ey manager presenting management strategy

How family businesses can plan their company capitalization strategy

Planning for the capital needs of a family enterprise requires balancing business growth objectives with stakeholder liquidity expectations.

In brief
  • A capital agenda provides a foundation for strategic decisions, financial planning and alignment of business needs with stakeholder expectations.
  • An informed capital strategy requires defined financial objectives, a financial readiness assessment and a clear view of the capital markets fields of play.
  • Capital planning benefits from aligned family goals and interests, plus solid financial management and governance practices.

Today’s transforming economy has brought about ever-expanding business capital needs that compete for limited capital resources and the net profits of companies. Demanding capital markets and tighter capital access also require strategic planning with insight, along with an understanding of the capital demands of the business and the needs of its owners to be successful in the long term.

The capital strategy of business-owning families and their enterprises has always been a critical component of a successful, long-term growth trajectory. Given the current economic environment of higher interest rates and cost of capital, even the most efficient capital plans should be reexamined and assessed. Effective capital planning needs to be informed, resilient and efficient while mitigating risk. This combination can support the development of capital alternatives to fund business growth and shareholder liquidity needs, with a focus on continued family control of the enterprise.

Capital agenda benefits

A formulated capital agenda is essential for business-owning families as it enables strategic decision-making, enhances financial planning and risk management, and aligns stakeholder liquidity expectations. It provides a foundation for effective capitalization and positions the family business for resilience and sustainable expansion in today’s dynamic business landscape.


“Families that have a clear plan and roadmap for capital can optimize their capital resources and mitigate risks,” says Bobby Stover, EY Americas Family Enterprise and Family Office Leader. “They also will have a better understanding of where to find the capital funding, internal or external, to support their long-term growth and success.”


Having a formulated capital agenda is crucial for business-owning families for a few compelling reasons:

  • Strategic decision-making. A formulated capital agenda allows business-owning families to make strategic decisions based on a clear understanding of their capital needs and priorities. It helps align capital allocation with the family’s long-term goals and vision for the business. By having a structured approach to capital, families can make informed choices regarding investments, expansion plans and financial strategies. This supports capital deployment in a manner that can maximize value creation and support the sustainable growth of the business.
  • Enhanced financial planning and risk management. A capital agenda enables business-owning families to conduct comprehensive financial planning and risk management. By assessing their capital requirements, available resources, and current or future shareholder liquidity needs, families can better plan for upcoming capital needs and mitigate risks associated with inadequate funding. A formulated capital agenda helps identify potential funding gaps, liquidity challenges and risk exposures, allowing families to proactively address them. This promotes financial stability, resilience and the ability to navigate through economic uncertainties.

3 steps to formulate your capital strategy

1. Define your financial objectives

Balancing the distribution of profits, dividends and reinvestment of capital helps the business meet the return and liquidity expectations of shareholders without jeopardizing its financial stability or growth prospects. It involves finding a harmonious middle ground that satisfies the needs and expectations of both the business and its shareholders. This balance is important to:

2. Assess financial readiness

The assessment involves a thorough evaluation of the current and future financial health of the business and its ability to meet the balanced financial objectives of the company and its shareholders. It is crucial to analyze all internal capital resources and key financial metrics, such as cash flow, profitability, debt levels and liquidity, prior to entering the capital markets.

During this assessment, the family enterprises should identify any potential risks or challenges that may impact their financial position. By proactively addressing any financial weaknesses or resource limitations and taking steps to strengthen the financial position, business-owning families can have an informed and efficient capital plan.

3. Understand the capital markets fields of play.

When access to the broader capital markets is required to meet the capitalization needs of the family enterprise, it is important to understand the capital markets fields of play and how they might align with the long-term capital needs of business and its shareholders. Understanding the various funding options helps business-owning families make informed decisions about the most suitable and advantageous route for their specific circumstances.

3 tips to streamline capital planning

1. Align family goals and interests

Business-owning families often have unique dynamics and complexities when it comes to aligning family goals and interests with capitalization strategies. Various family members may have different priorities, risk tolerances or timelines for capital needs. Balancing the interests of different stakeholders while maintaining a coherent and unified approach to capitalization can be challenging. Ensuring clear communication and alignment of family goals is essential to effectively navigate these challenges.

2. Develop a strategic capitalization plan (capital agenda)

A well-developed capitalization plan is crucial for addressing capital challenges. This plan should outline the family’s capital needs, preferred sources of funding and the timeline for securing capital. It should align with the long-term strategic goals of the business, consider potential risks and uncertainties, and meet the liquidity needs of its shareholders. By having a clear roadmap, families can navigate the capitalization process more effectively.

3. Strengthen financial management and enhance governance and transparency

Solid financial management and governance practices are essential for long-term success. Business-owning families should maintain accurate financial reporting practices, implement robust financial controls and demonstrate a sound understanding of their business’s financials. Sound financial management instills confidence in its stakeholders and, when needed, enhances the family’s ability to negotiate favorable terms with the capital markets.


Business-owning families can better position themselves for success when developing their strategic capitalization agenda by performing a thorough evaluation of financial readiness, establishing clear and balanced financial objectives and, if access to the capital markets is needed, understanding available funding options that will best align with the long-term capitalization needs of the family enterprise.

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