Having a succession plan in place for your funeral home or cemetery business is vital in today’s business environment. While there are many elements that go into your succession plan, one that is of high importance is who to choose as your successor. In our latest Ask the Analyst blog, Sierra Heil shares the key consideration when deciding who the successor of your business will be.
Question: I am in the process of deciding who to succeed me in my funeral business. What are the important things to consider when selecting my successor?
Sierra Heil: For all funeral home owners the decision to choose a successor to sell your business to is a significant and deeply personal one. Your business holds a special place in your heart, as you have helped families during their most challenging times and built up a reputation in your community. Ensuring that your legacy continues, both you and the new owners are well set for your next steps, and that the business thrives after your retirement are considerations of utmost importance when choosing a successor. There are several key considerations to keep in mind as you navigate this crucial decision.
Shared Values and Commitment to the Community
Many owners are prepared to retire but have not yet identified the scope of potential buyers for their business. According to insights from the 2023 NFDA Member Succession Planning Study, only 29.6% of owners plan to transfer or sell their business to their children, meaning most sellers are looking to continue their legacy without the help of a family member. If you are in this situation, consider key employees, competitors, or other firms who may be in adjacent communities who may be potential candidates. Funeral homes are built on trust and community reputation, so for many owners it is important to ensure that they feel comfortable that the individual or firm that will succeed them understands and respects the values and traditions that their funeral home has upheld over the years in the community.
Community Relations During Transition
A smooth transition is essential to maintain trust and avoid any lapses in the operations of the business. When considering potential successors, develop a comprehensive transition plan that outlines how responsibilities, relationships, and staff management will shift over time as you approach your exit from the business. For some owners, a phased transition or ambassadorship role can help both parties adjust to their new roles gradually, and an owner can often have significant control in how much they want to be involved in the future, if at all.
Be sure to share your vision for the future of the business and any unique traditions or practices that you wish to see continued in your discussions. Consider how your successor or buyer will manage connections and relationships in the community, while maintaining open lines of communication is vital during the transition period.
Financial Stability and Structure
Selling or passing on your funeral home involves several financial considerations. It is important to ensure that your chosen successor or buyer has the financial stability to manage the purchase, maintain the business’s operations, and meet ongoing financial obligations. While many transactions are structured so the seller receives full cash at close, oftentimes other structures or seller carry notes can be used depending on the means and situation of the buyer. Discuss the financing arrangements and terms of the sale in detail. Consider what is best for you and your family’s situation and goals.
Additionally, it is key to seek counsel from your legal, tax, and financial advisors. They can help you navigate the complexities of the sale or transition, ensuring that your interests are protected so you can smoothly transition into your next step.
Choosing a successor or buyer for your funeral home is a decision that requires careful consideration of various factors. By thoroughly evaluating candidates and firms, discussing expectations, and developing a comprehensive transition plan and structure, you can ensure a smooth and successful transition that honors the values of your unique business while securing its future for generations to come.
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