However, the allure of ownership should be approached with careful consideration. While the idea of having the freedom to set your own schedule and make decisions without supervision is appealing, there are inherent challenges. Being a good funeral director doesn’t necessarily equate to being a good manager, and similarly, good managers don’t always make good owners. It’s critical to recognize personal inadequacies and work on developing the skills necessary to succeed as an owner.

As Tom noted in his article, the journey from funeral director to owner requires a deep understanding of what ownership entails. It’s easy to look at the rewards of owning a business without fully appreciating the hard work required to reach that level. The climb to the top involves a great deal of learning, adaptation, and a willingness to let go of certain tasks in order to assume the broader responsibilities of ownership.

When exploring funeral home ownership opportunities, it’s advisable to memorialize any promises of future ownership in writing with a current owner. Without a formal agreement, there is little foundation to build on, and years of hard work might not result in an ownership stake. Aspiring owners should also be prepared to enhance their leadership and management skills through conferences and training programs, such as those offered by Johnson Consulting Group’s Leadership and Management Academies.

One of the current advantages in our profession is the availability of financing. With the right preparation, a bank can fund the purchase of a funeral home, allowing the new owner to pay back a loan over time while keeping the business for themselves. This is a key part of the American dream, but it requires thorough financial readiness, both in terms of savings and skill set. Aspiring owners must be equipped to manage debt and know when and where to seek assistance.

It’s important to remember that the learning process never stops. As an owner, others will look to you for answers, which can create pressure. But, it’s crucial to continue growing and seeking support when needed.

Looking at the next generation, there’s often a misconception that “They won’t work as hard as previous generations”. However, today’s business professionals are finding innovative ways to balance work and life. Through outsourcing, leveraging resources like associations and the internet, and using study groups, younger professionals are finding efficient ways to accomplish their goals without overworking themselves. In summary, it’s more about prioritizing balance and using the abundant resources available.

In conclusion, owning and running a funeral business isn’t for everyone, but it can be incredibly rewarding. The key to success lies in taking care of the families you serve…Period! If you can do that, they will take care of you. With the right preparation, support, and willingness to learn, you can enjoy the many benefits of ownership and establish a successful future for you and your family.

*This article was originally posted on the Funeral Director Daily website.

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Crafting a Strategic Financial Plan for Funeral Homes

Developing a robust business plan is the first step toward financial mastery in the funeral service profession. This plan serves as a roadmap, guiding your funeral home through budgeting, forecasting, and cash flow management. A well-crafted business plan showcases the viability and strategic vision of your funeral home.

Key Elements of a Financial Plan:

1. Budgeting and Forecasting: Establish clear financial goals and projections to guide your business decisions.
2. Cash Flow Management: Maintain a steady cash flow to ensure operational efficiency and sustainability. Consider using a thirteen-week cash flow analysis provided on a weekly basis.

Understanding a comprehensive financial strategy will enable your funeral home to provide essential services while maintaining financial health.

Balancing Empathy with Economics in Funeral Service

Funeral home owners face the delicate task of blending empathy with economic viability. Financial control is crucial in balancing these elements, ensuring that pricing structures are fair and transparent while supporting your business’s profitability.

Strategies for Balancing Empathy with Economics:

• Transparent Pricing: A key consideration would be placing your prices on your website. Also, utilizing phone shopping vendors to ensure you are not only in compliance but providing all options to families guarantees your transparency and compliance.
• Cost Management: Control expenses on essentials like caskets and services to keep operations efficient and families happy.
• Revenue Tracking: A detailed sales contract analysis ensures that you know exactly what the average sales are per case type along with the averages of the items sold within those calls. This ensures that your pricing is not only competitive, but that you’re recovering your pricing as a correlation to the average sale you’re receiving.

By combining compassionate care with sound financial strategies, you can offer meaningful services while maintaining a viable business model.

Sustaining Your Funeral Home Business

Effective financial control is key to sustaining a funeral service business. Strategic planning helps you adapt to market changes while honoring the emotional aspects of our profession.

