These “Five C’s of Credit” are sometimes used by commercial lenders, to get to the recommendation and approval stage as fast as possible:

    1. Character: will the borrower’s management work to repay? (credit history)
    2. Capacity: can the business operations actually afford to repay? (cash flow)
    3. Capital: does the borrower have sufficient “skin in the game”? (equity)
    4. Collateral: can the borrower provide an alternate source of repayment?
    5. Conditions: is operational discipline in place and how will we know going forward?

    Critical Family Business Dynamics

    You can use a similar approach to assess the critical dynamics present in all family-owned businesses. We call this the Five C’s of Family Business and encourage all small business owners to consider these questions as they ponder their future:

    1. Connection: What brought you here and how involved are the rest of your family in this business? Are you the founder of this enterprise or the second or even third generation to carry on the family’s business traditions?
    2. Culture: Describe your family’s values and how your family believes business should be conducted. Your family’s values drive the business vision – whether this vision has been defined and documented yet or not.
    3. Control: How are the major decisions made that affect the family business? Which family members have a voice in these decisions, and who’s voice is the “loudest”?
    4. Capital: How has each family member’s “human” and “financial” capital been invested in the business? How are they compensated for their investment (e.g. salary, dividends or reinvested in support of business growth)?
    5. Careers: Are there non-family executives in the business? Is a career in the family business a birthright expectation, or an objective that must be earned elsewhere before returning to the fold?

    By honestly assessing and understanding your own “Five C’s of Family Business”, you will have a better foundation for aligning with your family expectations as you grow, improve and transform your business.

    You may also like: When It’s Time For A Small Business Advisor


    This article was published more than 1 year ago. Some information may no longer be current.