If you’ve ever observed a beginner on a paddleboard, there’s a tepidness in movement that’s hard to watch. The beginner most often looks like he’s trying not to do something rather than trying to actually do something — crouched down, knees bent, unsteady and unsure. It’s a strain. Just fall in already.

Except they don’t. The beginner paddles carefully, with noodle arms that don’t slice the water. So the paddleboarder avoids the fall. But what good is that? Success, in this case, is defined by staying on the board, dry and useless, making an unproductive turn at covering very little distance.

This assessment is harsh, perhaps, but it’s meant to celebrate the opposite approach: Fall in, get wet, put it all out there, resolute and self-assured.

You might recognize a version of the paddleboarder’s careful tepidness in the workplace. Restraint in how we communicate is often misunderstood as professionalism or deference. Anyone familiar with blue-collar work and workplace culture a generation or two ago has seen the opposite of professional restraint: a good cussing, wrenches thrown, checks docked and people fired and rehired on a regular basis. This approach was chaotic and unproductive, but in many workplace environments today, we seem to have overcorrected.

A lack of candor can lead to unproductive conversations and ill-informed decision making. Too often, our office demeanor is one of two things: 1) careful and tepid; or 2) abrasive and cynical.

There is, in fact, another way. It’s the art of packaging the sharp edges of candor in the bubble wrap of respect.

Hedging Leads to Uninformed Decision-Making

It’s worth slowing down here and being precise about what’s actually happening. These “careful” behaviors are not random, and they aren’t the result of individual incompetence or lack of courage.

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What’s Next

i3 Family Ecosystem: Independent Pieces Become a Thriving Collective

We’ve recently updated our i3 website and, in doing so, we’ve shared some thoughts on our family ecosystem, and how it works to mitigate the challenges families in business face. We like the word “ecosystem” because it's designed to do the one thing families in business need above all else: Take independent entities and informational resources and harmonize each into a single, thriving collective. We’ve also provided a simple sketch to illustrate how it all comes together. Read It →

Where Have All the Assets Gone?

After working with families in business for decades, we’ve learned that many family enterprises accumulate “filing cabinet assets.” And, often, these assets are now worth a lot of money. Much of what we do as a firm is built around this first step: Uncovering the history and operating details of an enterprise by collecting, organizing, presenting and analyzing every document and item in that proverbial filing cabinet. It’s a family’s library of information; it’s the piece that makes our ecosystem go. Read It →

When Estate Docs Can’t Answer Your Questions

In this post, we explore the gap between when estate documents are drafted and when litigation sometimes ensues. Who exists in the middle, and who does the work to prevent litigation from happening at all? We know the paperwork often leaves questions unanswered, but we encourage families to avoid leaving questions unasked. There are answers to be had. But first, what’s the difference between mechanical questions and emotional questions, and does it matter? Read It →

The Big Read by Family Matter

About Family Matter and i3

”Family Matter“ is a content series by Kevin Heaton, founder and principal of i3 Global Enterprises, a private asset management and family CFO office. Newsletters and emails like “The Big Read” feature the latest content from Kevin and select posts from i3resources.com, our company’s website.

i3 helps families in business navigate the unique financial challenges and interpersonal conflicts that threaten long-term wealth preservation and growth. Our families reach positive outcomes through nuanced i3 processes and operational systems that align four core pillars: succession planning and family governance, wealth analysis and reporting, financial infrastructure and forecasting and private asset management (if needed). By creating durable systems within a financial ecosystem that’s tailored to each family’s needs, i3 Global helps families in business foster financial and relational harmony and grow wealth over generations. To learn more about i3 Global Enterprises, visit i3resources.com. Or contact us here.

In the intricate tapestry of the American socio-economic landscape, two fundamental pillars stand tall, each playing a pivotal role in shaping the nation's identity and resilience. The first is the rich tradition of family businesses — a remarkable 87% of U.S. businesses are owned by families. For generations, they’ve been the backbone of American commerce. The second is our country’s unique system of federalism, with its clearly defined division of powers between the federal and state governments. Both are integral to the nation's success.

While family businesses and federalism operate in different spheres, their importance to America is intertwined. Both embody and share core principles: resilience and adaptability, community connection and long-term sustainability.

Resilience and Adaptability

The close-knit nature of family enterprises allows for agile decision-making. In turn, this trait of agility lends itself to adaptability when faced with economic uncertainties and changing market conditions. And that’s a mark of resilience. Moreover, a family businesses’ commitment to preserving a legacy for future generations fosters a strong work ethic, openness to embrace innovation and an unwavering dedication to quality — values that resonate deeply with the American spirit.

Related: Who Should You Call When Your Estate Documents Can’t Answer Your Questions

In parallel, the United States' unique system of federalism exemplifies the delicate balance between a national government and individual state autonomies. This system, enshrined in the Constitution, ensures that power is distributed between the federal government and state governments, preventing the concentration of authority in any one entity. The smaller nature of localized governing bodies promotes a nimble work culture and the ability to respond to uncertainties with swift action.

Community Connection

Family businesses and federalism contribute to the fabric of local communities. Long considered the heartbeat of Main Street, many families in business make significant contributions to the economic vitality of the nation. These enterprises, ranging from small mom-and-pop stores to large multi-generational corporations, foster a sense of community and continuity. They anchor neighborhoods, provide goods, services and employment. Unlike their corporate counterparts, family businesses often prioritize long-term sustainability over short-term gains, investing in the well-being of their people and local communities.

Similarly, federalism ensures policies reflect the unique needs and values of individual states, fostering a sense of local identity. State governments can tailor policies to meet the specific needs of their communities, fostering innovation and experimentation. This decentralized approach prevents a one-size-fits-all solution, allowing for diverse strategies to address regional challenges.

