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.

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First, Let’s Get Your “House” in Order 

Business Assessment 

Ensuring success begins by strengthening the core of your operations. Think of the thorough operational checkup as checking the heartbeat of your funeral home in the areas of workplace, financial management, market place, and customer service. Recognize your strengths, find areas for growth, and locate where you can make things run smoother. It’s like giving your business a health check to make sure it’s in top shape for the journey ahead. 

Strategic Planning

Identifying areas of opportunity within your business can only be created by a strategic plan, this is where many businesses fail. We are staffed appropriately to manage the daily operations but not to execute on areas of opportunity identified in a business assessment. 

Customer Service “CX” Culture Training 

Strengthen your internal team by cultivating a culture that’s eager to embrace expansion. Enhance communication channels, ensuring everyone is passionately engaged in the exciting road ahead. A united and empowered team is the driving force to ensure that your funeral home can grow successfully in the dynamic landscape of acquisitions. 

Now, What You Need For A Successful Succession 

Expanding your business isn’t just about being brave—it’s about knowing what you’re doing and having a plan. From funding the dream to knowing how much your business is worth, there’s a lot to consider when moving through a successful succession.

Determining the Right Price

Valuation isn’t just numbers; it’s an art. Learn the art of valuing funeral homes, taking into account industry-specific factors. Master negotiation strategies to ensure a fair and mutually beneficial deal. 

Funding the Dream

It starts with funding. Know your cash flow, understand the assets involved, and make sure you can manage any funeral home loans. Explore different funding options while keeping your business stable. Evaluating various financing options without sacrificing your business’s stability is vital to success, underscoring the importance of amortization, interest rates and balloon payments, among others. 

Understanding the Structure

With any business value, the details of it are the structure. It has been said that you can make any value work if the structure is correct. For that reason, knowing among other things, what to allocate to cash, to a loan, to a non-compete agreement, and to consulting agreements, are critical. 

Successfully Onboarding a New Acquisition

The real magic happens post-deal. Craft a plan for a smooth transition, addressing challenges before they arise. Ensure the cultural integration of teams to create harmony within your funeral home. How do you do this? …. Due diligence and a strategic plan! 

Each step is a critical part in mastering the deal. Armed with knowledge and equipped with strategies, Johnson Consulting Group can help you step confidently into the future of acquisitions. 

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• When to retire.
• Who is next in line for funeral home management?
• If you want to continue being involved.
• When is the right time to sell?
• Who is the right person to take on the legacy?
• Is my current succession plan up-to-date?
• What happens if I, or a key figure, unexpectedly pass?  

We deeply understand the profound impact the untimely loss of any key figure can have on family-owned business. The question becomes even more critical: How can funeral home and cemetery owners thrive after the unplanned departure of a key figure? In smaller establishments, where the principal operator often wears multiple hats, from daily operations to public representation, the challenges magnify. The public’s confidence in the business’s continuity may waver following the loss of a prominent figure. At Johnson Consulting Group, drawing from over 600 years of industry expertise, we comprehend the intricacies involved in such transitions.

Complicating matters are the well-intentioned yet diverse pieces of advice survivors receive. The dynamics shift dramatically, especially when partners find themselves in business with the deceased’s spouse, who may lack practical experience. We’ve witnessed firsthand the potential pitfalls and family conflicts that can arise in these situations. This is why funeral home succession planning is paramount. We’ve assisted numerous families in navigating this process, emphasizing the importance of evaluating which aspects of the business survivors can effectively operate. Quality often surpasses quantity, as a smaller, well-managed business stands the test of time, while larger, weaker enterprises may face financial challenges.

Looking beyond the immediate challenges, it becomes imperative to consider the next generation of funeral home owners and funeral directors. Ensuring a seamless transition to capable hands is not only a strategic business move but also a commitment to upholding the traditions and values that define your establishment. Cultivating the skills and passion of the next generation is an investment in the longevity of your funeral home management and business in general.

This leads us to a pivotal point often under-prioritized in strategic planning and the lead-up to the sale of a funeral home business – recognizing the crucial role that next-generation leadership development plays in succession planning, business growth, and enterprise value. Without an intentional plan of action, the skillsets of next-generation owners or leaders will not develop or improve on their own. Acknowledging that being a good funeral director does not necessarily equate to being a good manager or business owner, we advocate for the creation of a comprehensive plan that provides ample opportunities for skill development.

