Nicole Vullo
on
Many times when our clients think of succession planning, they only think of the financial aspect of it. While this is a very important component, there is more too it when you are first getting started. In fact, one of the first steps is having the internal conversation with yourself and your team. We asked financial analyst, Taylor Weber to share her insights on this important first step in the succession planning process.
Question: Other than financial planning, how can we start to prepare for Succession Planning Conversations internally?
Taylor Weber: We often emphasize the equation plan + execution = success. This principle is particularly crucial when determining your exit strategy. With 55% of owners preferring to sell or transfer their business to a family member or current employee rather than a third party, succession planning becomes a vital and timely topic. While financial planning and readiness are undeniably important, another equally important aspect is the careful preparation in choosing and acclimating your successor and engaging in tough conversations to ensure a smooth transition, especially when the future of the business remains within the family or among trusted employees.
Early Planning of Your Goals
Succession planning should begin well before you intend to retire or step down. Create a well-defined outline of your retirement timeline and goals for the succession process to ensure the business’s stability and legacy. This includes discussions around your retirement needs and gives you a space to really envision what taking a step back in your business might look like. Transparent and sensitive conversations about your post-retirement happiness and the future of the business without you will help align everyone’s expectations and reduce misunderstandings. This might involve exploring family members or key employees’ interest in taking over the business, their ideas for growth and how they plan to maintain the reputation and service standards you have established. For example, if your daughter has shown interest in taking over, start with weekly meetings to discuss operations, financials, your long-term vision and what she sees as potential growth avenues. This gradual process of sharing insight on sensitive situations, relationships, and core values helps her to gain confidence and experience while giving you peace of mind that the funeral home will continue to thrive under her leadership. If not, you have the time to involve potential key employees or other family members.
Potential Successor Selection
When choosing a successor, 31% of owners prioritize maintaining community presence, and 27% value preserving the family legacy over getting the best price. Tough conversations are essential during this process to address potential conflicts and build trust in the successor’s ability to uphold the legacy and evolve the business. Evaluate their strengths, weaknesses, and alignment with the company’s core values. They must embody and share a passion for the level of service you provide to families, and act on it. These discussions ensure that the chosen successor is committed and capable, balancing respect for the previous owner’s legacy with their own leadership style.
Outline the necessary roles, skills, and experiences, and address any contentious conversations with family or key employees head-on to prevent future conflict. For example, if you have two children taking over shared ownership, it is vital to discuss who will take on which roles. Determine their strengths and where they will best lead, clearly defining who oversees what. Perhaps one understands the operations side better, while the other excels in the business and financial aspects. By defining these roles from the beginning, you can save potential family discord and resentment when you are no longer there and foster confidence in the successor’s capacity to lead the business. When you can place trust in them, the staff and community will see this as well.
Transition Process
Once chosen, set up your successor for success by allowing them to take on leadership roles while you are still available to guide and mentor them. Gradually shift responsibilities, operating as if you are no longer involved, but remaining available for consultation. Depending on size and scale, communicating openly with your staff about the successor’s new roles and upcoming changes can alleviate concerns, providing security in maintaining morale and stability during the transition.
Introduce your successor to your professional network by attending conventions together and involving them in key meetings to establish their credibility and build relationships. This also means getting involved in the community through events and local advertising, which not only boosts the successor’s confidence but also reassures the community of the new leadership sharing your core values of service.
In a profession where relationships and trust play a large role, this is especially important. For example, if your successor is a key managing employee who is not part of the family but has your full trust, you might worry about the community’s perception of “no longer being a family funeral home.” This is an opportunity to demonstrate that, despite the lack of a shared last name, the level of care and service will not diminish. Show this through actions: allow them to lead and host luncheons, bingo, pre-planning sessions, etc. Make them the face of your funeral home in the community. This visible commitment will help maintain trust and continuity.
Stepping away from the role you have always known and letting it be in someone else’s hands is difficult but defining when this will happen and being honest with your needs will ensure it is transferred into the right hands. We help our clients stay ahead with their exit strategy by starting early, defining clear goals, and maintaining transparent communication with those involved. Our guidance helps navigate the complexities of succession planning effectively, ensuring a seamless transition that secures their legacy and the future success of their business.