How to Successfully Manage Succession in the Funeral Industry? - A Practical Guide
Learn how to implement a successful succession plan in the funeral services sector. Concrete tips for transferors and successors with a focus on the specific characteristics of the industry.
Successful succession planning in the funeral industry is achieved through early preparation (ideally 3-5 years in advance), establishing a second management level, gradual handover of client relationships, realistic business valuation, and a careful transition phase with active knowledge transfer. Particularly important is sensitive communication with clients, employees, and local network partners, as well as preserving the company’s local identity while simultaneously modernizing.
The Unique Challenges of Succession in the Funeral Industry
The funeral industry presents its own distinct challenges when it comes to business succession. These particularities make careful and sensitive planning of the generational change indispensable:
- Strong personal bonds between funeral directors and clients
- High level of trust as the foundation of the business model
- Local roots and integration into the community
- Sensitive service offering in emotionally charged situations
- Specialized expertise and experience in dealing with the bereaved
The 5 Key Steps for Successful Succession Planning
1. Early and Strategic Planning
Succession planning in the funeral industry should ideally begin 3-5 years before the planned withdrawal:
- Clear timeline with defined milestones
- Creation of a candidate profile for potential successors
- Analysis of the company structure and identification of optimization potential
- Documentation of processes and workflows
2. Building a Sustainable Organizational Structure
A crucial success factor is reducing dependence on the owner:
- Establishment of a second management level
- Standardization of core processes
- Documentation of tacit knowledge and business relationships
- Training employees for leadership responsibilities
3. Realistic Business Valuation
An appropriate valuation of the funeral business is critical for successful succession:
- Application of industry-standard multiples (typically 3-6x EBITDA)
- Separate valuation of real estate and specialized equipment
- Consideration of intangible assets such as reputation and networks
- Distinction between operating and non-operating assets
4. Careful Handover of Client Relationships
The sensitive transfer of client relationships is especially important in the funeral industry:
- Gradual introduction of the successor to clients and partners
- Joint client meetings during the transition phase
- Personal recommendation of the successor by the predecessor
- Preservation of traditions alongside careful modernization
5. Structured Transition Phase
A clearly structured handover phase ensures knowledge transfer and continuity:
- Defined handover periods (typically 6-18 months)
- Clear division of responsibilities during the transition
- Regular feedback sessions between predecessor and successor
- Gradual reduction of the predecessor’s influence
Legal and Qualification Requirements
The funeral industry involves specific legal and qualification requirements that must be considered during succession planning:
Qualification Requirements
In many federal states, special qualifications are required to operate a funeral business:
- Master funeral director qualification in certain states
- Certified funeral director according to DIN EN 15017
- Proof of expertise in funeral services
These qualifications must be obtained by the successor early to ensure a smooth transition.
Transfer of Licenses and Permits
Various official permits must be transferred or newly applied for during succession:
- Business registration of the new owner
- Review of existing contracts for transferability
- Special permits for viewing rooms, refrigeration units, etc.
- Immission control permits for crematories
Communication Strategies for Successful Succession
Effective communication is crucial for successful succession in the funeral industry:
Internal Communication
- Early notification of employees
- Involvement of the team in the handover process
- Clear future prospects for each employee
- Training to adapt to new processes or systems
External Communication
- Personal introduction of the successor to key partners
- Sensitive public communication at the appropriate time
- Emphasis on continuity alongside careful modernization
- Preservation of the established brand and trust
Financing Options for Successors in the Funeral Industry
Successors have various financing options available:
- Traditional bank financing typically requiring 25-40% equity
- Subsidy programs for business succession such as KfW Entrepreneur Loan or ERP Start-up Loan
- Seller financing as part of the purchase price financing
- Gradual acquisition through stepwise purchase of company shares
Practical Example: Successful Succession in the Funeral Industry
A practical example illustrates the successful succession process:
Initial Situation:
- Established funeral business in a mid-sized town
- Owner (62) plans retirement in 4 years
- No family successor available
Measures:
- Early search for an external successor
- Employment of a potential successor as a manager
- Gradual handover of responsibilities
- Joint client appointments over a 2-year period
- Structured transition phase with clearly defined milestones
Result:
- Smooth transition without loss of clients
- Preservation of company value and reputation
- Careful modernization while maintaining traditions
- Satisfaction of predecessor, successor, and employees
Conclusion: Keys to Success in Succession Planning
Successful succession in the funeral industry depends on the following key factors:
- Early and strategic planning of the entire process
- Careful selection of the right successor
- Realistic valuation of the business
- Sensitive handover of client relationships and know-how
- Thoughtful communication with all stakeholders
- Preservation of continuity while focusing on the future
With proper preparation and a structured approach, succession in the funeral industry can be a success for all parties involved — the predecessor, the successor, the employees, and last but not least, the clients who rely on continuity and reliability in emotionally challenging situations.