Key Financial Strategies for Sustainability:

• Budgeting: Predictable costs ensure affordability for clients and stability for your business.
• Financial Forecasting: Prepare for industry trends and future demands in your market.
• Investment in Staff Training: Enhance service quality and succession planning which fosters client trust and loyalty.

A well-structured financial plan empowers your funeral home to meet customer needs with integrity, ensuring both dignified services and business longevity.

In Conclusion, crafting a strategic financial plan is the foundation of a thriving funeral service business. By focusing on budgeting, cash flow management, and balancing empathy with economics, funeral home owners can sustain their operations and serve their communities effectively.

*This article was originally posted in NFDA’s Financial Column.

The post Crafting and Sustaining a Funeral Home Financial Plan appeared first on Johnson Consulting Group.

A client of Johnson Consulting Group (JCG) sought to enhance profitability and the value of their business. With JCG’s guidance, the client implemented strategic operational and financial tools that significantly boosted their business value.

Challenges

Initially, the client’s business EBITDA was $2.6 million. However, the client recognized the opportunities for substantial growth and sustainability in their financial metrics to increase the business’s long-term value.

Solutions Implemented

The JCG team took a tailored approach, deploying internal tools and consulting methodologies to drive measurable improvements. Key steps included:

• Financial Analysis and Benchmarking: Conducted an in-depth business assessment and identified key areas to drive up profitability.
• Strategic Planning: Formulated a strategic plan focused on optimizing the workplace, reducing unnecessary costs, and enhancing revenue streams.
• Performance Tracking and Adjustment (JCG’s Survey and Sales Analysis Software): Implemented consistent performance tracking to ensure that every adjustment contributed positively to the client’s business profitability.

Results

The outcomes were notable:

• Enhanced EBITDA: The annual EBITDA improved from $2.6 million to $3.0 million, a 15.38% increase as a result of the solutions implemented.
• Increase in Business Value: Within this first phase of implementation, the client’s business value rose $3 million based on a conservative industry EBITDA multiple.

Conclusion

Through Johnson Consulting’s expertise and the deployment of targeted tools, the client achieved measurable growth and value. This case study exemplifies Johnson Consulting Group’s ability to deliver significant return on investment when compared to JCG’s costs to implement.

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The post Johnson Consulting Group Increases Client’s Value by $3 Million appeared first on Johnson Consulting Group.

Q: Which major tax provisions from the TCJA are set to expire at the end of 2025?

A: Individuals and families can expect tax increases, but for business owners, the most concerning provisions include:

• Loss of the Section 199A Deduction: This deduction, currently available to pass-through entities (such as S-corporations and LLCs), allows business owners to deduct up to 20% of qualified business income. When this expires, pass-through entities will lose a valuable tax-saving tool, potentially increasing the tax burden on small businesses and entrepreneurs.
• Loss of Caps on State and Local Tax (SALT) Deductions in High-Tax States: Taxpayers in states with high income and property taxes could face higher overall tax liabilities as the current $10,000 cap on state and local tax deductions disappears.
• Reversion of Capital Gains Tax Rates: Capital gains tax rates will revert to being determined by your regular income tax bracket. This means that individuals in higher income brackets may see a significant increase in their tax rate on long-term capital gains.
• Reduction in Estate and Gift Tax Exclusion: The current estate and gift tax exclusion of $12.92 million per individual will drop by nearly 50%, meaning estates valued over approximately $6 million will be subject to estate taxes. This change could affect many families planning to transfer wealth to the next generation, making estate planning a crucial step in the coming years.

Q: What tax strategies should funeral home and cemetery business owners consider as 2025 approaches?

A: One key strategy is to consider accelerating your income before the TCJA provisions expire. With capital gains rates set to revert to higher levels based on your income tax bracket, now is an optimal time to sell assets, take profits, or increase distributions. By doing so, you can take advantage of the lower rates now, reducing your tax liability compared to what it would be under future tax rules.

