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.

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.

As a funeral home or cemetery business owner, it might seem like a complicated and time-consuming exercise to invest in a professional business valuation on an annual basis. However, the results are well-worth the time and effort involved, and can help define a clear path towards growth and profitability for your company.

Johnson Consulting has helped thousands of funeral home and cemetery professionals achieve success, and we firmly believe that an annual business valuation is usually the first step towards driving positive results and improving your company’s competitive position. Here are our Top 5 reasons why you should get a business valuation every year:

Enhance Strategic Planning

Strategic planning is an integral part of effective business management and is especially important to the long-term viability of funeral and cemetery companies. Using estimates or relying on “gut feelings” can lead to costly operational missteps — a professional valuation provides real-time data and analysis to help you establish a business strategy and determine what operational actions are necessary to achieve your goals.

Maximize Sale Potential

Having a clear understanding of what your funeral or cemetery business is worth is crucial to evaluating sale options. Not only does a business valuation compare your firm to local competitors, it also reveals your position in comparison to the overall industry standings (utilizing benchmarks for expense accounts on your financial statements). Understanding where the profitability of your business falls, as compared to other operations, can assist in determining where improvements can be made now that will assist in maximizing your value when you’re ready to sell. This knowledge allows you to accurately assess potential purchase offers and maximize your bargaining power.

Attract Investment

Potential investors need to know how much your company is worth before they put any money into it, and a professional valuation offers an objective determination of where to put their investment dollars. In addition, if your strategic plan requires outside financing, you will need a current evaluation to demonstrate the financial health of your funeral/cemetery business.

 Succession Planning

Many funeral and cemetery businesses are passed down to family members or company employees, which can be a major challenge for both the seller and the buyer. A business valuation provides a clear value range that is fair to both parties, allowing the family members to determine a win-win situation moving forward. When the true value of the business is pre-established, it can help reduce conflict and assist with a smooth transition for all parties involved.

Simplify Taxes

The IRS levies specific taxes for significant business events such as mergers and acquisitions or share distributions. The total tax amount often depends on a company’s valuation, so a comprehensive review based on current financials and market capital could result in a lower tax bill for your funeral or cemetery business.

At Johnson Consulting Group, we work hard to provide our clients with accurate valuations that objectively measure all of the hard work that they have put into their funeral/cemetery business. Our experts evaluate your operational and managerial practices, analyze your company’s current and historical financial and case trends,as well as your market demographics, which provides a complete profile that determines how much your business is worth. Tom Antram, one of our valued customers from French Funerals & Cremations, said it best: “Johnson Consulting has helped our team stay in tune with our value as an organization. We feel that we have a solid value of our business and with this knowledge, will lead our business to even higher levels of growth.”

 If you are a funeral or cemetery professional interested in knowing where your business has been, where it stands today, and what the future holds, please contact Johnson Consulting Group for a free business valuation quote today.

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