The Elephant In The Room
With the uncertainty of how long the pandemic will last paired with reduced profit margins, it is no surprise that the Covid-19 pandemic is altering many funeral director’s retirement and succession plans.
A recent Family Business Australia survey revealed that whilst 81% of business owners intend to retire in the next 10 years, less than one third of these businesses have any sort of succession plan in place.
Evidence suggests that the succession of many family funeral businesses could be chaotic, messy, and more often than not, litigious.
This leaves industry leaders wondering, what are the factors at play and how can they be addressed?
Reluctance to talk about succession
Whether it is to preserve relationships or sidestep awkward conversations, avoiding the issue until the eleventh hour does everyone a
disservice. Don’t wait until a crisis forces your hand, having upfront proactive discussions best positions your family and the business for
Families today are more complex than ever; the perception of equality can be skewed by some family members causing significant problems in
the planning process.
Knowing the right time to let go
Parents can be reluctant or blind when it comes to the right time to hand over the keys.
Finding the right successors
Regardless of the passion for the industry and the families that you serve, sometimes a sale is the only sensible outcome when considering succession; even if it is a multi-generational business.
Not knowing where to start
You need the right tool for the job. While many business owners try the do-it-yourself approach, it rarely works out. Appointing an industry expert, someone who understands the dynamics of the funeral industry, who can provide an objective assessment of the true value of your business will not only make the process run smoother, but it will also ensure the right fit is found for your business and you get the best return from your investment.
Where to start
Succession plans should include both short term and long-term goals. Owners need to decide if they want to maximise the cash takeaway or if they prefer a steady secure stream of cashflow in future years. Of course, a key piece of the puzzle is the tax ramifications from the preferred outcome.
Some funeral home owners often have an unrealistic idea of the value of their business because of what they have “heard” around the traps.
It is important to ascertain the true value of your business when developing a succession plan and then move forward from there.
The most important factor is that any owner, wherever possible should not come out of a succession plan any worse off financially than when were in control of the business.
On the surface succession planning might sound simple, but in reality it can be a very challenging process. Successful successions involve a great deal of planning and benefit from industry expertise.
For funeral industry insights and advice, get in touch with Peter Mulqueen to discuss succession planning for your business.
This information is provided as a guide only and is not intended to constitute advice whether legal or professional. You should obtain appropriate advice concerning your particular circumstances.