of an embedded family office, maintaining a balance between business growth and personalized family support is vital to define clear roles, set expectations, and allocate resources effectively.
Episode 5: 9 Challenges of Managing a Family Office
Managing an embedded family office comes with unique challenges. In this episode, we outline the top 9 issues, from maintaining privacy and control to scaling operations. Explore how to overcome these hurdles and strengthen your family enterprise.
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Nine primary challenges in managing an embedded family office within the family enterprise.
1. Distraction. Balancing the business growth while supporting family members personal needs can be a potential challenge it’s essential to find the right equilibrium between these competing factors.
2 Privacy. When business staff also handle family. Matters Maintaining the same level of discretion as a dedicated family office can be challenging
3 Risk. Effective risk management and understanding risk outside of your area of expertise can be challenging.
4 Part time focus When the family office tasks are handled by business staff alongside their regular responsibilities, maintaining a dedicated focus can be a challenge
5 Control. Without clear oversight and accountability, an embedded family office can fall in no man’s land. Establishing proper governance structures and communication channels helps maintain control and timely decision making.
6 Cost and Value. Understanding the true cost and value of an embedded family office can be difficult as its resources may be intertwined with the business
7 Expertise. An embedded family office may lack the comprehensive focus and specialized expertise of a standalone office. Evaluating the offices capabilities and considering alternative models ensures the family’s unique needs are effectively addressed.
8 Scalability. As the family and business grow an embedded family office may face challenges in scaling its operations
9 Governance. complexities and controlling governance can arise without clear oversight and without any designated role.
Episode 6 : 10 Advantages of Managing a Family Office
What are the benefits of an embedded family office? In this episode, we uncover 10 distinct advantages of having this structure in place. From cost-effectiveness to enhanced governance, discover how this approach integrates business resources with family needs to create a seamless and personalized support system.
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So here are 10 primary advantages of managing an embedded family office within the family enterprise.
1 Cost Effectiveness. An embedded family office can be a cost-efficient solution compared to establishing a separate entity. By leveraging existing business resources and staff, you can optimize expenses while still receiving personalized support
2 Familiarity and Trust. With an Embedded family office, the family benefits from working with individuals who are already familiar with the business and its dynamics.
3 Seamless Integration An embedded family office seamlessly integrates with the business, allowing for a streamlined approach to managing both personal and business needs
4 Business Synergies. By having the family office within the business, there are opportunities to leverage existing resources and expertise.
5 Flexibility and customization. An embedded family office offers flexibility and tailoring services to meet the unique needs of the business family.
6 Confidentiality with an embedded family office. Confidentiality can be effectively maintained within the trusted business environment in
7 Business Alignment. The embedded family office allows for a closer alignment between families personal goals and strategic objectives of the business.
8 Consistency and continuity. Having an embedded family office ensures consistency and managing. Family Affairs Irrespective of changes in personnel, this continuity provides stability and enhances long term planning for the family and the business.
9 Access to Business Expertise. The embedded office provides easy access to business expertise and resources, enabling family members to tap into the knowledge and networks of the business.
10 Enhanced Family Governance. The Embedded Family Office can contribute to strengthening family governance by providing guidance and support in areas such as succession planning, wealth preservation and other business dynamics.
Episode 7: What Constitutes A Family Enterprise
Discover how family-driven companies create a lasting impact. In this episode, we explore the essence of a family enterprise—a business not only owned or operated by a family but one that also reflects its values, culture, and legacy.
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Today, we’re discussing what a family enterprise is.
A family enterprise refers to a business that is owned, operated, or influenced by a family. It’s more than just a company—it embodies the family’s values, culture, and legacy.
Family enterprises are built on shared history and often span multiple generations. They merge the dynamics of family relationships with the challenges and opportunities of running a successful business.
Family enterprises play a vital role in our economy, contributing to innovation and long-term sustainability.