Consider looking beyond the confines of your organization for opportunities such as management coaching or participation in distinguished leadership and management development programs. By investing in the professional growth of your next-generation leaders, you not only enhance the long-term success of your business but also elevate your funeral home management and the overall value of your enterprise. At Johnson Consulting Group, we deeply understand the intricate interplay between succession planning, business growth, and leadership development. We stand ready to guide you through these critical aspects, ensuring a prosperous and sustainable future for your funeral home.

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As part of your year-end planning, you’ll want to revisit the salaries of your team members and ensure they’re being paid a competitive rate. Since most employees expect a yearly raise of some sort, you’ll also want to account for additional monies being spent in this manner. Potentially, you might even recognize high-performing team members with promotions. 

While it might seem unnecessary to give out compulsory raises to everyone, these yearly raises are an important component of employee retention. Some studies show that to replace an employee, it costs roughly six to nine months of their salary to recruit and train a new person. 

For example, if a team member is paid $80,000, you can expect to pay about $40,000-$60,000 in recruiting and training expenses. In light of these numbers, a standard raise of about 5% looks much more appealing, especially if you’re pleased with a team member’s performance.

Marketing

Unless you want your business growth to stagnate, then you’ll need to develop a marketing strategy that not only retains current customers but also attracts new ones. While you won’t necessarily need to hire a full-time marketing manager, you’ll definitely need to allot for marketing-related expenditures. 

For starters, this will likely include managing or (if you haven’t already) creating a website for your funeral business. Here, visitors will be able to find contact information for your business, as well as a variety of informative posts that establish trust with your brand. 

Additionally, you might consider conducting market research in the form of sending surveys to your families. By obtaining feedback from prior clients––even if only a fraction of them respond––you’ll gain valuable insight into where your business excels and where it needs to focus. 

One cost-effective way to administer these surveys is through digital platforms. The Performance Tracker X from J3Tech is a software solution built specifically for death care businesses. With this tool, you can create digital surveys, send them to families via email, and automatically track their responses. 

Business Growth and Improvement

A large portion of your funeral home’s strategic budget planning should be set aside for business growth initiatives. Anything that will improve your business and make it better or more profitable will fall into this bucket.

This might include investing in new technology that improves customer experience, adding new services like green burials or cremation, or even renovating your facilities. To figure out where to focus your efforts, you’ll want to rely heavily on feedback from families, as they’ll likely be able to provide you with key insights related to your services. 

Additionally, on the back end of things, you might consider investing in training for your team members. Particularly when it comes to your high-performing employees, helping them acquire new skills will allow them to take on new responsibilities (adding value to your business) while further engaging them with your workplace. 

Johnson Consulting Group, a leading death care consulting firm, offers a variety of personalized training courses for leadership and management skills. While these courses do cost money, the results will be well worth your investment. 

Plan for Success With JCG

Oftentimes, business owners don’t know where to begin when it comes to yearly funeral home strategic planning. Particularly if your business is running well and seeing year-over-year profits, it might not be obvious where you should focus your attention. In these cases, it’s often helpful to seek the guidance of consultants. 

At Johnson Consulting Group, our team of death care consultants has worked with funeral businesses at all stages in their life cycle. Through a combination of experience and business acumen, our team can partner with your leadership, identify opportunities for improvement, and create a strategic plan––one that is budgeted to a T.

The key to a successful 2023 is having a plan in place before the prior year ends. To get started, give JCG a call.

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Selling doesn’t have to be spooky

Thinking about your business exit strategy can feel like you’re walking in darkness without knowing what’s lurking around the next corner. Planning to sell your business doesn’t have to be so scary! Selling is just a part of the business cycle, and a little knowledge can go a long way in helping your feel safe when it comes to the unknown. With the right tools and expert guidance, there is plenty of light to brighten the pathway to your future.

Get going on your succession plan

When it comes to succession planning, the earlier the better. Putting together a proper timeline and a solid plan is the first step to a better future for you and your business. It can take time to thoroughly evaluate prospective successors to discover who is best suited to lead the business you have worked years to build. Assessing their aspirations and goals, as well as considering how well they will interact with future colleagues, clients, and partners can be a lengthy process, but it is well worth the wait to know your legacy will live on.

Time for an accurate valuation

There is no need to sell your business for less than it’s worth, which starts with an accurate valuation performed by a professional well-versed in the funeral home and cemetery services business. JCG’s experts have you covered. Even if you intend to sell to a friend or family member, properly assessing your business’s value is essential when it comes to market value distribution and transfer tax regulations. Your business’s cash flow, risks, and potential growth need to be assessed in order to give your potential buyers a realistic idea of profitability (and may even boost your profitability prior to sale). Knowing your business’s value allows you to exit with confidence.