The connection between community and localized government bears out in national polling, which demonstrates a stronger approval of state government over federal governments. According to Pew Research, just 22% of U.S. adults have a favorable opinion of federal government, while 50% have a favorable opinion of their state’s government. The numbers surge higher when citizens are polled about their local governments, with 61% of U.S. adults rating their local government positively.

Long-Term Sustainability

Both family businesses and federalism emphasize long-term sustainability over short-term gains. Family businesses focus on preserving a legacy for future generations, while federalism aims to maintain a stable and enduring system of governance, both of which support one another.

In the grand tapestry of America, family businesses and federalism emerge as pillars of strength, embodying the principles of adaptability, community connection and self-governance. As the nation continues to navigate the complexities of the modern world, these foundational elements will undoubtedly play a crucial role in shaping the identity and resilience of the United States for generations to come.

Editor’s Note: “The Fairness Trap” is an updated version of an article originally published in Family Business magazine, a publication dedicated to improving family dynamics and their businesses.

When families are feuding, fairness is always an issue — and usually, it's about more than just money. In my 20 years of meeting with family-owned enterprises and managing family wealth, I have yet to meet a family who is free from the struggle of defining fairness among family members. Why is it so hard to define fairness?

Maybe because fairness is about more than the money — it's often about feelings. Take, for example, a meeting I facilitated with a family and their newly formed family counsel. All of the assets were equally divided among the children, and it was now their responsibility to manage them. A CEO was nicely settled into running the family business. The real estate assets were being actively managed by a family member. It could not have been fairer by a measure of dollars. But, as nature would have it, unfairness became a topic of discussion.

When it comes to transferring wealth to the next generation — especially when those next generations are involved in the family-owned business — fairness goes beyond its textbook definition of “impartial and just treatment or behavior without favoritism or discrimination.” But why? Generally speaking, fairness is defined by rules that are garnered from our faith, family or institutions (e.g. government). The “rules we live by” are set by small groups of people and applied to larger groups of people in hopes of achieving fairness. We even have a judicial branch to referee our “fairness.” However, when it comes to families gifting their wealth to the next generation, fairness is in the eyes of the Grantor.

Different from the “rules we live by” and the system that enforces them, a Grantor, who either created the wealth or, in some cases, inherited the wealth, is faced with being the judge, jury and executioner—unless “mom gets involved to protect the innocent.” At some point in a Grantor's life, s/he will face an overwhelming burden: to define fairness amongst those s/he loves most, and then be subject to their judgement while living, after death, or both. It might seem easy to address, unless of course, you have been in their shoes.

Fairness is a two-way street, and often needs a crossing guard. On one side of the street, we have the Grantor whose personal perception of fairness creates a framework for distribution of wealth among family members. On the other side, the beneficiary of that wealth creates his/her own interpretation of fair based on the size and distribution of the gift. But crossing the street is complicated by the oncoming traffic of opinions from family members, married-ins and friends, not to mention the evolving weather of emotions that can threaten to disrupt progress in an instant, without warning.

Here are a nine philosophies that create harmony for families in transition:

1) Remember that wealth is a gift not an entitlement.
As a whole, beneficiaries tend to take better care of the gifts they receive than entitlements they think they deserve. When families frame an inheritance as a gift and something to be thankful for, they foster a culture that embraces that very philosophy — and the great responsibility that comes with it.

2) Your wealth is not your only gift. Measuring fairness in assets only devalues the many other intangible gifts (location of an asset, type of an asset, skill sets inherited, access to family vacation homes, land, to name a few) that have been passed onto the next generation.

Sometimes the beneficiary who receives the least is ultimately the individual who does the most with their gift. That’s because they focus on what they can do with what they have been given, instead of obsessing over what they “should have” received. Here's an example: One side inherited what was a strong-cash-flowing crop business that lasted for three generations, while the “unfavored” side inherited warehouses that they grew into a $100 million dollar enterprise. The father's gifts were matched to the skill sets of the children; no one would have ever guessed the outcome.

3) Equality is not achievable, but fairness is. No matter how hard you try, you cannot achieve equality because it is about more than money. It's tied up in timing, genetics, opportunities, good old fashioned luck and so many other factors. And money is not the great equalizer. Just as the legendary football coach Jimmy Johnson once said, “I did not treat my players equally, but I was fair to each of them,” we must embrace the idea that a Grantor is empowered (and obligated) to customize the size and scale of a beneficiary’s gift based on individual needs, motivators and stages in life.

4) There will always be a needy one. Just plan on it. There are always family members who are constantly in need of money. The ones for whom “nothing is ever their fault” or “have the worst luck.” Accounting for them can involve more nuanced planning (special trusts, trustees, therapists, hard love). Whether it is over-spending, business failures or marital issues, these family members not only threaten the family's ability to achieve or maintain harmony, their bad decisions often take money from those who are independently successful — the whole squeaky wheel gets the grease thing. A Grantor's challenge is protecting the other family members from self-induced failures. It is very important to note that these individuals are not those family members who face unique circumstances due to mental and physical health spanning addiction to disabilities.

5) Expectations rarely yield expected results. I have never seen a Grantor’s personal or professional expectations of their children, regardless of age, be met with positive, long-lasting results. Children either excel at what they want, the way they want, which leads to happiness, or out of a desire to please the Grantor, which eventually fails with unintended consequences. So use your wealth to help children find their own gifts and offer them the greatest gift (above your love), which is to tell them the story of how the wealth was created (the good, the bad and the ugly). Share what it was like in the early years: The mountains climbed; the victories won. Let the expectations be those they set for themselves — your story will help them do it.

6) Fairness and harmony go hand-in-hand. Finding family harmony takes so much time (think in terms of years). If it were easy, families would stay together more often. Spend those family meetings and social outings seeking harmony among family members — even when it feels like it is a waste. After all, fairness tends to be both more achievable and more digestible when the family is in harmony.

