No matter how successful your funeral home, and no matter how much passion you pour into it, there will come a time where you must exit your role as its director and/or owner. Whether you sell the business or bequeath it to your child, it’s important to begin planning your exit strategy as soon as possible to ensure a smooth transition.
Before even taking the reins of ownership, you should begin charting your business lifecycle, one that guides you from purchase through operation, growth, and the eventual sale. While no plan can account for absolutely everything, having a rough guideline will help you make strategic decisions along the way. Most importantly, it puts each of your actions in perspective.
When planning to purchase a funeral home, it’s tempting first to consider the region; however, just because a funeral home is nearby does not mean that it’s a good fit for you. Apart from the location, facilities, and equipment, you’ll want to consider where the funeral home currently stands. This includes its employees, market positioning, and current financials.
Remember, buying a funeral home includes inheriting its current business structure, and while a fledgling business might be a savvy investment––depending on your experience level––it will also require more work to turn it around. Again, the key is to plan strategically.
Funeral Home Business Plan
In any industry, purchasing a business requires careful consideration of budgets, staffing, and growth initiatives. In addition to these concerns, the death care industry comes with the challenge of serving populations in times of emotional duress. Because of this, customer service should be at the forefront of your funeral home business plan.
Take the time to focus on every family touchpoint––from initial call to after care––and determine how you can optimize the client experience. Undoubtedly, this issue will bring staffing into question. You’ll want to take stock of existing employees, their roles, and their skillsets, ultimately determining where to make changes to better serve families.
Another vital component of your business plan will be your financial management. In tandem with plans for growth, you’ll need to develop a system to accurately track and report both profits and losses. The best option here is to hire an accountant with funeral-specific experience. A skilled death care bookkeeper can not only track your financial performance but also provide suggestions related to pricing and planning.
To succeed in your first year of owning a funeral home, you’ll want to start with human connections. First and foremost, this means reaching out to the families who have booked services with your funeral home. Consider sending them a handwritten letter in which you announce your new role as the director and your commitment to continuing to provide the exceptional service they’ve received in the past.
You should take the time to understand how each team member performs. Consider hosting an introductory meeting where you introduce yourself and clearly articulate your values as a funeral director. Once you’ve learned a bit more about how this team performs, you can assess where additional training is needed.
To sustain growth through your first year and beyond, here are some additional areas to focus on.
Look to patrons to learn more about the funeral home. They can likely provide valuable insight related to pain points and how to improve them.
For example, by sending a feedback survey to former families who have used your funeral home’s services, you can learn what parts of your funeral home excel and which stand to be improved.
Since a large portion of your staff and facilities will likely be the same, many prior problems will still exist. By soliciting feedback, you can better determine where to focus your improvement efforts.
Expand Your Preneed Services
A surefire way to increase your bottom line is through the expansion of preneed services. Often, many families are not aware that they can book funeral arrangements in advance, so one facet of this expansion will be raising awareness as part of your after care program.
Start by educating your staff on how to sell these services and begin to set goals each month. This is a great way to add value to your funeral home.
Diversify Revenue Streams
With the rates of traditional burial on the decline and alternative arrangements growing in popularity, there has never been a better time to invest in multiple ways to honor the deceased. Building a cremation facility or contracting with a local crematorium is one way to keep up with these trends.
Alternatively, if you don’t want to spend so much on capital improvements, you might consider offering keepsakes or alternative celebration services. These will allow you to supplement any fluctuations of revenue from traditional burials.
Create Strategic Partnerships
While relationships with employees and families are the most important when it comes to running a funeral home, building community partnerships can also be a boon to your business.
Partnering with local florists and cemeteries can secure you favorable pricing for services, while informal partnerships with other organizations––hospice centers, police forces, and Lions Clubs––can help ingratiate your funeral home as part of the community and keep you top of mind when families are in need.
While it might sound counterintuitive, after your first year, you should start looking into the value of your funeral home and start planning for an exit strategy. Even if you plan to run it for several decades, it’s good to conduct a valuation every year, as it provides valuable insight related to your progress and growth.