Don’t settle for less than your hard work deserves

You want to feel good about your sale financially, but you also want to feel good about it on a more personal level. Once you know what your business is worth, use that knowledge and certainty to find and train the right successor. Don’t settle for less when it comes to money or the right leadership. This will take some time and effort, but curating a proper transition that takes your funeral home’s needs and goals into account is so important. Going this extra mile will leave you feeling confident not only about your exit but also about your enduring legacy.

Understand the tax implications of selling

A large part of financial assurance is having a comprehensive understanding of your business sale’s tax implications. Tax laws are complicated and ever-changing, so enlisting professionals who know the funeral home and cemetery business is especially essential at this stage of your selling preparation. Having outdated information or miscalculating an assumption can quickly lead to decreased profitability and even sabotage your sale. Know exactly what tax ramifications are on your selling horizon so that there are no chilling financial surprises in your future.

Ask the experts!

Regardless of whether you’re business sale is a decade away or creeping up quickly, it is time to bring in the professionals to help you put yourself in the best possible selling position. Be bold when it comes to your succession planning and your financial future, but don’t go it alone. Johnson Consulting Group is your partner in planning and is here to keep you safe and sound through all phases of the business cycle. Planning your exit strategy the right way and with the right professionals by your side can ensure your future isn’t haunted by bad decisions for years to come.

Plan With JCG

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As a successful funeral home director, it might be tempting to coast along, assuming that past years’ successes are sure to continue; however, failing to create and implement a strategic plan leaves you vulnerable to straying off course. 

As John Lennon once sang, “How can I go forward when I don’t know which way I’m facing?” A strategic plan will not only let you know where to turn your attention but also how to continually refine your practice moving forward.

A Strategic Plan in the Funeral Profession

To put it more concretely, a strategic plan involves the owners and senior management teams at your company. Together, you will assess current performance, analyze the market, set goals, plan your actions, and identify how to achieve said actions. 

Preparations

Before you begin crafting your strategic plan for your funeral home, you’ll want to ask yourself:

• How is the business performing? 
• How do we continue to improve our services? 
• What changes are currently shaping the industry?
• Is employee morale positive? 
• Are we as profitable as we could be?

Naturally, not every question will offer a fruitful direction to pursue; however, it’s important to consider each of these areas. As you mull on these questions, you’ll want to pull in numbers when appropriate. While it’s easy to feel as though your business is performing optimally, actual revenue totals provide you with tangible support (or refutation). 

Another important source to examine is customer reviews, both from internal feedback and public reviews posted online. While you’ll likely find one or more glibly negative reviews on Google, it’s important to search for the grains of truth in here. While it’s tempting to fixate on the areas of weakness, it’s important to pay mind to the strengths identified in reviews, as these can become pillars of your business.

Remember, you won’t be doing this planning alone. Create a list of each area of your business and identify the key stakeholders in these areas. You’ll want to make sure these stakeholders are present at your planning meeting, as they’ll provide you with a better on-the-ground understanding of the different facets of your business. 

Steps of Strategic Planning 

Since the process of strategic planning should never be rushed, set aside an entire day to meet with your team. 

Once you’ve assembled your team, consider the following steps:

• Create an Objective: To start off, brainstorm a list of objectives with your team. This will give you an overview of your business’s potential. It will also signal what your teammates would like to see from your company.

• Company Review: Take a look at your current year. How is your business doing? What are the key successes and failures of the year, and what contributed to these outcomes?

• Conduct a SWOT Analysis: Take stock of your company’s strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are pretty straightforward, so pay close attention to the opportunities (ex: a rise of interest in virtual ceremonies) and threats (ex: a new funeral parlor opening in town).

• Set Goals: Based on all of your observations and team input, you’ll want to set tangible goals to achieve, both in the immediate and long-term future. 

• Give Ownership to the Team: Figure out which actionable tasks and duties can be assigned to individuals on your team. In future meetings, they’ll be reporting back to you on these duties.

Tips from the Experts

If you’re at a loss as to how to improve your business, then you might want to consider consulting with outside experts. Johnson Consulting Group has been in the profession for decades and has worked with funeral homes throughout the U.S.