Episode 8: Examples of Family Enterprise
What do Walmart and Samsung have in common with local family-owned businesses? In this episode, we uncover the shared traits of global and local family enterprises, showcasing how they thrive across industries and scales.
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So, what are examples of family enterprises, and what makes them family enterprises?
For today’s Family Enterprise series, we’re discussing examples of family enterprises.
You may have heard of global giants like Walmart, Ford, or Samsung, which are all family-owned and operated businesses.
But family enterprises aren’t limited to large corporations. They can be found in local businesses, from restaurants and farms to small manufacturing firms and retail stores.
What makes them true family enterprises is the integration of family values, a long-term vision, and the commitment to preserving their entrepreneurial legacy.
These businesses prioritize sustainability—not just in terms of longevity, but by maintaining strong family ties. They often foster a unique sense of loyalty and resilience, both with their staff and their customers.
Episode 9: Top 4 Family-Owned Enterprises
From Walmart to Mars Incorporated, we take a deep dive into four family-owned businesses that have shaped industries worldwide. Learn how long-term vision, innovation, and family values propel these companies to success.
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What are the top four family businesses?
First, you have Walmart, founded by the Walton family. It has grown to become one of the largest retail chains in the world.
Second, there’s Ford Motor Company, the iconic American automaker, established by the Ford family.
Third, you have Samsung, a South Korean conglomerate that has been led by the Lee family for several generations.
And fourth, there’s Mars Incorporated, owned by the Mars family, who have built an empire with brands like M&M’s, Snickers, and Mars bars.
Episode 10: Entrepreneurialism in the Family Business
Explore how family businesses can reignite their entrepreneurial spirit. In this episode, we share three key strategies for fostering innovation, creativity, and continuous learning within the family enterprise.
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Today, as part of our Family Enterprise series, we’re discussing entrepreneurialism within the family enterprise.
The entrepreneurial spirit brings innovation, adaptability, and growth opportunities to the family business. In fact, many companies are founded on this spirit, but over time and through generations, it can often fade.
Here are three ways to cultivate an entrepreneurial environment within the family business:
- Encourage Autonomy
Empower family members and employees to take ownership of their ideas. Give them the freedom to make decisions, take calculated risks, and explore new opportunities.
- Embrace Creativity and Experimentation
Foster a culture that values creative thinking and welcomes experimentation. At HLC Equity, we encourage this through brainstorming sessions, open dialogue, sharing diverse perspectives, and periodic off-site meetings.
- Foster Continuous Learning
Promote ongoing education and skill development.
At HLC Equity, we invest in training programs and workshops to nurture a growth mindset.
Episode 11: The Five Benefits of Commercial Real Estate Investing for Business Owners
Discover why business owners are turning to commercial real estate. In this episode, we highlight five key benefits, including diversification, passive income, and tax advantages, that make commercial real estate an attractive investment.
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Today, as part of our Family Enterprise series, we’re discussing the benefits of investing in commercial real estate for business owners.
At HLC Equity, we have many significant business owners who invest alongside us in our real estate projects. Here are five key benefits business owners find when investing with our firm:
- Diversification
Whether they’re in tech, manufacturing, or another sector, most business owners who invest with us are 100% focused on their own industry, which is exactly how it should be. HLC Equity provides them with a tangible asset that allows them to diversify their investment portfolio.
- Passive Income
Our limited partners (LPs) generate consistent cash flow, providing a passive income stream that can supplement their business revenue and contribute to long-term wealth.
- Tax Advantages
Real estate investments offer tax benefits such as depreciation deductions, mortgage interest deductions, and 1031 exchanges. These benefits help business owners minimize their tax burden, often offsetting taxable income from their primary business. Additionally, real estate provides significant advantages when dealing with estate tax planning.
- Appreciation Potential
Over time, real estate tends to appreciate in value, offering the potential for capital gains and long-term wealth accumulation.
- Hedge Against Inflation
Real estate investments have historically shown resilience against inflation.
