As we near the end of the calendar year, you might be thinking about the status of your business. Are you growing in the ways you had hoped? Are you meeting or exceeding goals? Is your staff aligned with the goals you’ve set? These are just some questions to consider when you are assessing the growth of your business. Keep reading to learn some methods of growing and building value.

Methods of growing and building value:

Reviewing your business plan:

Start by taking some time to review your business plan. If you don’t have one, it’s time to create one. The business lifecycle is always on our mind at Johnson Consulting Group and evaluating your plan as you go is a great way to see if you are meeting the growth goals that will take your business to the next level. You might be surprised by what you find. It’s possible you could see a specific area of your business taking the lead, an indication you should put focus there. Taking the next step of an in depth SWOT analysis for your funeral business could lead you to the right growth opportunities at the right time.

In sync staff:

Having a staff that is truly in sync with your business goals is another key to growth. There are tactics you can implement to help your team feel connected to the success of your business such as incentive programs. Another way to take a broad look at overall success is with Performance Tracker X. This service allows you to hear directly from your families on a variety of customizable metrics that may impact your growth. It’s a great way to balance sales with the compassion and sensitive needs of your customers.

Mindset:

We’ve touched on some of the more concrete, analytic things that are important to business growth, so let’s turn to some ideas that are a little more intangible. Bringing a positive mindset with you each day is very important. This article from Entrepreneur expands on the idea that thinking positively when it comes to yourself and your business can have a big impact on those around you as well as on the ultimate success of your business.

As a business owner in the funeral profession, you have a lot on your plate. Taking care of and empowering your staff while building meaningful connections with your families is often the top priority. The team of consultants at Johnson Consulting Group are a fantastic asset when it comes to growth strategy and the background details of running a funeral business. The JCG experts bring years of experience in the funeral profession and are constantly following the trends that are important and helpful to you.

The post Grow and Build Value: The Business Lifecycle in Action. appeared first on Johnson Consulting Group.

Here’s where to start. 

Get a Valuation

For funeral businesses, the first step to planning out your year will be obtaining a valuation. Ideally, you’re already getting consistent valuations of your business, and if you’re not, then it’s time to start. 

The best leaders use relevant data to guide their decisions, and there’s hardly a more important metric for death care businesses than a valuation. By knowing exactly how much your business is worth, you can begin to view your operation from a buyer’s perspective. 

Even if you don’t plan to sell your funeral home in the near future, selling will ultimately be your final move as owner. By understanding how much equity you have in your business, you can more effectively plan your exit. 

How a Valuation Impacts Plans

A valuation provides you with an unbiased, quantitative look at what your funeral business is worth. After getting a valuation, you can begin to leverage this data to plan your next moves. 

For starters, you might conduct a SWOT analysis, helping you better understand where your business excels and where it falls short. From there, you can begin to make operational adjustments. 

Evaluate Your Staff

Your staff has a direct impact on the value of your business. As such, you’ll want to closely examine how each of your team members currently contributes to this value. 

In most cases, you’ll have some strong performers whose passion is evident through their day-to-day successes. As you plan for the year, think about which team members fall into this category and how you might promote them to take on greater responsibilities. By providing training for these team members, you can simultaneously help them add value to your business while increasing their engagement. 

You’ll also want to look at which team members are underperforming. For these people, you’ll want to consider how you might inspire them to work more effectively. Additionally, you might even find — as you make operational adjustments — that you need to hire new personnel entirely.

In addition to evaluating your staff, you might also give them a chance to evaluate their working environment. Undoubtedly, your team members see aspects of your funeral home that you can’t. Taking the time to inquire about their perspectives will not only make them feel valued but will also give you additional insight into how your business is working.  

Strategically Planning Goals

Once you know where your funeral home stands in terms of value, you can determine what your goals are for the next year. These could include expanding your service offerings, upgrading your facilities, or fleshing out existing sales funnels.

For example, many funeral businesses have neglected their preneed programs. If your business falls into this category, you could create a benchmark for preneed sales. Once you’ve established a target number that you wish to reach, you can then begin planning how your team can achieve this. If necessary, this might include implementing new training, hiring new personnel, or even creating an employee incentive program. 