This strategy is particularly beneficial for those with capital assets such as stocks, real estate, or business interests that have appreciated significantly over time. Locking in current capital gains rates could save you a substantial amount in taxes before the rates increase post-2025.

Other considerations may be to reevaluate your business structure, either converting it to a C-Corp or an S-Corp to lessen taxes. It may also be an opportunity to increase contributions to retirement plans, investing in capital equipment, or exploring tax-advantaged benefits for employees.

The Importance of Timing in Succession Planning

When it comes to succession planning, the timing of a sale can have a significant impact on the value you ultimately retain. In the words of Jake Johnson, “It’s not what you get, it’s what you keep.” Even though the sale price of a business may remain the same before and after 2025, the amount you keep after taxes will change. This is due to the potential tax increases that could arise when the TCJA provisions expire.

Q: How should funeral home and cemetery business owners approaching a succession plan think about the timing of a sale?

A: If you’re considering transferring your funeral home or cemetery business, now may be the optimal time to maximize the value of your business. With the potential tax increases on the horizon, selling before the end of 2025 could result in you keeping more of the proceeds.

“It’s just food for thought and something business owners should be aware of,” Jake continued. “If you were planning to sell around 2025, the tax changes might push you to reconsider your timing. Even if you’re not quite ready to sell, it’s worth considering whether selling now could help you avoid a higher tax bill later.”

The core idea is that waiting until 2026 or 2027 could mean a larger tax burden, requiring your business to make up the difference in growth or additional calls on capital. By transferring before the end of 2025, you may be able to capture a more favorable tax position and keep more of the proceeds from the sale. However, it’s important to remember that not everyone will be ready to sell at that time, so planning ahead and discussing options with a tax advisor is crucial.

In conclusion, with the expiration of these TCJA provisions on the horizon, proactive tax and succession planning are essential, working closely with a financial advisor will help you craft the best strategies to minimize your tax burden.

*Johnson Consulting Group and its affiliates are not tax professionals. You should review the content of this article with your tax professional to see how it applies to you.

The post Tax Changes Looming: What Funeral Home Owners Should Know appeared first on Johnson Consulting Group.

Preneed Sales: Asset or Liability?

One of the frequent questions we encounter is whether preneed sales are an asset or a liability for a funeral business. The answer is both. In accounting terms, preneed sales are considered deferred revenue, which is technically a liability. However, the value of a robust preneed book of business is invaluable for future enterprise value.

Starting with Preneed Programs

There are numerous third-party marketing companies that can assist with implementing preneed programs, or you can manage it in-house. Regardless of the method, setting a monthly sales target is crucial. Ideally, for every at need contract, we aim to replace it with 1 to 2 preneed contracts.

Our analysis of various funeral homes across the United States and Canada indicates that preneed contracts typically represent 35% of the annual at need case volume at a funeral home. This statistic is often referenced when evaluating the value of the preneed book of business. For instance, a funeral home with $5 million in their preneed account, might see only 35% of that amount come to fruition annually. In other words, that represents 35% of the total at need revenue for the year. Then, taking into consideration the correlating operating expenses of the business, the result is excess cash. This method creates a simple view of how to determine the value of the contribution of the preneed total book of business.

For further insight, consider a funeral home with an annual revenue of $1 million (excluding cash advances), where $350,000 of that revenue is derived from preneed contracts converting to at need. This revenue then incurs expenses, and the resulting EBITDA (Earnings before Interest, Taxes, Depreciation, Amortization) is multiplied to determine the business’s value. Additionally, preneed sales help lock in today’s family preferences, which is crucial as trends like rising cremation rates continue.

Importance of Monitoring and Training

We believe that what gets measured gets done. Therefore, having a budget, weekly sales reviews, and consistent funeral home training in customer service are essential. Even funeral businesses experiencing a decline in at need volume often maintain consistent preneed case volume. This consistency highlights the loyalty families feel when they pre-plan and return to the same funeral home.