7) Don’t keep score in a game where there is no winner. Siblings or beneficiaries who keep score are playing a game where there is no winner (except the attorneys), and will only foster jealousy, distrust, anger and resentment between family members. Grantors are human; they are going to give what they want, to who they want, for their own reasons. Instead of keeping score, seek to understand why the Grantor is allocating assets in a certain way and support their decision. The results will be far better.

8) Define “fair”. While this may be the hardest thing you will ever do as a family, spend time defining what fair means in your family — and why. Defining “fair” isn't just for those who have lots of assets; it’s for everyone. It starts as soon as there is more than one party who will benefit from a gift you're sharing with someone, whether it is tangible or intangible. The more you have and the later you do this, the more assistance from outside parties you will need.

9) Let business be business. While I have heard every patriarch/matriarch say “business is business,” it is rarely applied — and for good reason. There is something innately gratifying about seeing your child(ren) carry on your legacy, especially in a family business. So much so that it can make up for shortcomings of the beneficiary(s). “Let business be business” means different things to different-sized companies, but this is what it means to me: Focus on building a successful and profitable business and let the business pick its leaders. Simply put, family members benefit when the company is successful. The egos of those who do not get “what they are entitled to” may be bruised, but they will maintain their healthy bank accounts.

If you ask the next generation if a gift they received from their Grantor was fair, you will get wildly varying answers that almost always include a “yes, but.” If you ask the Grantor if they were fair in distributing wealth, especially if the Grantor is the parents, I always get an overwhelming “Yes.” But what makes the “Yes” so interesting are the stories that make it all seem fair in the eyes of the Grantor.

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The life of a family business owner is a dance, requiring a delicate balance between the demands of work and the commitments to family. While all entrepreneurs face challenges in managing their professional and personal lives, family business owners encounter a unique set of dynamics that can make this juggling act even more intricate.

When you consider the sheer number of businesses owned by families — Family Business reports that, of the 37 million businesses in the U.S., 87% of them are family-owned — these intricate challenges are widespread.

Here are a few you might recognize:

• Blurred lines. Most notably, blurred lines are aplenty in the family business owned and operated by you and your spouse. How’s that for blurred lines? Decisions made at the dinner table can spill over into the boardroom or the bedroom. This intermingling often leads to tensions, at best.

• Succession challenges. Planning who takes over a family business can be tricky for a variety of reasons that could fill the pages of a large and heavy book.

• Dual roles and expectations. Often family members fill several roles, which sets up scenarios where expectations become cloudy, aren’t shared across all stakeholders and are generally misunderstood. This doesn’t even touch on the more complicated roles of, say, the company CEO and father whose adult children are also his employees.

• A way of life. A family business is woven into the fabric of families and often defines who they are. It’s not only a family’s sense of place, it’s also their sense of self worth. With these defining emotional associations, business decisions can become very personal very quickly.

So how does a family anticipate the challenges that are sure to arise? The short answer is have a plan for the “what ifs” before they happen. Here are a few items to consider to get started.

Defining boundaries between work and family lives is essential for family business owners to orchestrate harmony and success on both fronts. Establishing clear boundaries is also crucial when family members are employed within the same family business. While the bond of family can enhance collaboration, it also brings unique complexities to the table. Transparent communication is key; setting expectations regarding work conduct, decision making processes and personal boundaries helps to delineate boundaries. By fostering an atmosphere of respect and accountability, families can cultivate a harmonious and productive work environment conducive to success in both business and family relationships.

Prioritizing time management is a necessity when it comes to juggling the demands of work and family life. In the whirlwind of business pursuits and familial obligations, strong time management becomes not just a skill but a lifeline. Learning to delegate tasks, setting clear priorities, and establishing boundaries are all essential when it comes to not only optimizing productivity, but preserving time with loved ones. By mastering the art of time management, family business owners can navigate the dance between work and family commitments with grace, purpose, and a renewed sense of fulfillment.

Setting realistic expectations is vital for families in business striving to balance their work lives and family lives harmoniously. In the complex dynamic of balancing business responsibilities and moments spent with family, it’s easy to succumb to unrealistic ideals or overwhelming demands. However, by establishing achievable goals and boundaries, family business owners can navigate this delicate balance more effectively. Realistic expectations allow for flexibility and adaptability, acknowledging that both work and family life have their flaws. Embracing a realistic mindset fosters resilience and reduces stress, enabling family business owners to cultivate fulfilling lives both at work and at home.

The life of a families in business is a juggling act. Each day rings opportunities, some complicated and others simple. By mastering time management, boundaries and realistic expectations, a business owner can forge an equilibrium between their professional endeavors and personal lives, ultimately enriching both sides and laying the foundation for lasting success and fulfillment.

i3 is a family governance and private asset management firm focused on bringing financial and behavioral harmony to family’s working in or benefiting from multi-generational businesses and generational private assets.

Family Business is like the busy morning breakfast that occurs each day before everyone goes their separate ways. Just like cooking a family breakfast, managing a family business requires the right ingredients and careful preparation. Keeping the mess at a minimum requires one secret spice: collaboration.

Below are some ingredients and special tips to whip up a successful family business.

The Ingredients of Collaboration:

The Family Recipe is the first thing that comes to mind when you think of any family meal, from the busy breakfast to the holiday dinner. Similarly, to the shared values and visions of a family business, everyone is committed to this heirloom recipe. This commitment is what keeps the delicious meal special and the family business unique and thriving.

The Breakfast Buffet keeps even the pickiest eater of the family content by bringing something different to the table. Much like a well-rounded meal that offers something for everyone, acquiring and leveraging diverse skills ensures that all aspects of the business are covered.

The Family Meal allows everyone to sit together and enjoy the strong bonds they’ve created and consider the results of their collaboration in the kitchen. Working together towards common goals in a family business brings members closer, fostering business success and mutual respect. Just like the family meal, these collaborative efforts create memories and connections that go beyond business.

Cooking Tips:

Start with a family chat over coffee. Clear communication is essential. Regular family meetings to discuss business matters can ensure that everyone is on the same page, just like planning out the busy week on Monday morning.