While you can perform an in-house valuation on your own, the most reliable measures involve hiring an independent professional familiar with the funeral space. By assessing your funeral home’s cash flow, risks, and potential growth, a professional valuation will give you the most realistic idea of your business’s worth and aid with tax concerns.
Knowing When to Sell
Regardless of what you anticipate in terms of timing your exit, there may come a time when selling your funeral home makes the most sense. For example, as we emerge from the pandemic, and in-person gatherings are once again feasible, many funeral homes have seen a spike in their value, making now an optimal time to sell.
Alternatively, if you receive a low valuation, you can take adequate measures to ensure you reach your goal numbers by the time you wish to sell your business. This is why it’s important to evaluate your funeral home with regularity. A valuation functions as a tangible metric of your funeral home’s progress.
When the time comes, and you’re ready to exit your funeral home, you’ll have two main options:
- Handing over directorial duties while maintaining ownership
- Selling your business and moving on to other ventures
While passing on your funeral home to a relative is certainly an option, it’s important to make sure you treat this as a formal sale, rather than a gift. As you’ve undoubtedly learned, running a funeral home is no easy task, and a child’s passion for the industry doesn’t necessarily translate into business acumen. There’s a reason that a vast majority of family businesses don’t make it past the second generation.
If Selling Your Funeral Home
When selling your funeral home, you’ll first want to consider the market conditions. This applies to not only the funeral industry but also tax concerns. For example, taxes on capital gains are currently low; however, if they were to rise, then selling your funeral home might become less profitable.
You’ll also want to do some research on the multiples being paid for other funeral homes. A metric of a company’s financial wellbeing, multiples will give you greater insight into what price your business might sell for.
Then you should consider the situation in terms of buyers. Despite the pandemic, there is currently a large pool of buyers for funeral homes, including large corporations, regional buyers, and private, independent buyers. In most cases, an entity will use financing to purchase your business, so interest rates will also impact your ability to sell your funeral home.
Finding a Buyer
While a dedicated funeral home broker will be an indispensable resource for finding qualified buyers, there are also some steps you can take to avoid wasting your time.
When screening buyers, you’ll want to look for:
- Demonstrable interest in the funeral business. A reliable indicator of this is years of experience working in death care industry roles. If a buyer already has certifications related to death care and mortician practices, then they’re likely a qualified candidate. Ideally, candidates will have owned funeral homes, crematoriums, or cemeteries.
- Access to funds. All the experience and passion won’t matter if a person can’t afford your business. Make sure your buyer is already pre-approved by a lender. If a person doesn’t plan to finance the purchase of your business, then you’ll want to verify bank statements.
Additionally, it’s important to remember your role as the seller. In the same way, you’ll want buyers to come ready with financial and work information, you’ll also need to provide detailed records of your business’s value, revenue, and taxes. Otherwise, qualified buyers won’t be willing to risk a purchase.
Support at Every Step
Whether you’re looking to purchase your first funeral home, or you’re planning for an eventual sale, Johnson Consulting Group can help guide you through every stage of your funeral business’s lifecycle. Comprised of experienced and reliable death care professionals, the JCG team has a proven track record of helping funeral businesses both grow and maximize their values for sale.
To help you purchase a funeral business, they start by understanding your individual goals, both as a person and a funeral professional. With their holistic vision of success, they assist with identifying which funeral businesses offer the best opportunities for your needs and guide you through the whole process.
Whatever stage your funeral home is in, they can help you maximize its performance and achieve unprecedented levels of growth and family satisfaction.
While many view a business valuation merely as a prerequisite for sale, the experts at Johnson Consulting Group treat this process as a key component of tracking progress. Their valuation process keeps you informed of your funeral home’s worth, helping you more strategically plan long before selling.
When you’re ready to sell your funeral home, they can assist you every step of the way, connecting you with qualified buyers and executing a sale at the maximal selling price. They also assist with your exit strategy, helping you achieve your broader financial and personal goals.
As experts in the death care industry, Johnson Consulting Group is an all-inclusive solution to any funeral home needs you face. Partnering with them means you have an extended team to help you grow and flourish.FUNERAL HOME SUCCESS