Should You Treat Your Family Business Investment Like You Treat Your Stock Portfolio?

Shoppers wait in line as customer capacity is limited due to the virus outbreak at Market Basket store in Salem, N.H., Friday, April 3, 2020. (AP Photo/Charles Krupa) COPYRIGHT 2020 THE ASSOCIATED PRESS. ALL RIGHTS RESERVED

When it comes to sustaining wealth and influence across generations, family enterprises face a unique set of challenges. Some thrive for centuries, evolving into dynasties, while others crumble within a generation or two. The difference often lies in how they view themselves—not just as businesses, but as long-term stewards of wealth.

A recent article from the Family Firm Institute, Sustaining Family Legacies: What Family Enterprises Can Learn from Asset Management Firms, by Dr. Isabella Otero offers an intriguing perspective. It argues that family-owned businesses should take a page from asset management firms by adopting a structured, professionalized approach. Rather than viewing themselves as a single operating company, they should think in terms of a portfolio of assets, managed with a focus on long-term sustainability.

This means shifting from founder-driven decision-making to governance structures that balance both business and family interests. Professionalizing leadership, bringing in external advisors, and maintaining a disciplined approach to capital allocation are all key strategies. The underlying message is clear: families that run their enterprises like investment firms stand a better chance of preserving wealth and influence for future generations.

It’s a compelling argument, but does it reflect the reality of family-owned businesses?

The Family Business vs. The Business Family

In their book Business Succession Planning and Beyond, Dirk R. Dreux IV and Joe M. Goodman argued that not all family enterprises follow the same trajectory. Some remain family-owned businesses (FOBs)—where emotional ties, legacy, and control outweigh financial considerations. Others evolve into businesses owned by a family (BOFs) where performance, return on investment, and professionalization become the guiding principles.

Take the case of Market Basket, where Arthur T. DeMoulas built a fiercely loyal employee and customer base. The company’s competitive advantage wasn’t just its low prices it was the relationships Arthur T. cultivated, ensuring that the family’s legacy remained central to the business.

On the other hand, his cousin, Arthur S. DeMoulas, saw Market Basket more as a business owned by a family. His goal was to maximize return on investment, whether through dividends, capital gains, or reinvestment in new ventures. Decision-making should be based on performance rather than legacy, and succession is approached with the same logic as any corporate transition. He didn’t see their business as a single entity to protect at all costs. Instead, they treat it as one component of a larger financial strategy—diversifying their holdings, bringing in outside management, and prioritizing profitability over sentiment.

The result was when Arthur T refused to increase the distributions to the shareholders, Arthur S. had him removed from the management of Market Basket, generating such a backlash that within a few weeks Arthur S. had to concede and sell his interest in the company to Arthur T. or face bankruptcy.

The Real Challenge: Finding Balance

The Family Firm Institute’s suggestion to adopt an asset management mindset aligns well with the BOF approach, where professionalization and governance take precedence. But for many family businesses, such as Market Basket, this shift is easier said than done.

A family enterprise that has thrived for generations has likely done so because of its family-driven culture, not despite it. Introducing outside management or applying rigid investment principles can create friction, especially when the family sees the business as more than just an asset.

The challenge isn’t choosing between professionalization and tradition—it’s finding a balance between the two. The most enduring family enterprises understand that while relationships and legacy matter, so do efficiency and adaptability. They recognize when to hold on to control and when to step back in favor of professional management.

For those looking to ensure their family business survives beyond the current generation, the key question isn’t just, “How do we sustain the business?” but rather “How do we sustain the family’s influence and wealth over time?”

Some will do so by modernizing their approach, treating their holdings like an investment portfolio. Others will double down on their identity-driven strategy, ensuring their business remains a core part of the family’s legacy. The wisest families, however, will do both—adapting where necessary while preserving the values that made their enterprise successful in the first place.