In a perfect world, an owner will exit or transfer the business on their own terms—financially secure, ready to retire, and with a willing heir or buyer at the ready. But in many cases, exits happen for unexpected reasons: health issues, financial necessity, or death.
Forming an exit plan can ensure a smooth transition, no matter what the circumstances.
The Problem: Many Business Owners Do Not Have Exit or Succession Plans in Place.
A 2019 survey from the National Funeral Directors Association found that most funeral service business owners are over the age of 55, with many hoping to retire within 5 years.
But the survey also found that many owners are not necessarily prepared to exit:
Nearly 75% of owners do not have a solid exit strategy or succession plan in place.
Of the approximately 25% of owners that do have a plan, a majority have yet to put the plan in writing.
Many funeral home and cemetery owners are waiting to find a buyer or successor that meets the goals for the business. Some funeral home and cemetery owners are undecided as to who should take over the business. The survey data shows that about 50% of owners want to transfer the business to a child, but there are many other possibilities to consider:
We are proud to offer the only financial planning and exit planning solutions for funeral service professionals exclusively endorsed by the National Funeral Directors Association.
Key Questions to Consider:
- What is your business worth? (It’s important to work with an experienced appraiser and a Certified Exit Planner with specific knowledge of the funeral and cemetery profession. You must consider business value and real estate value as a commercial appraiser is generally focused on the most profitable use of the property).
- Have you identified a buyer or a successor for the business? Will it be a national company, regional competitor, local competitor, key person already employed in the business, family member or a first-time buyer?
- Have you assembled the necessary legal documents?
- What will you receive in after-tax proceeds from the sale of the business? Remember, taxes are often a major factor in what you actually net from the business.
- If you transfer the business to a new owner, how will you structure ownership and cash flows?
- What tax planning strategies could potentially increase the value of your business between now and the date of transfer or sale?
- What do you need your post-exit income to be, in order to maintain your standard of living and to meet your long-term financial goals? Make sure to take into consideration any personal expenses the business will no longer cover after your exit.
- What rate of return are you expecting?
- Is there an asset gap or shortfall?
This list may seem overwhelming for many business owners—you already have enough work to do running the business.
Roosevelt Investments can help—we have served the funeral service and cemetery profession for over 50 years, and we understand your business and your needs. We also know Exit and Succession planning.
How to Get Started with Your Exit Plan
Developing an exit plan starts with a review of the business owner’s goals and objectives. Then we will take time to ask you questions like the ones above, to understand the inner workings of your business.
Next, we need to consider how your business situation works alongside your personal financial plan. By understanding your current financial situation in detail, our CERTIFIED FINANCIAL PLANNER™ professionals and Certified Exit Planner can evaluate the different variables in play, ultimately determining how to monetize your business in such a way to address your long-term goals.
The end goal of a well-defined exit or succession plan is two-fold:
Over time, your financial situation will almost certainly change, and the business will evolve. But having an exit plan and a financial plan does not mean you’re stuck following a rigid step-by-step process—the plan makes it easier to evaluate new options, changes, or strategies that come along over time.
Your successor may change their mind, or a new buyer may come along and make a better offer. Your family may decide they want to keep the funeral service business going, or they may decide that the legacy of the business should move into new hands. Are these new offers/approaches better or worse for your business and your wealth? An exit plan can help you answer that question.
Get Started on Your Plan Today
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