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At the lower end of asset value range families often end up with a "family office" because the previous generation ran a family business which was passed down a

At the lower end of asset value range families often end up with a "family office" because the previous generation ran a family business which was passed down and now it's jointly owned by a number of family members. The option is to sell the family business and distribute the cash or start a "family office" and run it and it's assets together in a pool. For both sentimental and other reasons the family business is not sold (i.e. may have never had audited financials since it had a single owner and no outside investors so it would be near impossible to sell it for a price the family believes is fair). These type of "family offices" don't have any full-time investment management staff. They work with the same type of advisors an individual who had $5M of investment assets would.

javert 6y ago
People also use the term to mean something else, e.g.: https://en.wikipedia.org/wiki/Family_office https://en.wikipedia.org/wiki/Family_office But I think you're right as well.
quickthrowman 6y ago
That’s not what a family office is. That is a family-owned business. See the link in the sibling comment. Also, it’s possible to determine a value for any company.. not sure why you think it isn’t? Net profit/compensation to owner multiplied by a multiple determined by what industry/sector it is in is how small business valuation is done, plus/minus assets/liabilities.
- bretpiatt 6y ago
  There's a reason I put family office in "quotes", your view may be the Wikipedia definition of family office with $100M+ of investment assets, that isn't the view of many "family offices" out there and not matching Wikipedia doesn't make them wrong. Second issue on valuation, logically you're totally correct. In a jointly owned family business logic and Excel aren't the only way the business gets evaluated. Depending on the structure a sale may even be blocked by a minority owner member so all parties have to agree it is a fair sale price to sell. If this "family business" has built up $5-10M in investment assets and the operating business runs at a break even while the investments generate $1-3M a year in gains is it a small "family office" or a struggling family business with an excellent treasury team managing the investment assets?

javert 6y ago

People also use the term to mean something else, e.g.: https://en.wikipedia.org/wiki/Family_office https://en.wikipedia.org/wiki/Family_office But I think you're right as well.

quickthrowman 6y ago

That’s not what a family office is. That is a family-owned business. See the link in the sibling comment. Also, it’s possible to determine a value for any company.. not sure why you think it isn’t? Net profit/compensation to owner multiplied by a multiple determined by what industry/sector it is in is how small business valuation is done, plus/minus assets/liabilities.

bretpiatt 6y ago
There's a reason I put family office in "quotes", your view may be the Wikipedia definition of family office with $100M+ of investment assets, that isn't the view of many "family offices" out there and not matching Wikipedia doesn't make them wrong. Second issue on valuation, logically you're totally correct. In a jointly owned family business logic and Excel aren't the only way the business gets evaluated. Depending on the structure a sale may even be blocked by a minority owner member so all parties have to agree it is a fair sale price to sell. If this "family business" has built up $5-10M in investment assets and the operating business runs at a break even while the investments generate $1-3M a year in gains is it a small "family office" or a struggling family business with an excellent treasury team managing the investment assets?