More than a prerequisite for selling your funeral home, a valuation is an essential component of understanding where your business stands. By taking the time to analyze your funeral home’s position in the marketplace, you can more effectively plan for the future, making strategic adjustments that set your funeral home on the path to success.
Still, a valuation is just data, albeit a complex and thorough sequence of data. What matters most is how you leverage this data to optimize the operations of your funeral home.
Here’s where you can start.
Create a SWOT Analysis
Used by businesses across a variety of industries, a SWOT analyses provides you with a top-level view of your company’s market positioning and consists of examining four pieces of internal and external data:
- Strengths: This refers to anything your funeral home currently excels at. This could be a loyal customer base, unique services not offered by competitors, or even a high valuation.
- Weaknesses: Weaknesses refer to internal factors that currently hinder your performance. For funeral homes, this might include high employee turnover, high levels of debt, or a low valuation.
- Opportunities: Opportunities refer to favorable external factors that may benefit your business. For example, a growing population would present an opportunity.
- Threats: Conversely, threats represent external factors that could serve to harm your business. For many funeral businesses, a declining interest in traditional burials has presented a threat.
A professional, in-depth SWOT analysis can take months to complete; however, by taking the time to brainstorm the SWOT categories with your team, you can quickly identify areas to focus on, whether this means addressing a threat or seizing upon an opportunity.
Make Operational Adjustments
A valuation is an unbiased, quantitative look at what your funeral home is worth, and the results may be much lower than what you desire. In these cases, a valuation presents the hard truths, allowing you to look at core areas in need of attention. These may include:
- Preneed sales: Few strategies will increase the value of your funeral home as much as fleshing out your preneed backlog. By selling pre-arranged services, you’ll not only get some immediate cash flow, but you’ll also ensure continued business in the future.
- Funeral home aesthetics: Depending on the scope of the project, renovations can be costly and time-consuming. However, replacing outdated lighting fixtures, carpeting, and finishes can be a budget-friendly way to increase the value of your funeral home and appeal to more families.
- Accounting: A dedicated accounting manager can help you examine expense management across your funeral home. By figuring out where most of your expenses go and where most of your revenue comes from, you can more effectively understand how your funeral home produces value.
- Service offerings: If you notice a growing market interest in innovative services like virtual memorials or green burials, then it might be time to expand your services.
Reevaluate Your Goals
If you plan to expand your funeral business, refinance loans, or sell your business––in the near or distant future––the results of an evaluation will prove integral to planning your next steps. For example, an exceptionally high valuation, combined with optimal market conditions, might make you consider selling your business earlier than expected. Conversely, a lower valuation may indicate that you’ll need to execute some strategic initiatives before selling.
No matter how long you plan to own your funeral business, it’s important to remember that you’ll likely have to sell it or pass it on to the next generation. Because of this, from the day you begin operating your business, you’ll want to have an exit strategy, however loosely defined.
As the years go by, annual valuations will serve as a key benchmark of success for your funeral home, allowing you to track your progress in relation to your eventual exit.
The Right Direction
Annual valuations function like a yearly check-up for your funeral home, providing the quantitative data needed to measure the progress toward your business goals––whether this is to increase value for a sale or pass the business down to a family member. Conducting a valuation, however, is more than simply adding up revenue and assets. To conduct a professional, unbiased evaluation of your funeral home, you’ll need the help of accounting and financial management professionals.
At Johnson Consulting Group, our team of experts has the death care experience and resources to establish exactly how much your business is worth. By analyzing past, present, and projected sales, as well as examining trends in the broader market, our team can provide you with the accurate numbers you need to plan for the future.
Whether your evaluation meets, exceeds, or fails to live up to your goals, our team will advise you of your next steps. With our consulting and brokerage expertise, we can help funeral businesses at any stage of growth.IMPROVE REVENUE