Keep your recipes on a recipe card, or in terms of family business, formal governance. This recipe card provides a clear guide to making strategic decisions, managing conflicts and ensuring that personal relationships do not interfere with the success of the business.

A kitchen timer is always a good idea to keep things from boiling over. Whether this involves an external advisor or a family member who’s in charge of outlining conflict resolution procedures, having a plan ensures that inevitable conflicts are resolved quickly and effectively.

Lastly, a cooking class or two can never hurt. Professional development helps develop younger family members or future employees. Like a cooking class, professional education and training not only enhances skills, but brings new perspectives to the table, ensuring future success for the family business.

Just like the perfect breakfast, a successful family business requires the right blend of ingredients and secret tips to create an ideal spread. Collaboration and strategic planning in all elements of business can whip up a successful breakfast on each busy morning.

I’m not someone who has a great deal of down-time for video or television viewing, however recently, a colleague recommended I watch a 2016 episode of a show called American Greed.  The episode explored the tragedy that was the James E. Scripps family wealth.

The episode details how an heir to a Scripps newspaper fortune was ultimately sentenced to nine years in federal prison after being found guilty of embezzling $3.6 million from his mother and mentally disabled uncle to pay for a lavish lifestyle.

Michael Scripps, whose family once owned newspapers such as the Detroit News, was convicted of seven counts of wire fraud; using interstate wire communications for the purposes of fraud.

The patriarch of the Scripps family in Michigan was James E. Scripps, who owned the Detroit News. He was the half-brother of Edward Willis Scripps, the founder of what became the Scripps-Howard newspaper group. The two newspaper companies were separately owned. Michael’s trust fund was from the fortune of James E. Scripps, his great-great grandfather, not E.W. Scripps. The James E. Scripps holdings were sold in the 1980s for more than $700 million.

The tragedy that pre-dated the embezzlement of funds by Michael Scripps however, was the mismanagement of the more than $100 million dollars left in the hands of Michael Scripps’ mother, Melissa Scripps after the sale in the ‘80s. 

During Michael’s trial, Melissa testified that she had inherited $11 million, and also took over her elder brother David's share (said to be more than hers), because he was mildly autistic. But during his trial, Michael Scripp’s defense attorney argued that her fortune was closer to $100 million. Whether $11 million or $100, it rapidly evaporated.

As a weak justification for his actions, Michael Scripps is said to have thought that his mother was spending too much money and that she was spending his inheritance.

U.S. District Judge Legrome D. Davis reminded jurors that they had to decide if a crime occurred, not if people had "squandered, in a profound way, their lives."

To sum it up, a CNBC article described it as:

“…when the money began to run out, it triggered a family feud … [one] that saw mother and son turn on each other, landed one family member in prison, and left a name once associated with entrepreneurship and philanthropy forever tarnished by scandal.”

From Barriers to Enablers

In one section of the television episode, the story uncovered that Melissa Scripps was quite simply, “grossly unprepared for the responsibilities of managing significant wealth.” Her own attorney acknowledged to "American Greed" that at the time his client inherited the family fortune, she had never held a real job, and had no formal education beyond high school.

Those in trusted advisor positions of her late grandfather and father aged-out of her life. Others went from protectors or barriers of irresponsible spending to enablers. Their jobs became to make sure the checks cashed…until the checks didn’t.

Years of lavish spending included four husbands, two of Princess Diana's gowns, a Napoleonic tiara, luxury cruises around the world, the purchase of Queen Elizabeth II's coronation chair and Queen Victoria's nightgown.

Michael Scripps had his own six-figure trust fund and a $3,900 monthly allowance. But that wasn't enough; Michael soon persuaded his mother to entrust the management of her assets to an old college friend in the money business within a high-profile investment firm.

At some point -- only after she began to understand that her own resources were rapidly diminishing -- she noticed a mysterious $40,000 withdrawal that went to her son after she had turned down his request for the same amount.

Ultimately, Michael Scripps’ fraud of $3.6 million was settled by the high-profile investment firm necessitating his mother to report the fraud to the FBI in order to move the settlement forward. The rest as they say, is history and jail time.

While this is a simplification of a more involved, very public story involving a multi-generational, complex dynamic, it does go to the very essence of the Family CFO and Family Office Private Asset Management.

Managing Crisis through Anticipation

The best way to manage a crisis is to not be surprised by it.

As a part of our conversation with any Family, we discuss challenging subjects in what can be a series of family meetings; we must do this to understand the entire family dynamic. We plan for the “what ifs?” (and we have seen some spectacular ones). Experience counts when planning for crisis and for success.

Through these meetings and conversations, we construct a Family Profile which includes a Family Constitution, a Family Investment Philosophy and an Investment Policy.

We next create an Asset Summary Report including a detailed assessment and historical performance review of private assets owned by the family.  We then build a ten-year, Family Global Cash Flow map together; we assure access to information and trusted resources for decision-making, an infrastructure to support and manage a high-wealth family’s complex needs, and investment options for capital placement. 

I built i3 to be the trusted Family CFO – an objective, experienced voice in crisis and calm. A trusted expert who considers the complex dynamics of family change.

Had Melissa Scripps had access to and knowledge of the power of a Family Office, perhaps her wealth would be working today to support future generations.

To learn more about creating a sound Private Asset Management strategy for your family, visit i3’s website and schedule a consultation with me.

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“Wealth is a gift, not an entitlement:

This sentiment is more of a value that I encourage families to embrace and champion through the generations. It creates the opportunity for all family members to learn about the journey of previous generations - the origins of the family's success, and how wealth was created, passed down and why.”

In my most recent article published on the Family Business Magazine website, I discuss philosophies to help overcome the common “That’s Not Fair” syndrome.

Read the article here!

