If you are involved in a family business, you have heard much about ownership. One basic way of understanding what you own is through the concept of assets and liabilities. Quite simply, assets are what’s owned and valuable, while liabilities are not owned or valuable.
Think about the assets you have in your business. These can include cash, a building, office furniture, equipment and so on. Do you own all of these assets ‘out right’? Did you have to get loans from a bank to put money down on those assets? Are you still making monthly payments on any of these loans? If so, the money that’s still owed to the bank is considered a liability or a debt to the business.
One more important point about assets. They can be ‘liquid’ or ‘illiquid’.
A ‘liquid’ asset can be converted into cash quickly and with minimal impact to the price received. A good example of a ‘liquid’ asset is money in a bank account or a cashier’s check.
An ‘illiquid’ asset 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.
Why is it important to understand what assets and liabilities are? You might have learned in your business that you may ‘own’ many assets, but if you don’t have ‘cash’ you may have to shut your doors because you can’t pay your mortgage. It’s important to keep a balance between assets and liabilities in your personal life as well as your family business.
Here we describe some common formulations of family owned businesses and explains why family owned businesses are so vital to the economy and why we want to help you thrive.
Does your family have a family owned business? This segment informs stakeholders to speak about their business in a common language of assets and liabilities.
Did you know that you are already constructing your family and family business legacy? Have you communicated it to your family and business? This Slideshare presentation lays out the legacy components that contribute to a family enterprise legacy.
Have you heard of the three circle model? Did you know that your family business isn’t just one system but more? This Prezi presentation defines the family owned business model called the 3 Circle Model. It is commonly used to demonstrate how complex your family owned entity and all its moving parts can be.
Do you know what are the three most commonly used business financial reports? Do you know exactly what they report? This online quiz is a mix of standard financial reports and their uses.
Have you ever wondered why other family owned business leaders became entrepreneurs? This interview is with Barry Maclean on why he believes free enterprise is good for the community and the family.