![\"Bicycle](\"https:\/\/enlightadvisors.com\/blog\/wp-content\/uploads\/2019\/03\/familyofficediscipline.jpg\")
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When you hear the word discipline, you may think of world-class athletes or Nobel-winning physicists – or you may think of the principal\u2019s office. \u00a0Whatever pops into your head, it’s probably not the execution of your family office\u2019s investment strategy – and that\u2019s one reason even the best strategies are often unsuccessful.<\/p>\n
In our last post about Direct Investing in family offices, we outlined the importance of having the Right Strategy and Right Team<\/a>. \u00a0Today, we\u2019ll cover the final factor: Right Discipline. Just joining our family office discussion? Read our intro post on the topic<\/a> or review the basics for the first two factors Right Experience and Right Reasons<\/a>.<\/p>\n RIGHT DISCIPLINE :: \u00a0The family office and its team are disciplined in the execution of the strategy.<\/p>\n Discipline is where the rubber meets the road. \u00a0It\u2019s the really hard stuff because it\u2019s what\u2019s required to execute with excellence – consistently and over time. \u00a0Direct investing might sound sexy, but there\u2019s nothing sexy about this stuff\u2026 and without it, you\u2019ll be unwinding your investments in a few years. \u00a0Hopefully, the wheels don\u2019t fall off the family, as well. I wouldn\u2019t wish that on anyone.<\/p>\n Here are five keys to having the Right Discipline:<\/p>\n All that legwork you did to define your Experience, Reasons, Strategy and Team needs to be codified. \u00a0This document helps solidify the family\u2019s direction and provides a reference should your boat drift off course. \u00a0Most offices include:<\/p>\n Target Types of Investments<\/strong><\/p>\n Desired Basic Deal Terms <\/strong><\/p>\n Successful direct investment is a numbers game. \u00a0You\u2019ll need relationships with high-quality sources to generate high-quality leads. \u00a0Generating a bunch of crappy leads is a waste of everybody\u2019s time and is a recipe for financial disaster. \u00a0Typical deal flow sources include:<\/p>\n Evaluating a company for investment should be timely and conducted by experts, including experienced deal attorneys and accountants – not just the family\u2019s \u201chouse\u201d attorneys and accountants. \u00a0To believe you\u2019re a legit investor – a hurdle for many family offices – people need to believe you\u2019ll follow through quickly, which is particularly hard for family offices. The most successful offices establish and use a well-rounded investment committee that includes trusted, experienced third parties who can make decisions efficiently. \u00a0Typical activities of due diligence teams include:<\/p>\n You can\u2019t lose weight without regularly stepping on a scale. Successful direct investment requires careful monitoring. \u00a0Although your role in governance may vary based on your ownership share and voting rights, it\u2019s your duty to actively monitor performance.<\/p>\n Direct investments aren\u2019t passive. \u00a0Your family can\u2019t sit back and watch the returns pile up. \u00a0On the contrary, companies have operational challenges, cash flow constraints, management turnover and other unexpected issues that require constant care. \u00a0The best investors bring both cash and insight to the table. \u00a0Leveraging your family\u2019s industry expertise and business capabilities is a key element of oversight – maximizing returns while minimizing headaches.<\/p>\n Who speaks for the family? \u00a0How are intergenerational disagreements resolved? \u00a0Who has an active role in management? How can passive family members share their voices?<\/p>\n Transparent processes for making decisions and overseeing the family\u2019s interests help keep everyone on the same page – and hopefully reduces the chance of destructive blow-ups. \u00a0Your family\u2019s governance model should be grounded in your family\u2019s vision, mission and values – and its structure should enable timely decision making. Mechanisms for family members to play an active role include:<\/p>\n Family is, well, family. \u00a0And while all families have their ups and downs, when you\u2019re undertaking direct investment, relationships are even more challenging and potentially volatile. \u00a0Adding financial pressure magnifies these difficulties. On the other hand, high-performing family offices are a force for family cohesion – securing wealth for future generations.<\/p>\n Thoughtful planning and execution increase the likelihood your family’s legacy is secure.\u00a0\u00a0Whether you\u2019re just starting out or you\u2019ve been investing for generations, it\u2019s never too late to do it right:<\/p>\n Need help with your family office?\u00a0enlight<\/a> can help<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" When you hear the word discipline, you may think of world-class athletes or Nobel-winning physicists – or you may think of the principal\u2019s office. \u00a0Whatever pops into your head, it’s probably not the execution of your family office\u2019s investment strategy – and that\u2019s one reason even the best strategies are often unsuccessful.<\/p>\n","protected":false},"author":2,"featured_media":349,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3],"tags":[13,21],"class_list":["post-278","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-family-office","tag-execution","tag-leadership"],"acf":[],"_links":{"self":[{"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/278","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=278"}],"version-history":[{"count":2,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/278\/revisions"}],"predecessor-version":[{"id":288,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/278\/revisions\/288"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/media\/349"}],"wp:attachment":[{"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=278"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=278"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=278"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}1. Document Your Investment Thesis and Criteria<\/h2>\n
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2. Generate Quality Deal Flow<\/h2>\n
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3. Apply Consistent Due Diligence<\/h2>\n
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4. Provide Investment Oversight<\/h2>\n
5. Maintain Consistent Family Governance<\/h2>\n
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