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“Buy land, they’re not making it anymore.” - Mark Twain

As a firm, i3 has underwritten billions of dollars in CRE assets across every spectrum for the families we work with, whether traditional income producing CRE or land developments in the making. We have seen many interesting CRE deals but are still often surprised by the next deal.  For the families we work with, and so many others, CRE represents an opportunity for capital appreciation (because of rising rents and declining interest rates) and income yield, as CRE still outpaces yields on most government (local, state, federal) and corporate bonds.  But like every golden age that came before, prices can’t go up forever.  Our goal is to share with you, at least in this article, some of the vehicles available for investing. And in a second article, we’ll discuss the protection of your assets if and when the bubble bursts.

Diversifying an existing CRE portfolio or making a first-time investment into CRE starts with ‘making the decision’ to do so, which typically requires bringing all family members on board and writing an investment policy. With everyone’s blessing and a fully-formed investment policy, you will decide which investment vehicles you’ll use for CRE asset ownership. One or more of the following paths are how most families choose to participate in the ownership of CRE.

Invest in a project

Invest in a project generally refers to a project that someone else, usually a developer (a.k.a. manager, general partner, promoter), has originated and is promoting.  A project is defined as any number of things: ground up construction, existing building or re-development for any CRE asset class.  In any case a developer/ promoter, with a scoped-out project, establishes a partnership business plan and is off to the races in search of capital (or equity), from a financial partner (or a  “LP”, limited partner).  In this scenario, your family will underwrite the people (developer/ promoter) first, with the project (a close) second.  Investing in a project generally means you’ll pay fees to the developer based on two (2) variables: management and performance.  Historically, this is the most common entrance into the CRE market; it offers families limited exposure to risk (equal to equity invested) and relies on the developer to manage daily operations. For more visibility and control, please see Buy It, Own It.

Be the leader

Being the leader means that the project is entirely yours. You source, underwrite, execute, manage and report to shareholders on the asset at hand.  And beyond that - you’re leading the charge on establishing the business plan and managing, promoting and developing the project. Often referred to as the General Partner (“GP”), your role as leader entails lots of work. But guess what, there’s good news. You will be compensated accordingly. This path makes the most sense for families whose relatives already work in the CRE space or perhaps just wish they did.  In either scenario, to be an effective leader, or GP, it would behoove your family to gain as much visibility and control as possible on any given project.  A good strategic move? invest first as a limited partner.

Consider it as collateral

You will loan money as either a senior or mezzanine lender at an agreed-upon rate with either full or partial collateral.  While you may sacrifice returns (because loans generally get paid lower returns than equity) you have some downside protection. While lending money to a borrower, it is important to understand an asset’s business strategy, but it is more important to understand your three (3) repayment source payments from rents collected, the appraised value of the asset, and if those two (2) items are not enough, there’s always the borrower(s) additional collateral.

Buy It, Own it,

This is what i3 calls direct investment.  Depending on your family's balance sheet, you can skip the partnership options and go buy your assets directly.  While this may limit your ability to diversify, it offers complete visibility and control over the assets you purchase and own--which is why so many families take this route.  Watch CNBC’s “American Greed” for a few hours, and you’ll be hooked on buying your assets directly but it comes with the usual headaches of owning CRE; just like those headaches associated with almost anything else you own.

The Public Market

This is the easiest path available.  Through your online account, brokerage firm or other financial institutions, your CRE strategy plays out in public markets by way of publicly traded instruments such as  Real Estate Investment Trusts (“REITS”).  Easy to track, (usually) three (3) day liquidity, and regulated, these publicly traded instruments are a great option for families who want exposure to CRE without headaches or commitments.

My guess is that, if you’re reading this, you have been offered a slew of CRE investment opportunities from real estate brokers, bankers, investment advisors, friends/ family members and others.  You may be familiar with each of the above options, so your next question is likely: what’s next?  My advice is to take a step back, visualize your end goal, and define what level of involvement you are willing to commit too.  This will chart the right path for you, then you can decide on the next step: underwriting the opportunities before you.    

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I hope that you will join me here on Substack as I share 1-2 features each month, spanning stories, insights, and best-practices gained from working with families in business or those families with private assets to manage. 

Thus far, I've speculated on how married-ins impact family dynamics, i.e. Meghan Markle, asked the age old question, "where have all the assets gone?", and took a deep dive on my experience with direct investment into venture companies. With each article, I hope to share a few gems of wisdom to help bring the families in your life one step closer to harmony. 

Stay tuned in for more.

It rained all day during a recent client trip to Austin, TX. After a long morning of travel, I worked my way through a jam-packed sc

hedule. As my road-weariness set in, I begrudgingly looked forward to my final meeting. But, as luck should have it, that final meeting turned into a fated one, as I sat with a twenty-something who managed their family office's large portfolio of venture capital in the booth of a Mexican restaurant. For the next two hours, my new friend and I wore out the shoes of our waiter whose endless bowls of chips and salsa fueled our conversation about the right way to do venture capital (a term interchangeable with start-up or early stage investing). The conversation's biggest takeaway: if you can, make direct investments (ownership) vs. pooling investments (funds)... and think strategically about the right approach.

i3 has been advising families since 2007, with our core services grounded in family governance, asset management, reporting and/ or underwriting/ due diligence—and over the course of the last 13 years, we’ve done the same for hundreds (if not thousands) of folks/ individuals who are seeking venture capital opportunities.  As of 2021, i3 advises on or manages more than $500,000,000 of commercial real estate for families and more than $50,000,000 of private investment ranging from start-up, early stage and/ or growth companies.         

While venture capital firms are historically the first stop for those who want to invest in venture capital, new venture capital investors (e.g. family offices and high net worth families) are the future of start-up and early stage companies. So, if you’re anything like my twenty-something friend (overloaded on chips and salsa), what is your very first step in allocating your capital into start-ups or early stage companies? Engage an experienced securities attorney in your area. They’ll inform you of your state’s Blue-Sky laws and what it means to be an Accredited Investor.  Once you know the ground rules, you can begin your foray into venture capital.  