When creating your goals, you might also conduct a gap analysis. Through this, you’ll examine your funeral home’s current performance in relation to target performance. From this examination, you can draft a series of initiatives that will help you leverage your resources, people, and technology to reach your target. 

Survey Your Families

Much like evaluating your staff, surveying your families can help you identify the strengths and weaknesses of your funeral business. By actively soliciting family feedback, you can better understand exactly how they feel about your services and begin to incorporate these opinions into your services. 

In the past, funeral businesses relied on paper surveys; however, the advent of digital solutions has made it easier and more affordable to obtain client feedback. 

The Performance Tracker X from J3Tech allows death care professionals to monitor several key aspects of the client experience. Through the Performance Tracker X, you can create customized surveys and send them to families through both email and SMS. When families respond, Performance Tracker X will compile survey results, creating customized reports that allow you to monitor trends closely. 

Performance Tracker X can even push reviews to social channels, helping you to increase brand awareness beyond your current base of families. 

The key to a successful 2023 is planning. By arming yourself with the right set of data — financial, team member, and client experience — you can create a winning strategy that will carry you into the next year. 

The post Strategically Planning for 2023: Here’s Where You Should Start appeared first on Johnson Consulting Group.

That said, not all valuations are created equally. For funeral businesses, a proper valuation requires a variety of considerations, including your management, capital structure, and future earnings prospects. Your debt, cash, and A/R are also key components when determining the net value of your business.

Most Common Method of Valuation in the Funeral Profession

EBITDA Multiplier

The EBITDA multiplier method takes your EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and multiplies it by a variable specific to the industry. For average to larger funeral homes in today’s market, this ranges from 6x to 7x and much higher for prized firms when the real estate is included.

Components Considered During a Valuation

When determining the value of a funeral business, a valuation expert will consider several key components of the business. These include historical trends, labor, and tangible assets.

Historical Trends

This is critical to review the probability for performance for a new owner.  Multiple years of financial data are analyzed side by side to determine the likely outcome/budget/proforma.  One time expense items and owner related expenses are reviewed in great detail.

Labor

There’s nothing more costly in an organization than it’s payroll.  And with recent trends we are seeing payroll increased by 5-8% of net sales over prior years.  This section requires a very detailed analysis.  It will consider what the payroll would need to look like if the ownership is no longer there.

Tangible Assets

Every funeral business has buildings, equipment, inventory, receivables, cash, and the list goes on.  What stays?  What is not included.  The value of the real estate will be key in determining the most appropriate valuation method…Will it include the real estate or will the real estate have to be leased?…How will that impact the value?

Why an Annual Valuation Is Necessary

Beyond the possibility of selling your business, an annual valuation provides the information you need to understand your current positioning and plan for the future. Will you like the result? Will it impact your retirement? What do you need to live off of? How will you know?

By obtaining an annual valuation, you’ll:

• Deeply understand your finances: If your finances are currently in disarray, a valuation will force you to work with an accountant and organize your key financial metrics. Most importantly, you’ll be able to see your business’s profitability.

• Set realistic goals: Once you’ve obtained a valuation, you’ll understand how your business is currently performing, which will be an essential baseline to your planning. If your business is performing well, you can then plan for potential expansion. Alternatively, you can create initiatives to turn things around if it’s underperforming. 

• Plan for your exit: No matter how near or far, all funeral businesses will eventually be sold — that is, unless you plan to live forever. By obtaining regular valuations, you’ll be able to anticipate your gains (or losses) in the event of a sale, then plan your subsequent ventures accordingly. 

Make the Most of Your Data

While simple forms of valuation can be performed on your own, the only surefire way to gain a realistic picture of your funeral home’s health is through a professional valuation performed by an accountant or industry experts such as Johnson Consulting Group. 

At Johnson Consulting Group, our team of death care experts have performed thousands of valuations of funeral businesses of all stages and sizes. Through these valuations, our team of death care consultants can help you parse through the numbers and understand what exactly they mean for the future of your business. 

At the end of the day, a valuation is simply a number. What’s most important is how funeral directors utilize these numbers to make changes for strategic growth. Get in touch today to work with our team of experts, establish exactly how much your business is worth, and discover what you can do to increase its overall value.

The post What Goes Into a Funeral Home Valuation? appeared first on Johnson Consulting Group.

