Glossary

We have created this page as a resource for further understanding  of words, or other concepts introduced on our site.  

Assets – What the business owns.  Assets can be tangible (cash, buildings) or intangible (good will). See ‘Hard’,  ‘Liquid’ and ‘Illiquid’ asset definitions.

Balance Sheet – A company’s financial position – it’s financial “health” – is shown on the balance sheet, also called the statement of condition or statement of financial position. The balance sheet is often referred to as a “snap shot” of the company because it shows the business’s financial position at one particular point in time.  As the business operates, values shift from one category to another, and the balance sheet changes accordingly.

Beneficiary – A person or entity named in a will or a trust who benefits when the property owner dies – or when the trust is created. A beneficiary can be person, charity, or other entity or person to whom the property owner would like to give his or her possessions and assets.

Board of Advisors/Directors – A body of elected or appointed members who jointly oversee the activities of a business. Directors have fiduciary responsibility to the business and owners of the business.

Capital – Financial resources available for use.

Cash Flow Statement – A financial statement which shows a company’s ‘cash position’ or cash ‘activity’ i.e. cash taken in and cash paid out.  It helps identify periods when borrowing should be considered.

Charitable Foundation – A nonprofit organization that will typically either donate funds and support to other nonprofit organizations, or provide the source of funding for its own charitable purposes.

Cohesion – The act of adhering together; In family business literature cohesion means how ‘connected’ family members  feel to one another and how flexible they are with one another.  Family cohesion can be a  an important success predictor for  a family who owns a family business.

Debt – An amount of money borrowed by one party from another.  Many corporations/individuals borrow money to make large purchases that they could not afford under normal circumstances, leaving them with debt.

Drama Triangle – The concept of a drama triangle describes behaviors between people when they become entangled and which often lead individuals to assume the roles of  ‘rescuer’, ‘persecutor’ and ‘victim’ within that entanglement.

Emotional intelligence – Refers to the way people recognize and manage emotions in ourselves and others.  The five commonly recognized components of emotional intelligence are: self-awareness, self-regulation, motivation, social skill and empathy.

Estate – An estate  is the sum of a person’s assets, legal rights, interests and entitlements to property of any kind – less all liabilities at that time.

Estate Plan – An Estate Plan s the formal closure of one’s affairs and the transfer of assets to designated heirs.

Expenses – Costs that a  company incurs in supporting operations.  Expenses are normally divided into two categories: variable and fixed.

Family Board Member – A member of the board who is also a family member of the owner of the business.

Family Council – A governance structure made up of family members to provide leadership to the family and to assist the family in navigating the family’s relationships with their family business and their board of directors.

Family Mission Statement – A document that a family collaborates together to draft, as a unified expression of the family’s common purpose

Fiduciary Control – An individual, corporation or association holding assets for another party, often with the legal authority and duty to make decisions regarding financial matters on behalf of the other party.

Fiduciary Responsibility – In a corporation, the board of directors, as a body, has a fiduciary responsibility for the decisions they make with regard to corporate assets and the rights of stockholders.  Two fiduciary duties are generally applied in the corporate setting: duty of care (expected to use due care in managing the assets entrusted to them) & duty of loyalty (to manage assets for the good of the business and not for their own personal benefit). The fiduciary responsibilities of a corporation’s board members often include: avoiding conflicts of interest, acting in the interest of the company rather than the member’s personal interest, providing oversight to assure that all company business is transacted legally, making decisions to protect the assets of the corporation.

Founder-Entrepreneurs – Strong, entrepreneurial leaders and leaders of  a family-owned businesses who have very specific behavior patterns which have helped them to become the successful people they are today.

Governance – The act of providing consistent management, cohesive policies, guidance, processes and decision-rights for a given area of responsibility.

Hard Asset – A tangible item or object of worth that is owned by an individual or a business such as oil, natural gas, gold, silver

Heir – A person who inherits or has a right of inheritance from another person.

Illiquid Asset – An asset that cannot be sold quickly because there may be a lack of ready and willing investors or speculators to purchase the asset.  A good example of an ‘illiquid’ asset is a building or real estate.

Income statement  –  Often called The Profit and Loss Statement, (P&L), or statement of operations, shows the performance of a business over a period of time – typically a month, a quarter, a semi-annual period, or a year.

Legacy – The meaning and purpose that a family derives from its history, which is often modeled and defined by its elders in the founding generation.

Liabilities – What the business owes.

Liquid Asset  Liquid assets are cash on hand or any tangible or intangible item that can e converted quickly and easily into cash without losing much of their value such as accounts receivable, a checking account, or certificates of deposit.

Multigenerational Enterprising Family – A family who owns a business that has more than one generation (genealogically involved).

Net worth –  The total assets minus total outside liabilities of an individual or a company.

Neuroplasticity – The ability to  change our ‘brain patterns’ by changing our behavior.

Non-Voting Shareholder – A shareholder with very little or no vote on corporate matters, such as election of the board of directors or mergers. This type of share is usually implemented for individuals who want to invest in the company’s profitability and success at the expense of voting rights in the direction of the company.

Ownership – The ultimate and exclusive right conferred by a lawful claim or title, and subject to certain restrictions to enjoy, occupy, possess, rent, sell, use, give away, or even destroy an item of property.

Personal Proprietors – A perspective of heirs who feel fortunate to have the wealth that has been given to them or inherited by them, but don’t feel obligated to preserve it for future generations; they primarily use the wealth to benefit their current quality of life.

Put Agreement/Option – This is a legal option in contract (often a shareholder’s agreement) giving the owner the right, but not the obligation, to sell a specified amount of shares with a specified price sometimes within a specified time.

Revenues – A company’s income in some form – for example, from sales, professional services or service fees.

Sales –  In general, a transaction between two parties where the buyer receives goods (tangible or intangible), services and/or assets in exchange for money.

Scapegoating –Blaming someone over and over again for circumstances that may or may not have been caused or even related to that person..

Self-awareness –The ability to learn and examine one’s own emotional responses, allowing a person to tap into the information from emotions in order to change  patterns in behavior and thinking..

Self-regulation – The ability to intentionally  decide how to be respond when situations occur that create an emotional reaction.

Shareholder – Any person, company, or other institution that owns at least one share of stock in a company.

Stereotyping – An oversimplified, often judgmental, attitude toward others who are outside of one’s experience.

Stewards of wealth – Family members and their advisors who focus on preservation of wealth and legacy of a family.

Stewardship – The intentional care a family takes to maintain the value they want to preserve, and the wealth they want to sustain for future generations.

Succession – Succession is the process of one person or thing following after another, in sequence.  is a transition and can refer to any kind of  role transition

Triangulation – Triangulation happens when two people experience a conflict with one another, but instead of speaking directly to one another about this conflict, they include another party (or parties) in their communication, to avoid communicating directly with one another  – therefore creating a ‘triangle’ of their communication..

Trust (legal) – A legal arrangement in which an individual (the grantor or trustor) gives fiduciary control of property to a person or institution (the trustee) for the benefit of beneficiaries named in the trust.

Trust (relational) – the ability to have confidence and reliance on the integrity, strength, ability, surety, etc., of a person or thing.

Trustee – An individual or organization which holds or manages and invests assets for the benefit of another in a trust.

Voting Shareholder – Voting Shareholders have the right to vote their owned shares on matters of corporate policy

Wealth – All things that have a monetary or exchange value.