When investing in venture capital companies, your best deal is only as good as the best deal you have access to. To succeed as a venture capital investor, you must capitalize on your existing network, share an existing network with someone else, or construct a new network of professionals who are involved with start-up or early stage companies seeking capital. Your success stems from a good pipeline of opportunities. Once professionals know that you are in the market, your Inbox will pile high with new investment opportunities.  

While the quality of your deal is contingent on your network and your access, you need to build a team capable of underwriting, due diligencing, executing and managing the investment from origination through disposition.  Because of the nature of these investments—no cash flow, high risk and long-term horizons for return of capital—you’ll want to run a low-cost model. This means: keep your overhead low, and adopt the philosophy of “pinching every penny” or “bootstrapping”. For context, it is common for one person to review 500 to 1,000 deals each year, and to perform all related underwriting, due diligence, execution and management of the ongoing investment with experienced legal and tax counsel close by. In addition to your internal team, start to engage with a network of former executives, industry experts, and other investors to educate you—and maybe even co-invest. While finding your one internal full-time employee to manage your deals, like my twenty-something friend In Austin, you may also consider a hybrid of the pooled investment (fund) vs. the individualized team. The hybrid platform  is something that i3 offers, which comes with the ability to rely on an outsourced team to execute your clear vision and defined objectives. With an internal and external team structure in place, you’ll face the most challenging part: building a pipeline.  

In the venture capital industry, those who have the deal flow lead those who do not. Being an investor in a blind pool is not direct investing. Direct investing in venture capital (and for that matter, any private investment) is defined as having direct and individual ownership in the entity, or with a small group  who may also have direct influence on decisions made by the company’s leadership (e.g. board positions).  After filling your pipeline with opportunities and setting a clear vision for the direct investment of capital, you must rely on your team to filter through the pipeline, select the companies that fulfill your vision and objectives and execute the transaction. 

When growing your pipeline, it is important to define the amount of capital that you and/ or your team are comfortable allocating. There is not a magical formula to calculate this number, each investor is different. Some investors allocate larger portions of their net worth than others. I’ve found that those who make lower allocations of their net worth (3% - 5%) have less experience and use funds to get exposure to venture capital. Those with larger allocations (5% and up) are more experienced and active in this asset class. The more they have allocated to this asset class, the more they consider it a career. Most venture capital firms review three (3) to seven (7) deals a day and may only invest $25,000 to $125,000 in 20 - 50 of those over the course of a year. In our experience, one or two deals will generate (with a little luck), at least, a 4x multiple. Ten percent of your deals will survive and flounder. Ninety percent of your deals will fail with a total loss. Some venture capital firms prefer more concentration and involvement in the growth of the company; in these scenarios, the investor tends to be very active and participate in several rounds of funding for the company. This typically means they’ll participate in seed capital (start-up), series A, B, C,  (growth capital) and so on and so forth.  Each round of money raised by the subject company has a different purpose, one of which may be to buy out the previous round of investors. You (and by extension your team) will be asked to make decisions to invest into start-up and early stage companies—decisions that are made within hours or days of the pitch being made.  

Capitalizing on your pipeline, broadly speaking, will require four (4) core competencies: 

1. Understand the disruption  

2. Underwriting/ due diligencing 

3. Properly structuring your investment

4. Leveraging your brand or connections to add value to your investment (AKA: Being an Influencer)

These four (4) competencies are generally at the core of a large family office or venture capital firm; however, they rarely offer them on a ‘separate account’ basis. In other words you have to rely on a blind pool to access and leverage these competencies.  In our case i3 offers these competencies to individual investors on an outsourced platform (e.g. i3’s DIPCO platform). 

Understand the Disruption 

An early stage and / or start-up company’s value is based on the problem its service or product is solving (disrupting), their potential market share, and the sum of money required to reach these goals. To Understand the Disruption and its impact, we must first understand how the target company anticipates turning the service and/ or product into revenue dollars and, eventually, profits.  Or, how the target company becomes a strategic benefit or threat to a larger, competitive company.  Your upside as the investor is at the exit, which may come at various rounds of funding or upon a disposition of the company.  Before Amazon purchased Ring for $1 billion, the brand was passed over by Mark Cuban and other Shark Tank investors who are supposed to be the smartest in the business. Imagine missing out on that “one in a million” opportunity. To assess the true value of a deal, investors must proceed with confidence, calculation, and willingness to learn quickly about products, services and their respective markets. 

And then there is the ‘ole ‘gut instinct’. That’s the feeling that some people get when they first hear of a new or emerging business, or when they’re able to realize the potential of an idea before it ever becomes a business. Gut instincts are dangerous, but when used correctly, they can impact the speed and reliability of a decision.          

Underwriting/ Due Diligencing

“Measure twice, cut once” is our philosophy. After reviewing a pitch, you’ll hopefully be greeted with a full file of business plans, financial pro formas, legal documents, and the like.  Your team, who will be small and nimble (reminder to keep costs low), will digest these documents and chart the course of the investment. But it won’t be the MRR/ ARR growth rates, CAGR, gross margins, expense ratios, NOI, EBITDA, FCF that will matter the most, in fact that’s the easy part. The challenge lies in two (2) critical components of the underwriting and due diligencing (“UDD”) process; the first, understanding the disruption, which we previously covered. The second is believing in the people—namely in the founders and their management team’s leadership style. A start-up and early stage company is only as successful as its leaders’ ability to execute on their business plan and strategy. Listen to your gut instinct about the product, and about the people making the ‘ask’.    

How to Structure the Investment 

While most start-up and early stage companies clearly define their parameters for accepting investment money (e.g. convertible debt, membership interest, royalties, stock, loans, etc…), the opportunity to negotiate might present itself.  This will be dependent on their time frame for receipt of capital and how bad they need it.  If you find yourself in this position, involve your tax and legal counsel, as there are many tax advantages to different capital structures.  