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. 

The post I’ve Gotten a Valuation… Now What? appeared first on Johnson Consulting Group.

Knowing Your Bottom Line

If your finances are currently disorganized, then a valuation will force you to get them in order. While there are several different metrics through which one can assess the value of a funeral home, most of them require your gross revenue, EBITDA, and real estate totals. It also helps with looking at industry benchmarks to see if you can bring some of your expense items more in line AND revenue. For example, does pricing need to be adjusted to be more competitive?

Inherently, conducting a valuation forces you to see exactly how profitably your business is performing. Knowing these numbers can help you make decisions about new employees, remodeling projects, and other capital improvements to your funeral home.

Goal Setting

By knowing where your funeral home stands in terms of value, you can more accurately set goals. For example, if you’re setting benchmarks for preneed sales initiatives, knowing how your funeral home performed last year can help you set realistic expectations for your team. 

A valuation can also be a key component of a gap analysis, that is, the process of measuring your funeral home’s current performance and charting a trajectory to target performance. Looking at it year over year assists with planning for the next year, as well as, for the year you plan to sell. In addition to accounting for your business’s value, a gap analysis also requires you to examine your resources, people, and technology. From there, you can outline optimal performance indicators and begin developing strategies to set you on a course to achieving them.

Exit Planning

When planning your exit strategy, one of the most important considerations will be the amount of money you net from a sale. After all, the gains from selling your funeral home will likely compose a large portion of your retirement savings. Because of this, valuations will keep you informed of your alignment with post-ownership goals. It also assists with looking at the structure today (cash, CNC, seller note, etc.) to see what will be the best option for you tax-wise when the time comes. 

It’s good to be knowledgeable and informed before it’s time to sell as it helps determine if there needs to be any changes to your corporate structure. If you are a C-Corp, should you convert to an S-Corp for better tax advantages if you aren’t planning to sell in 5-10 more years?

Even if you plan to pass your business to a child or other family member, you’ll still want to assess a fair value range for your business, as this can help mitigate conflict and provide a smooth transition for the new owner.

Growth Strategy

The primary benefit of a valuation is clarity. While a valuation may not always come back as high as you’d like, knowing the truth will only help you in the long run. In addition to giving you a more tangible picture of your finances, a valuation will also provide insight into your operational efficiency, employee performance, and marketplace positioning. This can provide an understanding of revenues, average sales, demographics of your market area, etc.

When a report indicates that your high rates of employee turnover are hurting the value of your business, you can begin developing strategies to attract, train, and retain stellar talent. It can also help you identify positions that might be needed. Alternatively, if your value is hampered by an underperforming preneed program, you can put in the work to build up your backlog of preneed sales.

An Accurate Valuation

The valuation of a funeral home is typically looked at based on a multiple of EBITDA which takes your EBITDA and multiplies it by a variable specific to the industry. This multiple ranges from 6 to 7 for average to larger funeral homes in today’s market.  

The multiple can vary based on the size of the firm (case volume and locations) as well as pricing, demographics, historical trends and growth.. Looking at valuing your firm based on an “off the cuff” multiple of revenue or average sale will not be accurate and take into account all of the key value indicators necessary to determine a true value of your business.

At Johnson Consulting Group, our funeral home valuation process thoroughly analyzes your business, its performance, and the marketplace. Through our years of experience owning, managing, buying, and selling funeral businesses, we can help you determine and interpret your valuation and understand where you’re at in your business lifecycle. 

Not only will our consultants assess the accurate value of your funeral home, but we’ll help you strategically plan for the future. 

The post Why Getting a Consistent Funeral Home Valuation is Important appeared first on Johnson Consulting Group.

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

The post 5 Ways to Plan a Fearless Exit Strategy appeared first on Johnson Consulting Group.

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

The post What is a Strategic Plan and Why Do I Need One? appeared first on Johnson Consulting Group.

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

The post Five Things You Need To Know About Taxes Right Now appeared first on Johnson Consulting Group.

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

The post Top 6 Regrets Funeral Directors Had After They Sold Their Funeral Home appeared first on Johnson Consulting Group.

Luckily, the issues that arise can be dealt with through proper planning. Let’s take a closer look at some of the more common issues.

