“What do you want from your business?” It’s the question the board and new CEO asked of Bethany—a family owner who did not work in the business. Bethany wanted to be an engaged owner but the financials of the business were confusing and overwhelming. Rather than digging into the complicated details, she started simple. With the reinvestment rate.
A reinvestment rate is the number that can help you track your family business’s growth. Unlike dividends or profit that prioritize growing personal wealth, a reinvestment rate prioritizes growing the company. Essentially, a reinvestment rate measures how much money the owners should reinvest or distribute. And, depending on how much money is reinvested, it can signal whether or not your family business is on a sustainable path for growth.
To learn how to determine the reinvestment rate for your family business, check out “Is Your Family Business on the Path to Growth?” Don’t dip out of the article early! The authors provide four questions family business owners should be asking when it comes to growing the business.
Read about how to track your family business’s growth here.
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