When thinking about succession planning, I am reminded of the musical legend Kenny Rogers and his famous song entitled “The Gambler.” The most iconic words of the song are “If you’re gonna play the game, boy, you gotta learn to play it right. You got to know when to hold ‘em; know when to fold ‘em; know when to walk away; know when to run. You never count your money when you’re sittin’ at the table, there’ll be time enough for countin’ when the dealin’s done.” The sage advice that gambler gave the young man aboard the train one night is also sound advice when considering succession planning.
Succession planning can be a real gamble if it is not done properly. With proper planning, “every hand’s a winner”, but without it, “every hand’s a loser.” According to the recent 2020 Funeral Business Planning Survey conducted by Foundation Partners Group and NFDA, of those funeral home owners who are planning to retire within the next 12 months, only 33% have a plan in place. The remaining two-thirds either have no plan in place or are still developing their plan. Unfortunately, the time to plan for the transition of your business is not when you are sitting at the table.
The time to plan for a successful and prosperous transition is long before you enter the game. You would be surprised at the number of owners who rely on the ones on the other side of the table to tell them what their businesses are worth. This practice is like wearing mirrored sunglasses when playing poker. If you are contemplating a transfer, whether to another family member, your staff, or a third party, having a qualified industry expert perform a valuation of your business is a great place to start.
Of course, the money is not the only thing that needs to be considered when transferring your business. Some of the other items that you need to consider in advance include:
- Are their companies, whether national, regional, or local, with whom you do or do not wish to sell your business? What about family members, existing management, or even first-time buyers? Each of these have unique dynamics that could affect your sale, either positively or negatively.
- How quickly are you wanting to complete the transaction? For example, if you need to sell quickly, it may be important to consider those firms that have readily available funds for acquisition versus those who may need to seek financing. Of course, it is important to remember that many of those former acquisitionists have tightened their criteria and may not be interested in even considering your firm.
- How will this transaction impact the relationships within your family? Do you have children or siblings that are active in the business, if so, how will they feel? If they are passive owners or former owners, losing that tie to a family legacy may impede your relationship.
- What role will you have post-transaction with the business? Will you continue working for the new owner, or do you plan to take your winnings and ride off into the sunset?
- What about your staff and the continuity of operations? Do you have a team in place that can continue running the operations smoothly through the transition and beyond? Having an effective team and a well-oiled machine brings more value to the transaction for the buyer and ultimately more proceeds to the seller.
These are just a few of the considerations that should be made prior to hanging the “For Sale” sign on your company’s lawn. Of course, there are other items to consider as you navigate the path to a successful closing, such as cash, covenants not to compete, employment, consulting agreements, seller notes, earn-outs, and so much more.
With so many things to consider and decisions to be made, the ideal time to begin planning for a successful transition is years before it happens. To borrow from that sage advice once more, “Every gambler know the secret to survivin’ is knowin’ what to throw away and knowin’ what to keep.” If you begin the process early, in conjunction with a trusted industry expert as your consultant, you can fine tune your organization to maximize upon your years of hard work and dedication. If you are buying, especially as a first-time buyer, starting the process early will better prepare you for financial lenders, negotiating the deal, and more importantly positioning you to win the game post-closing.
As a former owner, I can tell you that one of your biggest decisions to make is who will represent you throughout the succession planning process. As funeral professionals, we tell price shoppers every day that not all funeral homes are created equal. Those same standards are true for you when choosing your business partner to help you buy or sell your funeral company. Are you looking for someone who may be the least expensive provider, or are you looking for someone that brings a wealth of knowledge and an unbridled passion for your success?
Just as the young man found in the gambler’s final words, you will find “an ace that I can keep” from the experts at The Foresight Companies. If you are considering buying or selling, give me a call or shoot me an email to learn more to ensure the hand your playing is a Royal Flush!
Schlitz, Don (Aug 1976). The Gambler. Momma’s Waiting. Performed by Kenny Rogers. United Artist (Released Nov 15, 1978). Retrieved from https://www.metrolyrics.com/the-gambler-lyrics-kenny-rogers.html