Engaged Ownership

Chapter 6Enumerating Core Capital

Core Capital

Owners who recognize enterprise capital as part of their core capital will be less inclined to undervalue their businesses or overlook opportunities to invest in and generate a return from the savvy in their lineage.

There are potentially an infinite number of ways to define capital. While financial and human capital are widely recognized, enterprise capital may be less familiar. The ability to combine resources in ways that generate new value—enterprise capital—is a form of well-honed alchemy mastered by many business-owning families. Owners who recognize enterprise capital as part of their core capital will be less inclined to undervalue their businesses or overlook opportunities to invest in and generate a return from the savvy in their lineage.

As a refresher, this book looks at three types of core capital:

1. Financial capital: money and equivalents; the income and distributions from the business; the financial value of physical assets such as equipment, raw materials, inventories, and real estate.
2. Human/social capital: their individual and family relationships; their talents; drive, perseverance, grit and determination; their strongly held values and their entrepreneurial zeal; the formal and informal education they've received and the experience and knowledge base they hold individually and as a group. (Social capital includes the family's relationships and connections; its influence, its values; the reservoir of goodwill ...