Succession planning should be on the mind of any business owner, no matter what stage they are at in the process.
Yet according to a recent study of funeral business owners and service professionals, 73 percent of respondents do not have an exit strategy or succession plan in place. More than one-third of all respondents plan to retire within the next five years – with 56 percent of those aged 55-plus expecting to exit their business within that time frame.
It is clear that succession planning is not a top priority for many funeral home owners, yet, according to Bob Ekins, Director of Business Development at Johnson Consulting Group, it should be. “Every business owner should have succession planning on their monthly and annual ‘to do’ list,” he says.
Owners may push planning to the side because of the time it takes and the stress it can induce. That is why finding the right partners to help guide them through the process is the key to a smooth transition – no matter what the next chapter looks like. “When considering succession planning, owners should consult a range of experts to ensure a comprehensive and effective approach,” Ekins emphasizes.
We spoke with Ekins in more detail about who funeral owners and operators should be engaging with to help them succession plan, and why:
1. Succession Planning Consultants
According to Ekins, these consultants are specialists in all things succession planning and can provide expert guidance on the right strategy. “These consultants help to develop a tailored plan based on the organization's specific needs,” he says. “They have expertise in best practices and industry benchmarks, and can assist in creating a structured succession plan that aligns with the organization's goals.”
2. Legal Advisors
“It is crucial to involve legal advisors who specialize in employment law and/or business succession and purchase agreements,” Ekins says. “They can ensure that the succession plan adheres to legal requirements, such as compliance with labor regulations, tax implications, and any contractual obligations.”
Ekin notes that they also aid in the drafting of legal documents, such as employment contracts, buy-sell agreements, purchase contracts, and non-disclosure agreements.
3. Financial Advisors
Financial advisors, including accountants and financial planners, play a significant role in succession planning, according to Ekins. That is because they can help assess all of the financial implications related to succession, as well as analyze the organization's financial health, and develop strategies to subsidize the transition.
“They can also assist with estate planning, tax considerations, and wealth management to optimize the financial aspects of the succession plan,” Ekins says.
4. Business Valuation Experts
It is crucial to accurately value a business when planning to transition ownership. Without understanding what the business is truly worth, the owner will not be able to articulate its value to a third party or prospective new owner, which could have a negative financial impact.
That is where business valuation experts come in. “Business valuation experts can provide an objective assessment of the company's worth, considering factors such as financial performance, assets, market conditions, and growth potential,” Ekins says. “This information is crucial for determining fair transfer prices, equity distribution, and negotiating terms with potential successors or buyers.”
5. Industry-Specific Consultants
Oftentimes the best advice one can receive is from someone who has done it before. Owners should consider engaging funeral home consultants or advisors who have deep knowledge and experience in their particular sector.
“These experts can provide insights into market trends, competitive dynamics, and specific challenges or opportunities related to succession planning within that industry,” Ekins says. “Owners can benefit from their specialized knowledge and experience in different areas of succession planning. This collaborative approach ensures a holistic and well-informed strategy that addresses legal, financial, human resources, and industry-specific considerations.”
For example, the founders and associates of Big Sky Capital Partners, a funeral industry real estate investment company, are a combination of experienced executives from within the funeral industry and real estate professionals. Given their deep industry experience, they understand the needs of funeral home owners, and are able to advise them on the best approach to selling their business or monetizing their real estate.
Planning for the Future Today
The survey found that among respondents’ retirement goals, 89 percent hope to maintain high-quality service to the community, 83 percent want to secure a financially stable retirement, and 69 percent strive to preserve a family legacy of community service. By getting a head start, and having the right partner in place, funeral owners can easily reach these goals and set themselves up for long-term success.
Additional Information and Resources for Succession Planning: