Whose De-Fault is It? It’s All Greek to Me…BondBeebe
Posting by Geoffrey D. Brown
I was reading an article the other day about some of the budget woes facing various states across the country and it’s not a pretty picture, as several may face default at some point over the next few years. For example: in ten years the state of Illinois will have to pay $14 billion annually in pension benefits, which will amount to roughly 25% of its budget. I found that astounding. Georgia’s infrastructure, which is woefully inadequate, is falling apart and the bill to fix it all is astronomical. And we’ve all heard about California’s troubles.
It is disheartening news. In better times much of it would barely get a mention, but today, with our economy mired in the doldrums and the federal government already having spent billions (or is it trillions) to keep our economic engine running, its big news. At some point in the not too distant future, President Obama or his successor may be dealing with our own internal “Greece-like” situation.
I don’t pretend to be an economist; however, it would seem to me that there won’t be a quick fix to the current economy. People are still waiting for the other ball (or balls) to drop in the financial markets and we may have our own financial collapse a la Greece. So, my guess is that the economy will probably lumber along for quite a long time, the volatility in the stock market won’t go away any time soon either and credit will continue to be crimped.
Financial Advantage: Family Businesses
So, what does this have to do with family-owned businesses? Everything. Family-owned businesses are traditionally well capitalized and usually have low debt-to-equity ratios. Many can also count on the human capital that is the family in times of need. Family-owned businesses are better poised than most other businesses to take advantage of an economic downturn and find a way to come out successfully. With stronger balance sheets many family-owned businesses will be better able to tap the credit markets to finance operations and expansion. And, since traditional investment markets may not be the best place to put your money now, investing in the family-owned business may be the smartest move.
In a recent blog posted to our Family Business Alliance site, Margaret Wilson of Tandem Partners wrote about some of the great family-owned companies that were products of the Great Depression. I suppose my message is similar. If you’re a family-owned business you might want to emphasize spending time assessing your internal human and financial capital as a means of looking forward to how you can position your family-owned business now so that it becomes a leader in a sluggish economy. Give your Board of Directors the necessary guidance so that they are aware of the family’s wishes and then position the company for that success. Whether focusing on your core business here at home or expanding into foreign markets, this is a great time for family-owned businesses to focus on growth.
And a Family Business Non-Sequitor…
On a lighter note there was a blurb in the Wall Street Journal today that Dreamworks is going to make a movie starring the Good Luck Trolls. If you’re old enough, you may remember maybe owning one back in the 1960s. As it happens, the Good Luck Troll dolls were made by Dam Things, a Danish company, which is a family-owned business.
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