Conclusion

When asked if a preneed program is an asset or liability, it is clear to us that it is a significant asset that enhances the value of a funeral business. However, careful planning and monitoring are necessary to ensure that preneed sales do remain an asset and not a liability. At Johnson Consulting Group, we conduct numerous contract analysis studies and provide strategic planning guidance to ensure the effectiveness of these programs. Our partnerships with third-party experts further support our clients in maximizing their business value through preneed sales.

If you want to know more about increasing the value of your business, feel free to reach out to us at Johnson Consulting Group.

The post Enhancing Business Value with Preneed Sales appeared first on Johnson Consulting Group.

Succession planning preserves an organization’s legacy, ensures smooth leadership transitions, and nurtures internal talent. It is vital to the long-term success of any and every funeral home.

About Johnson Consulting Group:

Johnson Consulting Group is dedicated to providing comprehensive business solutions and tools to achieve heightened performance, profitability, and success within the funeral and cemetery industry. Our expert services encompass Succession Planning, selling funeral homes and cemeteries, financing solutions, business coaching, accounting services, funeral business performance analysis, customer survey programs, Customer Experience workshops, incentive compensation plans, and Leadership and Management training.

The post A Brush With Death: Funeral Succession Success appeared first on Johnson Consulting Group.

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To ensure the success of the sale, there are a number of factors to consider. From setting realistic expectations to finding the right outside help, selling your funeral business is a difficult act to pull off, but if you do it right, you can guarantee that the sale sets you up for success – whether this means retirement or moving on to your next venture. 

In this guide, we’ll review all the steps an owner must take from start to finish when selling a business. 

Planning is Crucial

Before you start the sale process, it is important to plan ahead. Take the time to understand your business’s current financial health, market position, and future prospects. 

Beyond this, you’ll also want to consider what your goals are with the sale. Are you hoping to exit a lifetime of work and retire in Florida, or are you hoping to sell the business and remain on the team in some capacity?

By planning out what your ultimate aim is, you can begin to figure out when you might sell, for how much, and to whom.

Set Realistic Goals

As you plan, it’s important to outline realistic goals. Naturally, every owner wants to sell their funeral home for the maximum price in the shortest amount of time, but this may not always be possible, depending on the state of your business and the greater market conditions. 

Unlike real estate, in which homes may sell within a day of hitting the market, the death care industry is more specialized. Not just anyone can buy a funeral business, and among those individuals buying, not everyone is qualified.

By being realistic about the timeline of your sale, as well as your business’s asking price, you can prevent settling for less than you’re worth.

Valuation Package or Marketing Package?

Getting a valuation is the best way to internally understand where improvement opportunities exist for creating value. 

A business valuation is an internal product and should not be shared with a potential buyer. Why? A business valuation will have a more conservative review with payroll, marketing, and other expenses that will be adjusted differently and more aggressively under a marketing package. 

The sole purpose of a marketing package is to show the opportunity, minimize the risk, and create value in the business that may not exist today. For this reason, marketing packages are invaluable for business owners who are ready to sell NOW.

Time to Create a Marketing Package

As you begin the process of selling your business, you’ll need to get a professional marketing package created. Not only are marketing packages critical for any qualified buyer to review, but they also can give you an accurate picture of how much money you should ask for.

If the value from the marketing package doesn’t end up where you want it, then it may be best to hold off selling until you can make proper adjustments to your operations. At Johnson Consulting Group, we can help you create a post-valuation plan to improve your enterprise value. 

Understand Tax Implications

When selling a funeral business, it’s essential to understand the entire picture of tax implications. Particularly for those who plan to retire after a sale, it’s imperative that you account for the potentially large taxes that follow a sale. Otherwise, you might have an unpleasant surprise come tax season. 

In most cases, it’s best to seek some outside help. A consultant who specializes in the funeral industry can help your tax accountant and attorney best minimize your tax burden. 

Buyers Matter

Finding the right buyer for your business can be a challenging process, one that will ultimately depend on the current state of the market as well as your ability to leverage your network. In most cases, an ideal buyer will be one already affiliated with the funeral services profession.