How to Use Your Brand or Connections to Add Value to Your Investment (Being an Influencer) 

As both a human and a venture capital investor, you'll likely be attracted to investment opportunities within the industries you are familiar with by trade or by experience.  Allocating capital to start-up and early stage companies within your existing spheres of influence will further support your investment’s probability of success. As an influencer, your network may (should) positively impact the growth, expense, and thus the subject company's net income trajectory. Being an influencer comes with a two-fold responsibility. The first is bearing in mind how, what or who you are influencing as this will affect  the financial and behaviour/ cultural aspects of the company (i.e. company values). It’s best to ensure that your values and the subject company’s are aligned, which is more relevant today than any other time in history due to our many social, policial, and environmental divides.  Your second responsibility: consider if your personal brand is more powerful than the subject company’s. Is (or will) the company be able to deliver on the demand that you help generate? Social media platforms and the advent of the “Influencer” can take a start-up from tens of thousands in revenue to millions—with just a few Instagram posts. This is particularly relevant if you are a local, regional or national celebrity….or planning to be one.   

A venture capital investor is blessed with more than just capital, but also a keen eye for disruptive products and services, an intuition for people who will take a product or service and make it a great company, accompanied by an appetite for high levels of risk and the patience to allow the companies and those running them to mature. Not every investor is made this way, but I’ve never met an investor who does not understand the “greater the risk; the greater the reward”. All investors realize that only one in hundreds (if not thousands) of early stage/ start-up companies will generate monster returns; however, saying the words “I lost my money” and experiencing the actual loss of capital are two very different things. So, take your first steps into venture capital wisely and with caution, knowing that venture capital is at the core of the American entrepreneurial spirit. If you use, like, and or love Facebook, Airbnb, Dropbox, etc, you have a venture capital investor to thank.

Updated: June 2025

“What is a filing cabinet asset?” most clients ask with a perplexed smile.

After twenty years of working with families in business, we have learned that they accumulate “things” that are filed away in those filing cabinets and—in many cases—these things are now worth a lot of money. Whether it is land, income-generating property (a mobile home park, apartment complex, office building, storage warehouse, or the like) a membership interest in a private company, private loans, a piece of artwork, a table (a funny story for another day), or the family farm, families in business often use their free cash flow to acquire other assets. In some cases, their “things” are now worth more than their business. And this is where it gets complex. Accumulating things is different from inheriting things. Think of it like this: Accumulating things is like building a library by purchasing one book at a time, while inheriting things is like someone giving you a library of books at once and expecting you to know something about every book.

So how efficiently and effectively can you report on all the assets your family in business owns? Whether you are a family in transition, developing or educating your board, or simply tracking and reporting on the family’s assets we recommend a four-step process: Collect, Organize, Present and Advise.

Collect

As a family in business with assets (in the filing cabinet), you are in one of three categories: 1) the patriarch and/or matriarch is still alive and in control with their team, 2) your family is transitioning to either a family member(s) or a leadership team, either with or without a board, or 3) your family is several generations into this and now you are just tracking the performance of the family’s assets. In any one of these stages, collecting information—whether through a corporate librarian, a family CFO, or just a curious family member—by asking “how much?” (cost basis), “why this asset?”, timing of purchase (and/or sale), and “for what reasons?” is the starting point. Whether you are opening the proverbial filing cabinet, downloading bank (and securities) statements from a financial institution’s website, scouring tax returns, or talking to old business partners, the collection process is the key to building the foundation for a meaningful reporting matrix that tracks the family’s assets and their performance. Not to mention this information can be helpful in creating both a family history timeline as well as understanding the behavioral dynamics of decision making in a family.  

Organize

Remember when I mentioned building a library? Think of organizing the data as building the card catalog. Organizing the data starts with cataloging the assets and ends with tracking each asset so that meaningful performance reports are available for decision making. Your family may have already collected the information on their public and private assets or rely on the information provided by advisors and consultants; so the struggle is not so much collecting the data as it is organizing it. Depending on your portfolio size (especially of private assets), a family may face dozens, if not hundreds, of reports from partnerships, asset management companies, and financial advisors, and are faced with evaluating the information and making decisions. Private assets (e.g. commercial real estate holdings, private equity interests, private loans, etc.) are the most difficult assets to organize due to their very nature and illiquidity. So, whether you are using Excel spreadsheets, subscribing to the latest and greatest software package, or building your own proprietary system, decide what your mechanism is for organizing the family’s assets so your family will benefit from meaningful reports that will be presented. 

Present

So you’ve collected and organized the data. Now what? It’s time to tell the story—or present it. The presentation of data from so many different sources is, in my opinion, the biggest challenge facing both advisors and families. How do you organize information from so many different sources, across so many different types of asset classes, for so many different types of viewers (family members), with so important decisions can be made? Our answer is grounded in three simple points. Make the presentation relevant, decision focused, and aesthetically pleasing. 

• Relevant: The information tells a story with facts that impact the beneficiary. While the financial advisors, asset managers, and tax counsel digest the details, the board/family members do well when the reports tell a story about the bottom line. 

• Decision-Focused: The reports present questions that the family needs to answer. Decisions are usually focused on cash that is needed or cash that can be distributed and the risk being taken. 

• Aesthetically Pleasing: The presentation is easy on the eyes and invites the beneficiary into a conversation.  

It is a growing trend for families to take an active role in the management of their assets, informally or formally through their family office. This is being made possible by families having access to information about their assets and technology, allowing for meaningful reporting that was once too cumbersome and difficult to put together and present to the common family member.    

Advise

Most families in businesses are inundated with advisory services from firms offering expertise in the family’s assets. Whether it is your family business interest, public market assets (securities), commercial real estate, or private equity/debt, there is no shortage of excellent asset management advisors in the marketplace. But picking advisors comes with its own challenges, which is why we recommend your family taking ownership of the assets the family owns. With the proper infrastructure, you are in a better position to evaluate your assets and select those advisors who will have the greatest impact on the performance of your current assets and the ones you will own in the future.  

