A lot of leaders who fear their exit from a business fail to see the importance of succession planning. But unless your funeral home operation has a succession plan in place, it will remain vulnerable to adversity. In fact, multi-national businesses lose an average of $1.8 billion in shareholder value when they fail to plan a replacement for their leaders.
As a leader, you certainly cannot risk losing that much value. Before time runs out, you should plan for the future of your career and your funeral home entity by finding the most deserving successor. Here are some of the things you should consider so that you can start succession planning early.
The timeline for the succession must be laid out in advance
Succession planning is a long, rigorous process that may take years. You can manage the time and effort that your team will spend by crafting a long-term plan with a realistic timeline.
Conduct active engagements with your executive team in planning and structuring the succession. As a team, you can create a realistic plan by considering the current projects and future goals of your funeral home operation. Afterwards, discuss a timeline that will encompass the selection and the training of the successors as well as the timeline for the turnover of roles.
It is not simple to select a competent successor
The next leader can dictate the success of your funeral home’s future. Thus, there are a lot of things that you have to consider before choosing a deserving successor. For some businesses, the leaders have to contemplate if it’s better to pass the role to a family member, an employee, or even to a buyer.
Moreover, it’s important for leaders to thoroughly evaluate prospective successors. Conduct discussions with different candidates and evaluate their strengths and weaknesses, financial needs, skills, and experience. You have to assess how well they can interact with their future colleagues, clients, and partners, and from there, how much growing they have yet to do. Most of all, you also have to consider their career aspirations and ensure that the role is in line with their own personal goals.
Proper successor training takes time
A leadership role is not merely given, it is earned. Setting enough time for prospective candidates to be trained for leadership is crucial. This period will help them slowly but surely accumulate enough skills and experience to understand and fit in the role.
Before you start training the successor, you have to curate the right development process based on your funeral home’s needs and goals. Apart from leadership skills, your successor must also be able to hone other competencies that are integral to your funeral home operation’s progress. You may be able to optimize this training process through the expertise of business analysts. Their background in business administration trains them to plan for the business’s continued and future success, all the while recognizing its potential and limitations. Business analysts can create strategic plans that successors can implement based on data, as well as identify resources that are necessary to make them happen. With the use of data, your company can identify the skills, knowledge, and strategies that your successor must master to ensure the continued prosperity of your business throughout the change in leadership.
Assess your business’ value before passing it to your successor
Succession planning is neither quick nor inexpensive. Once you pass your funeral home onto another person, you will also have to distribute its market value and abide by transfer tax regulations. Understandably, succession planning within a family is much more favorable for some business owners because it is a less complex and costly process. Funeral homes can be handed over from one family member to another as an outright gift or through Grantor Retained Annuity Trusts for better tax efficiency.
Before implementing the succession plan, business owners must consult with qualified financial appraisers to review their funeral home’s market position and finances. The business’ cash flows, risks, and potential growth must be assessed for the business valuation. This may also allow entrepreneurs to carefully assess which successor is profitable and efficient for the succession planning. Furthermore, you may also use the valuation as a guide in increasing your funeral home’s profitability before it gets transferred or bought by a successor.
Early planning leads to a graceful and profitable exit
People think succession planning is merely a part of one’s retirement plan. However, you shouldn’t wait for accidents to happen before you plan for the future. Make a graceful exit from your funeral home operation by ensuring that it will remain profitable and successful after you leave.
Consider succession planning as part of risk management. It is a type of insurance in which you and your team will invest time and effort so that your funeral home can meet its goals and earn profit both during and after you make a plan for the future. This will ensure that your successor will be able to maintain the legacy that you have cultivated for the business.
Time can either be your enemy or your ally when it comes to succession planning. This process may be tedious, but it ensures that the transition will be beneficial for all the parties involved. Most of all, early succession planning is a good business practice of a leader who simply wants the best for their funeral home and its people.
Article written by Cleo Wintringham for Johnson Consulting Group
Want to learn more about succession planning? Contact the JCG team today!