Rapid changes in the marketplace will only accelerate in the next century, and many family businesses are not prepared for the sophisticated financial challenges they will face. The globalization of markets, the increasing liquidity needs of shareholders, and the continued growth of communications technologies are but three of the massive shifts requiring family business owners to sharpen their financial acumen.

Such changes call first for professionalizing your financial management. Second, they make it essential to manage your cost of capital, both debt and equity, more efficiently.

Many family businesses continue to confuse the function of a controller or accounting manager with that of a chief financial officer. True CFOs fill multiple roles for family firms. They serve as your financial strategist; they're familiar with the many sources of capital available; they map out ways to maximize shareholder value; and they manage your capital structure. Ideally, today's CFO also has global capital market experience and perspective. Perhaps most important, because a CFO is at the fulcrum of business and family activity, he or she can often function as a peacekeeper, skillfully managing the desires of family members for liquidity and a return on their investment with the growth-capital needs of the business.

It's time for family firms to truly entrust financial management to executives who are qualified by training and experience to manage these tasks, yet also have a sensitivity to and understanding of family dynamics.

One duty of an empowered CFO is to manage the cost of capital for the business. Managing the cost of debt requires broad access to borrowing sources by a professional skilled at tapping into diverse global capital markets. It will be up to the CFO to maintain relationships with multiple global borrowing sources, so that the family business can rapidly take advantage of growth opportunities, both domestic and foreign, and avoid pitfalls when the business climate is less rosy.

Managing the cost of equity is equally critical for family businesses entering the 21st century. Equity is the most expensive form of capital, and hence the comparative costs of various sources must be accurately assessed in order to avoid an excessive burden on the business. The company's leaders should be aware that shares owned by family members-often referred to as patient equity capital-have a cost. Like any other investor, family shareholders expect a return on their capital, which they will measure in the form of current returns (dividends) plus the future appreciation in value of their stock.

Amid alluring reports of gains from Internet stocks and day-trading, next-generation shareholders are more inclined than their elders to evaluate their investment in a dispassionate manner-"What has my family business investment done for me lately?" Management ignores these expectations at its peril.