Families are stronger together and one of the pillars keeping a family together is the long-term financial benefits generated by the assets that may be locked away in the filing cabinets. So where did the reference to “filing cabinets” come from, you ask? When I was twenty-two years old, my grandfather took me back to the office he and my grandmother shared in their small “millionaire next door” home and pulled out Farmers’ and Merchant Bank stock certificates (which by that time was Nation’s Bank) for me to coordinate dividing between the grandchildren. I enjoyed watching him flip through crusty old 3-ring binders and faded manilla folders, telling me stories of all the different interests he had accumulated in so many different things over his (now 100+ year) life, all stored away in those filing cabinets. As years passed and I have advised more families, I realize most have had similar experiences. I remember walking away from my grandfather’s house that day, a young Financial Advisor at Merrill Lynch, thinking, “Man I love those stories—but who in the h&^* manages the land, buildings, and stocks in those filing cabinets?” I am still wondering about that to this day.  

J. Kevin Heaton is the founder and principal of i3 Global Enterprises. Founded in 2007, i3 is a private asset management and family CFO office. Learn more.

Updated: March 22, 2025

Watching Meghan Markle and Prince Harry’s interview with Oprah after their move to America, I could not help but wonder how the Royal Family felt while watching the interview, or even how they felt when first hearing of its existence. If I had to venture a guess, their emotions likely spanned anger, frustration, confusion, retribution, indifference, or…all of the above. Meghan could not have spoken truer words than, “Perception and reality are two very different things. We are judged on the perception and living in the reality.”

So, what went wrong within their family?

Who Controls Your Family’s Perception and Reality?

Take a moment to consider: Who controls your family’s perception, and who creates their reality in the ever-present age of overexposure and decentralized communication via social media? We can arrive at the answer by, first, understanding the influence a married-in has on their new family, how families control their narratives, and what it means to communicate effectively both in and outside the family walls.  

As we heard Meghan describe to Oprah, marrying into (and assuming a professional position within) the Royal Family came with countless expectations — some of them expected, while others, wildly unexpected. Yet other than being under the world’s microscope, does Meghan’s experience differ from what all families in business face? I think not. 

High-powered and high-net-worth (HNW) family businesses are successful because of their commitment to a collective set of beliefs, values, philosophies, and business practices. This is reflected in something as simple as, “In this family, everyone goes to church together on Sundays. No matter what.” It can also surface in weightier situations, like, “when [insert your most embarrassing or challenging issue] is made public, we expect [every family member to respond this way].” Married-in’s are expected to share the values and commitments of their new extended family, but what happens when things change along the course of the marriage?

When Behavioral Norms Don’t Align

Married-in’s enter their new families with their own set of values, traditions, and problem solving skills. And when they enter that family office as well, typically, those same values, traditions, and skills accompany them. When their behavioral norms don’t immediately align with that of their new family’s, and their approach to business, that once (self-described) harmonious group can orbit into uncharacteristic dysfunction, unwanted crisis, and premature transitions.

Restoring a family’s harmony (or never losing it to begin with) starts with the family and the married-in coming to a mutual understanding — really taking the time to listen and understand their unique perspectives. Since changing people is usually not an option, the only real way for families to unite is to embrace their different vantage points and diversity of thought.  

Lost in so many family businesses is the family members’ ability to share their respective points with clarity. This requires both understanding your audience, as well as clearly framing your point — otherwise known as communicating. It is rare for i3 to begin working with a family-in-business without translating what one family member is saying to another. After months of practice, each family member finally begins to understand the other (if multiple generations are involved, with multi-married-ins, it can take even longer — but, we get there).  

The Spouse as a Bridge (an Impossible Role)

Communication goes beyond one party listening and the other party talking. Both parties need to be able to communicate their wants, needs, and beliefs in a way that resonates with the other party. And even more important is knowing what a married-in needs once they marry into a family. Oftentimes, a married-in is against their new family, with the spouse as their only bridge (AKA: an impossible role for a spouse).

Understanding the beliefs of all individuals who have married-in to a family serves as the foundation of successful ongoing communication. This means they can work to control their narrative together, or even just settle on Christmas dinner plans.

Nothing is more enticing to the media (and to all of us, for that matter) than chaos in any Camelot. Controlling your family’s narrative is so important. Most families in business do not employ the media team that The Royal Family has in place, and yet, the narrative of those seemingly-immortal folks spun out of control. Unwanted narratives are born out of dysfunction, crisis and/or transition so, as it relates to married-ins, take the time to understand their beliefs and values or you may be reading about them in the news or, even worse, watching them on TV, telling Oprah your family’s secrets!

Regardless of the difference in beliefs of a family and their married-ins, the narrative they create together is far better than what they might generate independently.   

It Is Not Enough to Listen

In my twenty-plus years of assessing a family’s needs and advising on a range of issues, avoiding the question, “What went wrong?” starts with understanding each other’s backgrounds and beliefs. Trust me when I say, this is no easy task; it takes time, commitment, open mindedness – and often a 3rd party. It is not enough to listen. With understanding (and acceptance), a family can communicate with respectful boundaries. This does not mean everyone gets along, but it does mean that there can be harmony. When family members understand each other and communicate effectively, they, as a family, will control their narrative — leaving very little difference between outward perception and internal reality. 

My hope for The Royal Family, is that what we watched on TV was for “ratings”, and that behind the scenes, they are just like any other family business, trying to figure out how to ‘make it work’ with new behavioral dynamics. This is, of course, my hope for all families-in-business, after all — there is a bit of The Royal Family in us all.

J. Kevin Heaton is the Founder and President of i3, LLC.  Started in 2007, i3 is a family advisory practice providing family governance, global family asset reporting, and private asset management services to high net worth families and families with high profile lifestyles. Learn more.

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