Everything You Need to Know About Feasibility Studies for Expansions
With the growing popularity of cremations and alternative funeral arrangements, many funeral directors are contemplating expanding their business. These expansions hold the potential to not only increase revenue but also diversify income streams; however, they must be implemented strategically.
If you expand your funeral home without a thorough understanding of its costs, legalities, and required expertise, then you risk wasting a whole lot of time and money. Before breaking ground, you should always conduct a feasibility study.
What is a Feasibility Study?
A feasibility study is a formal assessment used to determine the practicality of a potential project. It analyzes all aspects of an endeavor and determines whether or not it is likely to succeed.
For example, if a funeral director wishes to acquire a local competitor, the associated feasibility study would likely consist of a cash flow analysis, an assessment of risk, and projections of income, among other factors.
Benefits of a Feasibility Study
When thoroughly conducted, a feasibility study gives you all the information you need to determine whether a project is worth pursuing. Benefits include:
- Identify reasons for and against proceeding with a project.
- Sharpen the focus of your project team.
- Provide actionable steps to begin a project.
- Provide accurate estimates of required resources.
- Calculate the return on your investment.
What Should Be Included in a Feasibility Study?
When looking to expand your funeral home, the associated feasibility study will include the following:
- Executive summary: Briefly outline your plan for expansion.
- Technological considerations: Depending on the type of expansion––particularly if you plan to build new facilities––you’ll want to consider the technology needed, if you already have it, and how much it will cost.
- Current marketplace: Analyze the current market for funeral services and project how your expansion might affect this ecosystem.
- Marketing strategy: Describe how you plan to publicize your expansion, ensuring the right clients are aware of any new services involved.
- Required staffing: Consider what an expansion means in terms of staffing. Will you have to hire new team members? Will they need any specialized training? How will your existing team members fit into this equation?
- Schedule and timeline: Include an outline for key benchmarks of your expansion, from the beginning to completion.
- Project financials: Create an itemized budget for the project, including manpower, labor, licenses, and any other associated costs.
- Findings and recommendations: Drawing on each of the prior components, this portion of the feasibility study will both conclude if an expansion is worth it and provide actionable steps to begin the project.
How to Conduct a Feasibility Study
For a funeral home expansion, a feasibility study will generally consist of five steps.
Step 1: Conduct a Preliminary Analysis
A preliminary analysis essentially functions as a condensed version of a feasibility study. Since a feasibility study can take weeks or months to complete, this step of the process can help you quickly identify which projects justify further examination.
In a preliminary analysis, you’ll first want to outline the basics of your expansion. This will likely consist of real estate, facilities, and services, culminating in the ultimate goals of the project. Make sure to look at the greater marketplace of your funeral home. Examine your competitive advantages and also look at similar expansions carried out by competitors and how they have performed.
During this step, you’ll also determine the risks of expanding your business. This includes financial risks, in addition to issues related to staffing, supplies, and anything else that could threaten the success of your expansion.
Step 2: Create a Scope
Once you’ve got a basic understanding of your expansion, you’ll want to delve more deeply into its technical components by outlining its scope. This consists of answering the following questions:
- Is this expansion technically feasible?
- Will you need to acquire any new technology to successfully expand?
- Is this expansion legal?
- Are there any licenses, certifications, or other legal requirements to consider?
- Is this expansion operationally feasible?
- Do you have the staffing (both in numbers and individual skillsets) to pull it off?
- Can this expansion be completed within a reasonable timeframe?
- Ideally, when would your expansion be complete?
- Is this expansion economically feasible?
- Do you have the funds to conduct this expansion, and will the returns be worth it?
Step 3: Perform Market Research
Conducting market research means to gather information about your target audience to determine if your expansion would be well-received, if it’s needed/wanted, and how you might iterate the project to fit your family’s needs.
A tangential benefit to market research is that in provides insight into many other areas that can be useful to you, such as:
- What’s trending according to families
- Competitors that are looked to as a leader in death care and why
- In the entirety of the local death care market, the main challenges faced by funeral homes
- Determining if there is demand for the expansion you’re proposing
- Family needs that are not being met
The idea of market research is to get the pulse of local families–how they feel about your current funeral home and their interest if it were to expand.
Step 4: Financial Analysis
In most cases, the financial component will be the most important in determining the feasibility of an expansion. While the financial concerns will look entirely different for every expansion, you’ll want to consider the following:
- Will you fund your expansion internally or through external financing?
- If your expansion were to fail or underperform, what would be the potential costs?
- Which risks pose the largest financial issues for your expansion budget?
- Once your expansion is complete, at what financial point will you break even?
- Weighing all risks, how much money will you need to complete your expansion?
When completing this step, it’s important to remember that––no matter how carefully you plan––most projects and expansions will go over budget. So it’s important to provide yourself with some added flexibility in your allocations.
Step 5: Review Results
Once you’ve figured out the scope, market, and financial concerns of your expansion, it’s time to compile your results and present them to key stakeholders. From this presentation, you should be able to conclusively state whether or not an expansion is worth it, supporting this conclusion with ample evidence.
Feasibility Study Best Practices
Each expansion requires a slightly different approach to determining feasibility; however, you’ll undoubtedly want to follow some best practices:
- Your preliminary analysis should include feedback from funeral home stakeholders. It should also consider similar expansions from other businesses and how they succeeded or failed and why.
- Ensure the financial data is valid. Check, double check, triple check.
- If possible, conduct original market surveys to better understand how your expansion might fit into current funeral home trends.
- Create an exhaustive list of obstacles to your expansion and contingency plans to mitigate them.
Get a Third Party Involved
A key tenant of feasibility studies is attention to detail. To thoroughly analyze market trends, your funeral home’s position, and how an expansion can increase your reach requires expertise and time. Often, a feasibility study can take 2-3 months to complete, making it beneficial to call in some outside help.
At Johnson Consulting Group, we have decades of experience owning, operating, and growing funeral businesses of all sizes. Our consultants understand what it takes to run a funeral home, and we can help existing businesses adapt to the shifting terrain of the death care profession.
We’ve guided countless funeral directors through openings and expansions, and we regularly conduct feasibility studies to aid in these processes.
A feasibility study is only as reliable as the work that goes into it. With the help of Johnson Consulting Group, you can expand with strategic precision.