Here are our additional tips when it comes to strategic planning:

• Meet Offsite: By meeting outside of the workplace and providing meals, you’ll create a more relaxed atmosphere, one in which your team will feel more comfortable expressing their honest thoughts on the company’s performance.

• Encourage Written SWOT Analysis: It’s imperative that the input from your team is honest. To ensure this, you should instruct your team to write down a SWOT analysis and bring it to the meeting. This way, you could anonymously read people’s thoughts, ensuring each person’s findings are heard. 

• Clearly Define Ultimate Goals: If everyone at the company knows what the long-term goals are, then they can better steer your company in this direction.

• Schedule Regular Check-Ins: As with any aspect of life, not everything goes according to plan. By scheduling check-in meetings, both as a group and individually with team leaders, you can keep track of any unexpected changes or setbacks and adapt accordingly.

• Measure Everything: A worthwhile goal is nothing without a way to measure it. Be sure that you establish metrics of success for each goal (ex: positive reviews, number of conversions, dollar amounts, etc.) and that you’re tracking accordingly.

Why You Need a Plan

If your funeral business doesn’t have clearly stated goals, then it’s impossible to determine how well you’re doing. Creating a strategic plan is about preventing your business from stalling out, spurring continuous growth and evolution, providing a higher degree of service to your families.

If all of this seems difficult then consider consulting the experts at Johnson Consulting Group. Through our years of experience with helping funeral businesses, we can help you identify any existing pain points and provide the appropriate guidance for the ongoing success of your funeral home. 

Ensure Your Future

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Sunny business prospects may soon turn cloudy. Just when things were looking bright for funeral home and cemetery sales, the tax people have started closing in. Darker days are on the way in the form of increased capital gains and ordinary income taxes. Now is the time to consider selling.

Tax Fact #1 – The Proposal

A proposed federal tax increase could soon affect your business by raising taxes on long-term capital gains and qualified dividends, as well as ordinary income. If put into effect, the U.S. would have the highest marginal tax rate in the OECD (Organisation for Economic Co-operation and Development) at 39.6% (currently 20%). When combined with the 3.8% NIIT (Net Investment Income Tax) and average top state capital gains tax rates, the proposal would lead to a top combined state and federal tax rate of 48.4%, up from the current top rate of 29%. At this number, the U.S. would have the highest overall tax rate in the OECD.

Tax Fact #2 – The Timing

Things are already starting to look gray and the cold chill of the new tax proposal could be approved and take effect on January 1, 2022, if not sooner. This means time is of the essence to get a succession plan in order and possibly even push up your selling timeframe in order to avoid lofty new taxation on your business and personal income.

Tax Fact #3 – The Details

The new tax proposal:

• Would apply to taxpayers with taxable income over $1 million
• Is not expected to be retroactive
• Would put the U.S. in a small, elite group of only five countries facing capital gains and dividend tax rates above 40% along. The other countries are Denmark, Chile, Ireland, and Korea. 
• Is part of a broader plan to raise taxes on those making over $400,000

Tax Fact #4 – The Consequences

Because funeral home and cemetery businesses tend to stay around much longer than others, sometimes even 100 years or more, capital gains can be significant. This potentially puts funeral home and cemetery professionals at greater tax risk than others. Unlike other businesses, funeral homes and cemeteries almost always include real estate, which most often results in building depreciation. This building depreciation many times creates a net income tax benefit over the years, but the benefit is then eroded at the time of sale due to a depreciation recapture tax. The depreciation recapture is taxed at the ordinary income tax rate up to a certain threshold percentage, which could mean well over $500K-$1M in additional taxes under the proposed tax structure changes. Ordinary income taxes may have an even greater impact than capital gains taxes, so all angles need to be considered. 

Tax Fact #5 – The Exit Strategy

The first leaves are already falling, so the time to act is now. Get your share of the current selling boom before it’s silenced by new tax laws. If you do not yet have a succession plan, need to update your succession plan, or need to push up your selling timeline, we are here to talk. Johnson Consulting Group has the knowledge to help you understand what’s coming next and the experience to lead you forward. We are in business to assist you in getting the most out of your business.

Contact JCG Today

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Did you know that 75% of business owners regret exiting their business? And it’s not all about the money. In addition to financial concerns, we often see funeral homeowners regret issues related to timing, their employees, and their greater sense of purpose. Luckily, all of these regrets can be avoided with a bit of proper planning.

1. Settling 

When you’re selling a funeral home business, you’re going to receive offers, and much like a flea market or yard sale, you’ll undoubtedly receive lowballed offers. The key to choosing the right deal, however, is knowing which deals to consider and which to say no to.