1. Poor Market Conditions

Above all else, your decision to sell your funeral business should hinge on the state of the market. Much like real estate, the market for funeral homes is subject to fluctuation, and you’ll want to be sure your business is primed to garner a maximum return in a seller’s market.

To spot poor market conditions, you should look for the following:

• High interest rates: The more debt buyers have to take on, the less they’ll be willing to pay to purchase your funeral home.
• Low number of buyers: If there aren’t many people out there looking to purchase funeral businesses, then the market is likely in a slowdown, and offers will be lower.
• Periods of decreased revenue: If your business has experienced a year of lower revenue or slowed growth, then it will appraise for less than it otherwise might. This was particularly common for funeral businesses in the wake of Covid-19.

How to Combat It 

The key to dealing with poor market conditions (if waiting isn’t an option) is to make yourself look like the best option out there. The market will eventually hit an upswing, and you’ll want to position your business for success when this occurs. 

To accomplish this, you’ll want to make sure your funeral home is in tip-top shape, making it more enticing to a potential buyer. Consider the following:

• Soliciting positive reviews: If your business maintains its good reputation, then more buyers will likely have interest, especially when the market picks back up.

• Cultivating a happy team: As with most human-facing businesses, funeral homes are majorly defined by their personnel. As soon as it’s reasonably possible, communicate your intent to sell the business, and assure them that the business will continue to function.

• Review your financial statements: Having detailed financial statements is essential when selling a business. Be sure to organize your accounting records, particularly the profit and loss, balance sheet, and cash flow statements.

2. Low Valuation

Getting a low valuation can feel devastating especially if it’s much less than expected. Not only can it affect your appeal to potential buyers, but it also likely means you won’t get as much as you want from the sale. 

Valuing your business either too high or low can be a costly mistake, so it’s important to make sure you trust the results you find. Additionally, if the assessed value of your business is low, you may wish to change course, increasing your value before initiating a sale.

How to Combat It

In most cases, buyers will want to see three years of financial accounts and asset/liability records. Additionally, you’ll want to be able to furnish legal records, real estate documents, call volume reports, vendor and partner agreements, and a current list of employees and their compensation. 

Instead of ordering a private or independent appraisal, you could also consider estimating the amount of debt that a potential buyer can realistically pay for. By calculating an estimate of affordable debt on the buyer’s part, you can value your funeral home based on the buyer’s means. 

Another helpful strategy is to present the buyer with a list of owner-related expenses such as salaries, pensions, life insurance policies, and any other expenses that won’t be inherited by the buyer. This will provide additional context surrounding how much they’ll actually spend to operate your business.

3. Unorganized Accounting

Critical to your valuation and any subsequent sale is the story told by your records. Mainly, a buyer will wonder if you’ve been profitable and if there’s room to grow once he or she takes control of your business.

Unless your records are properly organized, it’s nearly impossible to put a value on your funeral business. Sure, you might have tax returns that demonstrate year-over-year profits, but if you don’t present detailed documents that explain how your revenue compares to operating costs, then a potential buyer has no proof of your business’s profitability.

How to Combat It

The best way to ensure organized accounting is to work with an accountant who understands the funeral profession and its idiosyncrasies. Not only can a funeral-specific accountant help you in the planning stages to ensure maximum profitability, but they can also be a key player when you’re selling your funeral business.

Financially speaking, a well-managed business will likely sell for more when the time comes, and an accountant with death care experience––like those from Johnson Consulting Group––will help you through every step of the process, from valuation to sale.

Sell with Ease 

When looking to sell your funeral business, your best bet is to start early, organize your finances, get a professional valuation, and communicate with your team. To be sure you’re covering all of your bases, it’s best to seek some outside help. 

With over $2 billion in closed transactions, Johnson Consulting Group is uniquely positioned to help you sell your business. Their funeral brokerage team can help guide you through every step of the process––from the valuation and finding a potential buyer to securing and facilitating the loan process. 

While selling a business of any size is a complex process, Johnson Consulting Group has the experience and team to help make it seamless and profitable for you.

Learn Next Steps

The post The Top 3 Challenges of Selling Your Funeral/Cemetery Business and How You Can Easily Combat Them appeared first on Johnson Consulting Group.