This is especially beneficial for business owners whose industries are more exposed to the negative impacts of inflation.
Episode 12: Five Risks of Real Estate Investing
Real estate investing comes with risks. This episode covers five critical risks every investor should understand, from market volatility to operational challenges, and how to mitigate them for long-term success.
Read Transcript
While it’s easy to focus on the joys and benefits of real estate investing, it’s important to acknowledge the real risks involved. Here are five risks every investor should be aware of:
- Market Volatility
Real estate markets can fluctuate, especially due to sensitivity to interest rates. Economic conditions and inflation can impact property values and rental demand, which in turn affects the return on investment. - Financial Leverage
Using leverage in real estate presents a great opportunity to earn outsized returns, but it also adds significant risk. If not structured prudently, leverage can result in a complete loss of capital. - Vacancy and Cash Flow
Rental properties may experience periods of vacancy, which affects cash flow. Managing properties can be time-consuming and demanding, and even a minor operational issue can potentially result in significant financial losses. - Operational Challenges
Owning and managing real estate is demanding. The smallest operational issues can quickly escalate, potentially costing millions of dollars. - Regulatory and Compliance Issues
Real estate is highly dependent on local regulations and compliance. Changes in these regulations, which are often out of the investor’s control, can negatively impact investments. This is particularly true in cities like New York, where regulatory changes over the past few years have affected investors.
Episode 13: Estate Planning and Tax Benefits of Being an LP in Real Estate
Learn how real estate investing can enhance estate planning. We discuss three key tax benefits for family business owners when investing as limited partners, including valuation discounts and wealth preservation.
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Many of our investors at HLC Equity are significant business owners who face large estate taxes. Based on our experience of settling estates, investing as limited partners (LPs), and managing real estate investments for other family businesses, we’ve identified three key benefits of LP investing for family business owners:
- Valuation Discounts
Real estate investments held through LP structures can benefit from valuation discounts. These discounts account for factors such as lack of control and lack of marketability, which reduce the value of ownership interest. By leveraging these discounts, wealthy investors can potentially lower the taxable value of their estate, leading to significant tax savings for those above the estate tax exemption threshold. - Wealth Preservation
Real estate investments offer long-term appreciation and income generation potential. By investing as an LP, family business owners can access diverse real estate portfolios managed by experienced professionals. This not only provides passive income but also helps preserve their wealth by mitigating market volatility. - Flexibility and Control
As an LP, investors benefit from real estate ownership without dealing with the administrative burdens. The general partner handles management and decision-making, though major limited partners may still participate in key decisions. This allows family business owners to focus on their core business and personal endeavors while still enjoying the wealth-building potential of real estate.
It’s important to remember that tax laws and regulations can be complex and subject to change. Always stay informed and seek professional advice.
Episode 14: To Buy or to Invest as a Passive LP?
Should you build your own real estate portfolio or invest passively as an LP? This episode breaks down the top five advantages and disadvantages of each approach to help you decide the best fit for your goals.
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Should you buy your own property and build your own real estate portfolio, or should you invest as a passive limited partner (LP) in other people’s investments?
At HLC Equity, we invest both passively and actively. Here are five benefits and five disadvantages of investing passively in real estate versus building your own real estate portfolio.
Five Disadvantages of Investing as an LP:
- Limited Control
When investing as an LP, you relinquish direct control over property management decisions. - Lack of Liquidity
Real estate is inherently illiquid, but as an LP, you generally cannot control when to sell or refinance the property. - Lower Returns
While LP investments offer passive income, the potential returns might be lower compared to owning a successful investment property outright, especially when factoring in the fees associated with LP investments. - Limited Flexibility
LP investments often require a longer-term commitment, limiting your flexibility to exit early. - Dependency on GP Performance
Your investment success heavily relies on the performance and expertise of the general partner (GP) managing the deal. Even a great investment can suffer if poorly managed.