Often, funeral directors see the sale of their business as a means to an end, quickly accepting the highest offer available; however, this overlooks your needs in the transaction. Before selling, you should ask yourself what you’d like to accomplish with the sale. 

• What are your goals? 
• Do you wish to keep majority/minority control? 
• Are there personal financial goals you’d like to achieve? 
• Do you plan to engage in the new owner’s education regarding your business? 

It’s really about chickening out. Your funeral business does not have a set value; rather, it’s worth whatever someone is willing to pay for it. Taking time to assess this worth, free of the pressure to pull the trigger, will help prevent you from looking back post-sale and feeling as though you could have done better. 

2. Treatment of Employees

Whereas the sale of national corporations often comes with little changes to the people they employ––apart from shifting change in command––small businesses like funeral parlors often feel greater loyalty to their employees. Especially for hands-on funeral directors, their employees become something of a second family, from the bookkeepers to custodial staff.

Therefore, selling a funeral business comes with the difficulty of letting go of people you once cared for so deeply. While a new owner will likely keep around most, if not all, of your existing staff, there’s no way to guarantee this. 

One of the best ways to ensure that your employees are taken care of post-sale is to provide the new owner with organizational charts, job descriptions, and detailed reviews of all current workers. Often, a new buyer is immediately interested in cutting operating costs, which could mean slashing salaries or letting go of some workers altogether. By imparting the importance of each person’s role to a new owner, you increase the likelihood that their employment will carry on similarly.  

3. Leaving Money on the Table

If money is a core motivator to selling your funeral home, then it’s important to really look at your finances and the potential for more revenue in the future. Ask yourself if now is the best time to sell or is there more business to earn that will also boost revenue and make your funeral home more appealing to buyers. 

One metric to consider is the health of the economy overall. If the stock market and real estate market are doing well––particularly local markets––then you’re likely to get a better deal. If, however, the current state of affairs is similar to that of the 2008 recession, then it might be best to hold out if you can. 

You’ll also want to consider your year-over-year numbers. If your profits have been continuing to climb, then it might behoove you to hold off on the sale. Many funeral business owners report selling their business at a low point only to find that in subsequent years its earnings and value continue to increase. 

4. Losing a Sense of Purpose 

When selling your funeral business, we cannot stress enough the finality of this deal, not only regarding your money and employees but also your future plans. Think long and hard about whether or not you’ll be happy without the connection you had to your business. Again, you should reconsider your motives for selling. Are you planning to retire, or do you just need a vacation? Do you have a plan beyond cashing out?

If you started your business from the ground up or––as is often the case in the funeral industry––a parent passed it down to you, then you likely hold a special attachment to your funeral home. Not only was it your workplace, but it was also like a child, one you raised for the better part of your life. Think carefully about how it would feel to let go of this child. 

After selling their funeral business, many people report losing a sense of purpose. As the owner, you’re likely putting in more than forty hours per week into your business, and while this might sometimes feel stressful, many are surprised at the malaise that sets in. 

The key to addressing this is to plan. Whether you wish to start a new business, move to Mexico with your spouse, or focus on your golf game, it’s important to direct the passion once reserved for your business into a new outlet. Otherwise, you risk enduring a sense of drifting.  

5. Neglecting Taxes 

As with any large transfer of money, the importance of accounting for taxes cannot be overstated when it comes to selling your business. Business sales are taxed based on your capital gain, meaning the rate will match what you pay on your ordinary income taxes. Not considering what this looks like is a major mistake. 

This is where a skilled accountant can come in handy. The accounting team at Johnson Consulting Group not only knows the ins and outs of tax law, but they also have a deep understanding of the funeral profession. Seeking their counsel can help you save money and ensure that you’re abiding by local and national tax codes.

6. Not Talking to Experts

All of this is to say that selling a business is not a decision to take lightly. While the prospect of netting yourself hundreds of thousands of dollars––if not more––is exciting, selling your funeral business takes some careful consideration of your goals, your finances, your people, and your post-sale lifestyle. 

At Johnson Consulting Group, we have a team of experienced business brokers with skill sets related to finances, accounting, and the process of acquisition. We work specifically within the funeral profession and have closed over $2 billion in transactions for other sellers, like you. 

If you’re interested in selling your funeral business now or in the future, we can help you plan your arrangements to ensure you’re happy with your ultimate decision.

MAKE THE RIGHT DECISION

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