Empire Building

What is Empire Building?

In general, empire building is the process that an individual or entity undertakes to broaden the scope of its influence and power. In the business world, empire building entails the comprehensive steps and actions that either an individual or company takes to expand their power and reach. It is done primarily in an attempt to boost the individual or company’s profits and – in the case of corporations – to improve their chances for further growth, which ultimately boosts their bottom line.

Building a Familial Empire

One of the ways that an empire is built is through familial relations. In the U.S., around half of the yearly gross domestic product (GDP) is brought in by family businesses, though just over 25% of such family-run businesses are actually passed down to a second generation. According to the Small Business Administration (SBA), slightly more than 10% of said familial empires are passed on to a third generation.

The primary issue that the empires fall victim to is financial difficulties, which can easily be circumvented by a contract or a buy-sell agreement. Otherwise known as a buyout agreement, the buy-sell agreement is a contract between a business’ co-owners – in this case, members of the same family – which, among other things:

• Dictate what happens if a co-owner dies
• Structure the continuation of the business if a co-owner is asked to, or must, leave the company for any reason
• Establish the parameters for what triggers the buyout agreement
• Set the price that a partner/co-owner’s shares can be sold/transferred for in the event that the individual dies, must leave, or is forced out

One of the most common ways the agreement is triggered is by the death of a co-owner. Generally, the individual’s life insurance policy – which is essential for a buy-sell agreement to work – is what triggers the agreement and is used to fund the agreement.

The buy-sell agreement allows for a smooth transition of assets and helps a family continue its empire as previous members leave or pass on.

Empire Building on an Individual Level

Empire building can also be used to reference the actions that one person – or a small group of people – embark on to secure power and influence, specifically when it relates to their position in a company or organization.

The employees or managers of a company can seek to establish their own empire, using job performance, inter-office promotions, and even underhanded means to move into greater positions of power or into areas of the business where their voice and influence can achieve more impact and sway.

The goals may be something as inherently noble as looking to make the company better – to help it operate more efficiently. However, in most cases, an employee is usually looking to move up in the company, to bring in a higher salary, and to achieve more influence in terms of how the company is run. One of the key elements for individuals looking to build an empire is the quest for power, regardless of how they intend to use such power.

The Five Core Building Blocks of an Empire

Every empire is built in layers; however, there are five core blocks that every empire must utilize successfully. They are:

1. Branding – A solid brand name and widespread acknowledgment and respect of the brand
2. Communication – A framework of communication within the company and between the company and the public
3. Networking – Building a community of employees and consumers that work together to make the company strong
4. Marketing – Advertisements and advertisers willing to work with the company and remain loyal; a foundation of strong marketing is critical for creating an empire’s brand name, strengthening its message, and solidifying the empire’s network
5. Income Strategy – Each empire must diversify income-generating strategies to be effective and lucrative

Every empire is built on a foundation of branding – including the individual, who must “make a name” for themselves. In the end, power, control, and effectively offering goods and services to consumers should be the goals in order for the empire to remain strong.

Additional Resources

CFI offers the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following CFI resources will be helpful:

• Conglomerate
• Multinational Corporation
• Spin-off
• Sum of the Parts (SOTP) Valuation