Most funeral home owners hope that their business will grow. But “hope” is not a plan.
When I work with a Private Client, the first step in my process is to develop a Strategic Plan that outlines the objectives, strategy, and action plan for growing the business. Basically, I turn “hope” into a roadmap for growth.
I’ve spent most of my career working as a consultant. Early on, I thought that a consultant’s value comes from their ability to answer questions. Now I know that the actual value is in the ability to ask the right questions.
Here are a few of the questions I typically ask when developing a Strategic Plan for a client. How much additional revenue are we looking to add to the business?
- How many calls and at what revenue per call do we need to add to meet that goal?
- What assets do we have that we can leverage to grow the business?
- What portion of the market is being underserved?
- Are their struggling competitors?
- What are their weak points and our complementary strengths?
- What portion of the market is growing by at least 10% per year?
- How can we position ourselves to be #1 in this market?
First, we need to identify our opportunities for growth. Next, we need to evaluate our opportunities using the following three questions.
Is it a real opportunity?
There are plenty of pseudo opportunities in the world these days. Typically, such options are presented to you by someone with a vested interest in you taking the bait. Therefore, always do your due diligence before pursuing any opportunity.
Is it personally exciting?
Your chances of succeeding are minimal if you are not excited about this opportunity.
Does the math make sense?
What revenue and expenses can you reasonably expect in the first few years, and how will it impact your cash flow? The fastest way to kill any business is to run out of cash. You might have identified a tremendous opportunity, but if you can’t afford to pursue it, you need to keep looking.
Let’s say, for example, that the owner has a 300-call funeral home business doing roughly $2M/year in revenue and would like to do $4M.
The first opportunity the owner wants to consider is creating a discount cremation business.
- Is it a real opportunity?
- Unless your market is already saturated with discounters, the answer is yes. The discount cremation market is definitely growing.
- Is it personally exciting?
- Most owners I know aren’t excited about this opportunity. They see it as a defensive strategy. Someone will do it, and it might as well be them.
- Does the math make sense?
- The revenue side might be possible, but you’ll need more than 2,000 calls to add $2M in revenue with a discount cremation business. You will need to invest a lot of money in marketing and target a large area to meet your volume goals.
- Realistically, it’ll be multiple years before you break even. This might be part of a growth strategy but not the only element.
The second opportunity the owner wants to consider is to acquire existing funeral homes in neighboring communities.
- Is it a real opportunity?
- There are lots of owners looking to cash out these days and not a lot of buyers. It sounds like an opportunity to me!
- Is it personally exciting?
- Most owners like this idea because it’s already in their comfort zone.
- Does the math make sense?
- The revenue side might work, but you may have to buy more than one competitor to meet your goal. You will also need to buy competitors at rock-bottom prices to make this work. If you overpay, you’ll have too much debt to service, and you can expect serious cash flow problems.
- This is an option worth exploring if you can find the right funeral home at the right price.
A third option I encourage my clients to consider is to open new locations of their current business in neighboring communities. So rather than buying an existing funeral home, you’re opening a new one.
- Is it a real opportunity?
- In most markets, the answer is yes. If the public is dissatisfied with their current funeral home options, you can leverage your existing brand to create a new option for them.
- Is it personally exciting?
- This is a very exciting option for entrepreneurs because you’re creating something new rather than dealing with the former owner’s baggage.
- Does the math make sense?
- Your revenue will directly reflect how much you’re willing to out-hustle your local competition. However, you have to keep your start-up costs low for this to work. Leasing a facility and investing in remodeling it is a lot cheaper than building a funeral home from scratch.
- This is an excellent option if you can find a market with competitors who are just treading water. Rather than spending millions buying their business, you can open a new location, invest in good marketing, and win the lion’s share of the market.
There are other options to consider, but the key point is that you have to evaluate your options before moving forward.
For a funeral home owner to become a Funeral Business Builder, they must learn how to develop a Strategic Plan, and that plan always includes a clear description of the opportunity for growth.
Once you have a clear objective, the next step is to define the specific actions you need to take to succeed. I’ll discuss that topic in the coming weeks.
By the way, option #3 (opening new locations) is precisely what Newcomer has been doing for years. They have made some acquisitions, but most of their growth comes from opening new locations and out-marketing their competition.
Until next time
John
