Capital budgeting tools are ideal for evaluating the financial feasibility of capital projects. However, these tools are unable to answer an important question: Should the family business undertake a proposed capital project?
There are three qualitative factors that family businesses must first consider.
The first factor is market opportunity. The business’s leaders should be able to explain—in a simple, straightforward sentence—why the capital project makes sense for the business. The answer should consider customer needs.
There are two additional factors, which you can read about in “Three Considerations for Capital Projects.”
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