Five Advantages of Investing as an LP:
- Diversification
Investing as an LP gives you access to a professionally managed portfolio of real estate assets, providing diversification across different properties and locations. - Passive Income
As an LP, you enjoy a steady stream of passive income without the responsibilities of property management. The general partner handles day-to-day operations, including tenant management and property maintenance. - Professional Expertise
By investing as an LP, you leverage the expertise of seasoned real estate professionals who understand the complexities of institutional-level investing. - Lower Capital Requirement
Investing as an LP typically requires a lower initial capital outlay compared to purchasing an entire property. For example, our investors can invest in $40 to $70 million properties while contributing six-figure checks. - Limited Liability
As an LP, your liability is generally limited to the amount you invest. Additionally, you take on no loan obligations as a passive investor, which is a significant benefit.
Episode 15: 9 Considerations for Implementing Solid Family Business Governance
Effective governance is key to long-term family business success. In this episode, we explore nine essential components, from family constitutions to shareholder agreements, that ensure smooth decision-making and succession planning.
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- Family Constitution A family constitution is a document that outlines the family’s shared values, mission, and vision. It often includes policies and procedures for decision-making, conflict resolution, ownership transitions, and the roles and responsibilities within the business.
- Family Council
This is a representative body composed of family members from different generations, promoting communication, unity, and collaboration within the family enterprise. - Shareholder Agreement
A shareholder agreement outlines the rights and obligations of the various shareholders involved in the business. - Succession Planning
This involves creating a comprehensive plan to ensure smooth leadership transitions within the business over time. - Board of Directors or Advisers
Establishing a governance body composed of independent professionals who bring diverse expertise and perspectives to the business is crucial for balanced decision-making. - Family Employment Policy
Define the qualifications and expectations for family members seeking employment in the business, ensuring professionalism and fairness. - Education and Development Programs
Develop continuous learning opportunities to enhance business acumen, leadership skills, and knowledge within the family enterprise. - Governance Review and Updates
Regularly assess the effectiveness of governance structures and processes within the family enterprise to ensure they remain relevant and functional. - Professional Advisors
Engaging external experts, such as lawyers, accountants, and consultants with experience in family business governance, can provide guidance, facilitate discussions, and offer specialized insights to support effective decision-making.
Episode 16: Top 5 Challenges of Running a Family Enterprise
Family enterprises face unique challenges. This episode outlines the top five obstacles, including balancing family dynamics, succession planning, and preserving family values, and offers insights on how to overcome them.
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So when I boil down some of the key challenges associated with running a family enterprise, here are five of the top challenges.
- Balancing family dynamics and business decisions.
- Succession planning and ensuring smooth leadership transitions across generations.
- Effective communication across generations.
- Preserving family values and legacy.
- Managing conflicts and decision-making processes within the family enterprise.
Episode 17: Differentiating Between Ownership and Management in a Family Enterprise
Ownership and management are distinct roles in a family business. This episode explains the differences, focusing on why clearly defined roles between shareholders and managers are essential for governance and operational success.
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One important distinction we’ve found in our family enterprise is the difference between ownership and management. While these roles often intertwine, they are distinct.
Ownership refers to those who hold equity in the business—the shareholders. Owners have legal rights to the assets and profits and are responsible for making critical decisions about the direction and strategy of the company.
Management, on the other hand, is focused on the day-to-day operation of the business. Managers, who may also be owners, are responsible for executing the company’s strategy and ensuring smooth, profitable operations.
It’s crucial to recognize that while a family member might own part of the business, ownership alone does not automatically qualify them to manage it. Competence, skills, and experience are key to effective management. Conversely, a manager doesn’t need to be an owner. Many successful family businesses bring in professional, non-family managers to help drive the business forward.
Striking a balance between ownership and management is a critical aspect of family business governance. Clearly defined roles and governance structures help ensure both family harmony and business success.
Episode 18: 10 Key Components of a Family Enterprise
What makes a family enterprise thrive? In this episode, we outline 10 key components, including family councils, advisory boards, and management teams, that support smooth governance and foster long-term family success.
