Passing control from one generation to the next is a natural part of business ownership.  Many owners and operators in the funeral industry, however, view business transition planning with the same dread and discomfort that tends to accompany preneed planning and death services.  This is totally understandable!  When you have owned and run a business for years, or even decades, the idea of handing off control to someone else can be difficult to process.  In both life and business, there are certain topics that most people would rather not think about.  However, when the time comes, a well-planned transition can make the difference between an easy, comfortable, and even pleasurable move into retirement and a logistical and legal fiasco for everyone involved.

Set Your Goals

It’s never too early to start planning for retirement.  You should start with broad, clearly defined goals of what you want retirement to look like, financially and otherwise.  Where do you intend to live?  Do you have a second home intended for retirement?  What will your financial needs look like in your retirement years?  Have you thought about estate planning?  Formulating and writing down these goals ideas is a necessary (and, yes, difficult) first step in planning a smooth transition.

Do you Already Have an Obvious Successor?

In addition to the personal benefits, documenting your retirement goals is the cornerstone of a good transition plan.  As you age, your employees will wonder where they fit into the mix.  If you sell, do they still have a job?  Is there a possibility one of your employees might be the potential buyer?  If you think a manager or loyal employee may be part of the successful transition plan, start informal conversations about their goals and future plans.  You may just find your future owner is right in front of you.

Taking Stock of the Present

Whether the business is sold to someone familiar with the business or to someone totally new, now is the time to take stock of your business’ overall financial picture, starting with a business valuation.  As you start to develop an exit strategy, having a business valuation prepared will give you a clear sense of where things currently stand and help guide you in the right direction.  Among the issues a valuation will clarify are:

1. Consistency and growth of revenue over time
2. Outstanding debt and its structure
3. Compensation structure of owners and managers
4. The status of associated real estate, which may either be part of the sale or maintained for an income stream during retirement
5. How your business fits into the regional funeral home industry

Building Your Team

Now is the time to start assembling the team of advisors and professionals that will make the transition smooth and successful, both for you as you exit and for the new business to continue to thrive.  An effective support team should include your accountant, attorney, estate planning professionals, business valuation specialists that are funeral home specialists, and a financial advisor. 

You have put years of work into your business, and you certainly don’t want major life events forcing you, your family, and your employees to rush into a sloppy, unplanned leadership and ownership change.  Preparing and planning for a successful business transition and exit into retirement will be the key to maximizing your retirement funds and minimizing stress for all stakeholders.

This is just the tip of the iceberg when it comes to effective transition planning.  At Bowman & Company LLP, we have extensive experience helping funeral home owners and operators pass on their businesses to the next generation and enjoy retirement.  We will be sharing our expertise and presenting a deeper dive into the nuts and bolts of good transition planning in future blog posts.  Stay tuned!

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