Time to Manage Your Private Company Wealth

Owners of successful closely held and family businesses need to focus attention on the management of all of their wealth.  For most owners, wealth comes from two primary sources:

  1. The value of your interests in closely held or family enterprises.  This wealth is, by definition, illiquid, for there are no well-organized markets for the sale of interests in private businesses.  Quite often, there is a concentration, even an extreme concentration, of wealth in this illiquid form.  While businesses in their entirety can be sold, the decision to sell is often difficult, and is postponed or ignored or not agreed to by their various owners.  Let’s call this type of wealth illiquid wealth.  We can also use the term pre-liquid wealth to signify that private wealth may be in the process, even a very long process, of becoming liquid.
  2. The value of your interests in any assets inherited, earned, derived from distributions or other transactions with your businesses, or otherwise obtained and held outside your businesses.  While such other assets might include real estate and other forms of potentially earning or appreciating assets, many owners attempt to diversify and to develop portfolios of liquid assets outside their businesses.  They do this directly and/or in retirement plans.  We can call this type of wealth liquid wealth.

The management of liquid wealth is a well-organized industry in the United States.  It involves legions of financial planners, tax advisers, asset management consultants and asset management firms.  Liquid wealth in the United States totals many trillions of dollars and it must be managed, in many cases for fiduciary reasons.

The management of the illiquid wealth represented by investments in successful closely held and family businesses, on the other hand, is at best a cottage industry.  As a shareholder of one or more successful private business enterprises, that wealth should be managed with the same intensity, care, concern and respect as your liquid wealth. However, many owners of successful businesses manage the wealth represented by their investments mostly by chance. There are a number of not-so-good reasons for this:

  • The belief that managing the business is managing the wealth.
  • It takes time and business owners don’t want to do it, or else believe they cannot take the time to do it.
  • It is uncomfortable talking to other owners (or a spouse or other family members) about wealth management.
  • Many owners are hesitant to invest to retain competent corporate, tax, accounting, valuation and financial planning advice, or to retain (and pay for) a “quarterback,” or a professional who will facilitate the investment management process.
  • It is too easy to procrastinate over the always looming yet never realized plan to work on important management and ownership transition issues.

These “reasons” are really excuses and there is no excuse for not managing your wealth in a reasonable and orderly manner.  It is a matter of personal and family responsibility.  So, the time for excuses and procrastination is over.  It is time to take action.

Action Steps

My latest book, Unlocking Private Company Wealthis all about the conversations you need to have to begin to really manage all of your wealth.  Section One addresses the topic of managing private company wealth.  Section Two talks about tools to help in managing private company wealth.  And Section Three provides a number of interesting perspectives on managing wealth in private companies that will cause you to rethink what you are doing.

If you are a business owner, it is time to get with your appropriate family members, fellow owners, and trusted advisers and begin to get serious about managing your illiquid wealth, which likely accounts for a disproportionate share of your net worth.  If you don’t have a trusted adviser or advisers, it is time to begin your search. You won’t manage your illiquid wealth well without them.

Unlocking Private Company Wealth may be the catalyst you need to help you do what you know you need to do about managing the wealth in your business.  Get your copy today.  Get copies for your family members and fellow owners (quantity discounts are available).

This book will help change the nature of conversations you have together and with your advisers.

My questions for you are:

What are you doing to actively manage the wealth in your closely held of family business?
What are you willing to begin to do, now, to begin or to better manage your illiquid wealth?

Feel free to comment on this post and to share it with others!

Until next time, or until we talk,


Please note: I reserve the right to delete comments that are offensive or off-topic.

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