There is a perfect storm forming in the funeral home industry. Many independently owned and operated funeral home owners are at the stage in their professional lives where they begin thinking through succession planning. At the same time, as baby boomers reach an advanced age, an increase in demand for funerals and other deathcare services is on the horizon.

Yet when it comes to succession planning, or setting up any type of future plan for their business, most owners are not prepared to weather the storm.

According to a recent survey by the The National Funeral Directors Association, 34 percent of their members plan to retire within the next five years; however, 73 percent do not have a succession plan for their business. The challenge now becomes: How do those in the deathcare industry ensure that funeral homes continue operating successfully?

The Current Landscape

There are currently more than 18,800 funeral homes in the U.S. Of those funeral homes, 89 percent are privately owned by families or individuals. When it comes to funerals vs. cremations, the latter is outpacing the former: the 2021 cremation rate was 57.5 percent, while the burial rate was just 36.6 percent. The national median cost of a funeral with a viewing and burial in 2021 was approximately $7,848 while the median cost of a funeral with cremation was approximately $6,971.

What this means is an increasingly transient society and evolving views on burial and cremation options pose additional challenges for funeral directors as they develop their succession planning strategy.

Succession Planning: Where to Start

Given the current landscape, proper succession planning is crucial. The question then becomes, where does one even start?

The first step funeral home owners should take before doing anything else is to ensure the financial health of their business. Some of the information that will be important to gather include:

  • Case volume

  • Average revenue per case

  • Percentage of cremation vs. traditional funerals

  • Sales of goods, including caskets

  • Preplanning contracts that are funded/unfunded

  • Readily available and digestible tax returns

  • Local organizations the home is affiliated with

  • Number of part-time and full-time employees

It will also be important to consider their options as it relates to creating liquidity, or finding cash for any potential expansions, renovations, or other changes to their business.

Resources to Rely On For Planning

While all of this can be overwhelming, the good news is there are a variety of consultants who can serve as helpful resources. Their job is to ensure that the business, and ultimately the owner, will be set up for success, no matter what decision the owner makes regarding their funeral home’s future.

These consultants include:

  • An accountant or bookkeeper to ensure financials are in order and all records are accurate and up to date

  • A bank, SPA or other financial institution, which can help with financing or loans

  • A funeral home broker, consultant, or attorney with a deep expertise in the deathcare industry

Understanding Succession Options

Once an owner has their finances in order and has employed the right resources to help move planning forward, they’ll be in a better position to make real decisions about what’s next.

These options include:

  • Improving the current location through renovations

  • Expanding beyond their current footprint

  • Transitioning to a family member

  • Selling some or all of their real estate

Investing Now for the Future

Whether ready to retire, looking to expand, or just wanting to make more strategic long-term investments, funeral home owners and operators will benefit immensely from solidifying succession planning. By having finances in order and employing the right people to help guide the process, funeral home owners will set themselves up for success, no matter what they choose to do next.

Additional Information and Resources for Succession Planning:

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