The funeral profession is a small network and many of the buyers are known. How you engage with those buyers depends on a well-constructed marketing package, confidentiality, and a timely process. This will ensure your success to maximize your value. 

You may already have a buyer in mind, and that buyer would hope you would only talk to them. There are few buyers, if any, that would want to work with you indirectly through a broker. This is because they know they will have to pay more for the business. Ironically, all buyers would agree that a process that includes a broker is more organized, flows better, and is more timely to a close. 

In summary, to maximize value, more than one buyer needs to be involved and it must be a structured process. Keep in mind that the highest price may not come from the buyer you thought would pay the most. At Johnson Consulting, we like to have 7-10 buyers involved in each marketing package. We are continually surprised by who the ultimate buyer is, as opposed to who we thought the buyer would be. 

Work With Industry Experts

Selling a business is a complex process, the success of which will drastically impact your next steps in business and life. It’s essential to seek the outside expertise needed to execute a sale right. It’s surprising to see business owners who commonly use a real estate agent to sell their home, but not using an expert to sell the most valuable asset they own — which is their funeral business. 

If the industry expert does their job, they will increase the value which will accomplish two things: put extra money in the owner’s pocket and pay for the consultant without infringing on the value the owner receives. 

At Johnson Consulting Group, our team of death care professionals can help you through every step of the process, from obtaining a valuation, finding a buyer, and brokering an eventual sale. With our collective decades of experience in the field, our consultants, accountants, and brokers can help you plan an exit strategy from the ground up, aligning your goals with the potential of your business. 

It all starts by partnering with us. By conducting a holistic examination of your funeral home, we can help you determine where your business currently stands and what needs to be done before a sale. Reach out today to schedule a consultation.

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The post Thinking About Selling This Upcoming Year? Here are 5 Things You Need To Know appeared first on Johnson Consulting Group.

Multiples are based on a number of factors, including the specific industry as well as a business’s size and profitability. When you are considering what multiple to pay, it is the same as considering how many years of cash flow you feel confident you will receive from your purchase. It’s the number of years of cash flow you are buying.

In this guide, we’ll review the importance of multiples, how they’re assessed, and what’s considered a “good” multiple for the death care profession. 

What’s a Good Multiple When Selling a Funeral Business?

When planning to sell your funeral business, you’ll need to obtain a valuation, and during this process, the appraiser will determine a multiple range for your business. 

Multiples vary greatly by industry. In the death care industry, a multiple of six to ten is considered a good range for mid-to-large size businesses. However, this multiple will vary based on factors such as the current economy, lending rates, as well as the business’s case volume, market share, and historical trends. A business’s value is dictated by the level of opportunity and risk. The higher the opportunity and the lower the risk, the higher the multiple. How you demonstrate the opportunity and the risk depends on how well your marketing package and presentation is put together. 

How Can You Improve Your Multiple?

For many funeral business owners, improving multiples will be an essential step to take before putting a business up for sale. There are several proven ways to increase one’s multiple, and many of them dovetail with boosting a business’s valuation. 

Getting Regular Valuations

Getting regular valuations is an important step for any funeral business looking to improve its multiple. Valuations not only provide you with a top-down assessment of current performance, but they can also help identify areas of weakness in the business, which can then be addressed. 

When performed annually, valuations can track the progress of a funeral business over time and help establish realistic expectations for the company’s future. We often ask how often clients look at their investments in stocks/bonds/cash, most likely they are looking on a monthly or annual basis. Funeral business owners rarely look at their own business’ value, which is ironically the most valuable asset they own. 

Understand Your Financials

While some funeral business owners can tell you how profitable their company is, fewer can readily report the deeper financial picture. 

To increase a funeral home’s multiple, it’s essential for leadership to have a comprehensive understanding of the company’s current financial position and to be able to accurately interpret financial trends and performance. This includes clear and concise profit & loss/income statements, and balance sheets.

Set Goals for Growth

Setting goals for growth is also critical for improving a business’s multiple. By creating goals and executing a budget and plan to achieve them, your business can begin addressing any issues that caused it to obtain a less-than-ideal valuation. 

