Recently, Tom Johnson was asked to “weigh-in” on succession planning at cemeteries.
1. Why is exit planning for cemetery owners important?
Succession planning for cemetery owners may be more important than any other type of business for one simple reason; you have a deleting resource. Once a cemetery is full there is nothing to transfer or sell. The only remaining issue is the liability of maintaining the property into perpetuity. Hence the importance of looking at your cemetery and understanding the current and future inventory needs. A Masterplan is essential for this reason.
2. What are some of the problems that cemetery owners might face when planning an exit for their business?
The biggest problem is answered in the first question. That is, making sure you have adequate inventory now and in the future so there is value to the enterprise. Most buyers get wary of any property with a future less than forty years. If you have less than ten years, it may be impossible
Assuming that inventory is not a problem, the next major issue we see is deferred maintenance. This is primarily true with roads, curbs, lawns, statuary, mausoleums, equipment, fountains, fencing, marker, sunken graves, etc. There are more. Any of these issues would be a deduction to value and in mass may eliminate even the bullish of buyers.
Lastly, by its nature, the location of a cemetery never changes. But, the neighborhood around a cemetery certainly can. Changing demographics can drastically affect the value of a cemetery. Owners needs to prepare for these types of changes as clients may very.
3. What are some important tips that you can share with cemetery owners on cemetery succession and cemetery planning?
Have a master plan for your cemetery. As basic as this step is, there are many cemeteries that do not have one. You must know and stay abreast of your inventory at all times. It is your most valuable asset. A good master plan will give you the information you need.
Have a business plan for your cemetery. I would do it strategically (5 years or more) and also tactically (1 to 2 years). Look at your trends, keep the good ones and fix your problems. Perform a SWOT analysis. Look at your Strengths, Weaknesses, Opportunities, and Threats. You can do it yourself, but it is not a bad idea to have an outside company take a look from time to time.
Operate with an annual budget. Many operations do not budget, but with our changing consumer it will become more and more important in the future. Don’t take a chance with your cemetery. Create an operation plan and make the financial commitment to that plan by preparing a budget.
If remaining inventory is an issue at your cemetery, address it now. If it can be expanded, do so if the demographics warrant such an expansion. If it can’t be fixed, call a doctor as it won’t be too long before you start feeling ill.
Lastly, I would say one of the biggest negatives, if a cemetery hasn’t planned for it, is a good accounting system. Be sure you have GOOD reconciled accounting records. This is important for funeral homes and cemeteries alike, but REALLY has a negative impact on cemeteries when this is lacking. Break out AtNeed Sales, break out PreNeed sales (cash received) break out AtNeed and PreNeed receivables, have a good aging report, make sure you have good detail in all of the different types of sales in the preneed sales volume reports as well. (Have sale volume reports handy) have a good tracking of liabilities to be delivered (merchandise and service) and the relevant liabilities, etc