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- Family Council
This is a formal body representing the family in relation to the business. It includes family members who may or may not work in the business. The council helps resolve family disputes, educates family members about the business, and plans for succession. - Board of Directors
A board that includes both family and non-family members can provide strategic guidance and hold the management team accountable. Non-family directors offer an objective perspective to decision-making processes. - Family Assembly
This is a larger meeting of all family members, regardless of their involvement in the business. It serves as a platform for communication and education about the business and family values, fostering a sense of ownership among younger or more distant family members. - Family Office
The family office manages wealth and investments outside of the core business. It often oversees estate planning, philanthropic activities, and financial education for younger generations. - Ownership Council
Composed of all family shareholders, the Ownership Council is responsible for making decisions related to the family’s ownership, such as dividends and ownership transitions. - Family Constitution
This written agreement outlines the family’s vision, values, and goals for the business. It defines roles, responsibilities, and rights of family members, along with protocols for decision-making and conflict resolution. - Management Team
Comprised of both family and non-family members, the management team handles the day-to-day operations of the business. Clear guidelines should be established for hiring and performance evaluation, especially for family members. - Advisory Board
If a formal board of directors isn’t suitable, families may opt for an Advisory Board consisting of trusted non-family members. While they don’t have legal responsibilities, they provide valuable strategic advice and outside perspectives. - CEO and President
Whether a family member or a non-family professional, the CEO or President is responsible for executing the strategic decisions of the board or Family Council. - Committees
Larger family businesses may require committees focused on specific areas such as compensation, audits, or nominations. These committees can include both family and non-family members, as appropriate.
Bonus Episode: Difference between public company and private family enterprise
In this Bonus Episode, HLC equity CEO Daniel Farber is exploring the contrast between public stock markets and private family enterprises, this Bonus episode reveals how focusing on long-term value creation over daily pricing can lead to true compounded growth.
Read Transcript
The stock market confuses everyone as to the actual value of investing because daily pricing of a company is simply an illusion.
You focus on adding real value on a daily basis over a long period of time, and that creates true compounded alpha.
It’s the difference between being a day trader and being an owner.
News Articles
While hedge funds and private equity firms grab headlines, family offices—the private wealth management firms serving ultra-high-net-worth families—are quietly revolutionizing the financial landscape. With trillions of dollars under management and the freedom to operate beyond the glare of public scrutiny, these silent titans are reshaping markets and economies on a scale that few fully appreciate.
Over the past 60 years, there have been countless economic cycles—booms, busts, recoveries and recessions. One critical lesson stands out: Recessions can present opportunities for savvy investors. Preparation is vital, especially for family offices that want to preserve and grow wealth across generations. With the right strategy, family offices can take advantage of upcoming multifamily and office real estate opportunities.
The release of Deloitte Private’s second report in its Family Office Insights Series – Global Edition,
Defining the Family Office landscape, outlines the world of family offices—what they are, how they’re growing, their future outlook, and more. As family offices continue rapid global expansion, Deloitte Private’s research reveals that these organizations expect increased wealth creation…
Family offices are becoming a more prevalent part of investment and wealth management, as family wealth surges and their needs evolve.
While there were an estimated 6,130 family offices globally in 2019, just five years later there are around 8,030 and that number is set to increase to 10,720 by 2030, a 75% increase, according to a new report…
Family offices are expected to add more than $2 trillion in assets by 2030, as an increase in wealth concentration and a revolution in wealth management drive rapid growth in new family offices.
The number of single-family offices — the in-house investment and service firms of families typically worth $100 million…
The number of family offices in the world has tripled since 2019, setting off a new race among private equity firms, hedge funds and venture capital firms to attract their investments.
According to a new report from Preqin, the number of family offices — the private investing arms of wealthy families — topped 4,500 worldwide last year. North America has the largest share of family offices, with 1,682…