A good place to start this process is with a JCG performance analysis. Gathering key stakeholders and discussing the funeral home’s strengths and weaknesses in its 4 pillars of success is critical. By doing this, you can create a strategic plan that sets your business up for greater valuations.

Invest in Your Team

Payroll is the highest expense within your company, and it’s gone up at least 5-10% of net sales in comparison to recent years. Is your labor pool an asset or liability to the business’s success in the future? Bottom line: invest in your team.

Furthermore, higher turnover rates and employee dissatisfaction can hurt your valuation. You should implement strategies to recruit and retain top talent. In many cases, to optimize the performance of your teams, leadership may create incentive compensation plans that reward top performers within your organization.

Lean on Funeral Home Consultants

Improving the multiples of your funeral business will require extensive planning and years of execution. Your time is best suited to being active within the community and with the families you serve. 

We like to say an owner’s time is worth $1000/hour….Where are you best spending your time? What are the things you should be doing, and what are the things you should be outsourcing to the experts? In these cases, it’s logical to rely on the expertise of funeral home consultants. 

Johnson Consulting Group (JCG) is a leading firm specializing in the death care industry. By partnering with your leadership team, we can help you through every step of the way to improve your multiples, assist with exit strategy planning, conduct valuations, and provide brokerage services. 

The JCG team provides the outside perspective and industry expertise that allow funeral businesses to boost their multiples. Reach out today to learn how we can help.

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The post What is a Good Multiple when Selling a Funeral Business? appeared first on Johnson Consulting Group.

In the early 1950s, the original owner retired and sold the firm to a new owner who has continued to be part of this special community providing guidance and actively serving families ever since.

The Situation

This owner knew selling was in his future, but also knew there were a few things that needed to be taken care of before he went down that road, the first being getting his finances on track and organized. His initial engagement was with JCG’s accounting services where he worked with their experts to help manage his expenses.

This owner also had some issues internally that required addressing before he could sell. He used J3Tech’s Performance Tracker X to get a true look at his business so he could clearly see what areas needed improvement.

When it was time to start down the path of selling, the owner reached out to JCG for their brokerage services. It was important that whoever the new buyer was would understand the role they played in their community and would continue that legacy. They also of course wanted top dollar for their business, and needed a team that would negotiate professionally and advocate for their best interest at all costs.

After learning all of this critical information about the owner, firm and community, it was time for the JCG team to determine the full valuation for their firm.

The initial valuation of this firm was between 4.4M – 4.8M before working with JCG in 2019.

To determine Starting Value, JCG used the following criteria:

• Thorough analysis of their past, present and projected sales
• Detailed market assessment including demographic trends
• Detailed study of historical death trends for their market
• Analysis of all critical and non-critical assets
• Thorough review of minimizing taxes
• A thorough study of their payroll, compared to profession standards
• A review of purchase structures before going to market
• Review of their financial statements to determine future projected cash flow
• Inventory and excess acreage needs for their businesses
• Consideration and discussion of life after the deal
• Review to ensure successful retirement.

By the end of 2021 after working with JCG’s business consultants and accounting team, this firm’s value increased to between $6-$6.5M.

The Solution

This firm got the benefits of working with JCG’s experienced brokerage team. This meant having a custom marketing package put together with the exact information that would get buyers attention and interest to maximize value that is above and beyond what a seller could achieve on their own.

JCG worked to get this firm in front of multiple buyers under a structured and confidential process. The result of this process combined with the prior work generated an extraordinary offer well above their initial valuation.

Final Purchase Price: $7.3 Million Dollars

The Results = Increased Value

This client was able to increase their profitability with the help of JCG’s experienced consultants, accounting team, as well as utilizing the Performance Tracker X software. This allowed the client to be set up to get top dollar when they were ready to sell.

By taking the needed steps guided by JCG, this client was able to get an offer that was over $3 million over their initial valuation in a final purchase offer!

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