Foresight
on
Succession planning is an essential process that ensures the seamless transition of leadership and ownership within a business, from one generation to the next or even to new proprietors. In the traditional world of the funeral profession, where family ownership has long been the norm, passing down the business to the next generation was often seen as an inevitable path. However, the landscape is shifting. Sustaining and growing multigenerational funeral homes has become increasingly challenging.
In this blog post, we will delve into the intricacies of succession planning in the funeral profession, using insights from the 2023 NFDA Member Succession Planning Study as our guide. We will explore the evolving challenges faced by funeral professionals, delve into the critical elements of succession planning, and emphasize the necessity of early preparations and expert guidance.
The Changing Landscape of Succession in Funeral Service
Traditionally, the funeral profession has been characterized by family-owned businesses that have been passed down from one generation to another, serving their communities with care and dedication. For many funeral professionals, the dream has been to safely entrust the family funeral home into the capable hands of the next generation, thus preserving a legacy of service.
However, recent statistics indicate that the path to successful transitions within family-owned funeral homes is not as straightforward as it may seem. According to Score.org, only about 30% of all U.S. family-owned businesses manage to reach the second generation of ownership. A mere 12% make it to the third generation. Surprisingly, only 13% of family businesses remain under family ownership for more than 60 years. These figures serve as a stark reminder that the preservation of a family-oriented legacy in the funeral service industry is not guaranteed.
The Importance of Early Succession Planning
One of the most compelling reasons to begin succession planning early is the fact that it provides business owners with several years to prepare for the eventual sale or transition. This extended period allows owners to maximize the value of their funeral homes, ensuring a smooth and profitable transition.
The 2023 NFDA Member Succession Planning Study sheds light on the urgency of succession planning within the industry. Notably, 45.9% of surveyed owners expressed their intention to retire within the next five years. As retirement looms closer, owners become increasingly concerned about various aspects of their post-retirement life, with healthcare costs being the foremost worry for 55.6% of respondents.
Health issues and concerns about maintaining one’s standard of living are other common anxieties, but it is encouraging to note that these concerns have decreased significantly compared to previous years. This suggests a growing awareness among funeral professionals about the importance of proactive planning for their financial well-being in retirement.
Securing Business Continuity
A fundamental aspect of succession planning is ensuring that the business can continue to operate smoothly in the event of unforeseen disruptions. The survey found that the majority of respondents (29.8% “Yes, very much so” and 53.2% “Yes, for the most part”) believed that their funeral homes could withstand major disruptions without a significant interruption in operations.
Moreover, the study explored potential successors in the case of an untimely incident. Notably, 40.3% believed that a licensed funeral director would step into their role as owner, while 33.1% envisioned their son or daughter taking over. Spouses (21.6%), co-owners or business partners (21.6%), and current managers (17.4%) were also mentioned as potential successors.
Planning for a Seamless Transition
Determining who will take over the business is a pivotal aspect of succession planning. According to the study, 29.6% of owners plan to transfer or sell their business to their child(ren), while another 29.6% intend to sell to a third party. Additionally, 18.7% plan to sell or transfer the business to a key employee, 39% to another family member, and 2.6% would sell their ownership stake to other owners. Nearly 16% of respondents were uncertain about their plans.
The survey also inquired about the most critical factor in selecting a successor. Notably, 30.8% emphasized the importance of maintaining a presence in the community, while 26.6% sought to preserve a family legacy. Others considered the financial ability of the successor to purchase the business (24.1%), obtaining the best price (12.7%), and ensuring employees’ job stability (5.9%) as significant factors.
Seeking Expert Guidance
Succession planning is a complex undertaking, and many funeral professionals recognize the need for expert guidance in this process. When asked about their plans for seeking assistance in selling their business, 37.6% stated they would consult with an attorney or CPA, while 26.2% would turn to a funeral service merger and acquisition consultant. However, 27.1% remained undecided about who to contact, 5.7% planned to handle the process independently, and 3.5% intended to seek assistance from a local professional.
Succession planning in the funeral profession is evolving to meet the changing dynamics of ownership and leadership transitions. The insights from the study provide valuable guidance for funeral professionals navigating this crucial process. It is clear that early planning, meticulous consideration of potential successors, and seeking expert advice are vital steps on the path to a successful transition.
While challenges and uncertainties are inherent in succession planning, the ultimate goal remains unchanged: to preserve a legacy of service and secure the future of funeral homes for generations to come. Funeral professionals must embrace these challenges with determination, ensuring that their businesses continue to provide solace and support to grieving families for years to come. Succession planning is not merely a business task; it is a commitment to honoring the trust and legacy that has been built over generations in the funeral service industry.
Sources:
Gillespie, D. and Defort, E.J. (2023, August 24). NFDA Study Focuses on Succession Planning. Memorial Business Journal.
NFDA Endorsed Providers: Succession Planning
NFDA Announces Endorsed Providers for Succession Planning
Continued Success and Personalized Solutions:
At Foresight, our commitment to your business’s success goes beyond a one-size-fits-all approach. We leverage our expertise to provide solutions tailored to your unique needs. As your trusted partner, we advise with your goals in mind. Our Succession Planning and Advisory services empower you to make informed decisions about your funeral home or cemetery. Our dedication to forming strong relationships and building trust is at the heart of everything we do.
For more information on our Succession Planning and Advisory services and to explore how Foresight can help your business grow, contact us today at 888-426-0165.