“A fool and his money are soon parted” – Dr. John Bridges 1587
Last week, I discussed some steps you could take if you don’t have any cash. This week, I’ll focus on the reverse: your cash reserves are in great shape. Now what?
Please do not think that I’m calling you a fool for having money. In fact, it’s the complete opposite. You’ve obviously done something right because the vast majority of funeral home owners are not in your situation.
However, many business owners do foolish things once they accumulate cash.
There are a lot of things you could do with extra cash. You could buy a vacation home, fund your retirement accounts, or buy that classic car you’ve always wanted. For this newsletter, I’ll assume that you’re interested in using the cash to expand your funeral home business.
There are very few guaranteed “good decisions” in business, but you can improve your odds by following the three steps we used last week.
Step 1 – Evaluate where you are today
Step 2 – Envision where you want to be in the future
Step 3 – Develop a plan & move!
You’ve accumulated some extra cash in your business. Now what?
Step 1 – Evaluate where you are today
The funeral business is cyclical. You can be swamped for weeks or months, and then suddenly everything stops. Is this really “extra cash” or is it simply enough to survive the next slowdown?
Are you well positioned to serve Baby Boomer and Gen X families? If not, this should be at the top of your priority list.
Do you have a marketing system you can turn on and off at will, bringing in a predictable stream of either at-need or pre-need business?
Do you have operating processes and procedures that allow your team to deliver a world-class funeral experience for every family and their guests?
Have you established a unique position in the market? In other words, are you known for something that other funeral homes do not provide and that families want?
I ask these questions because I’ve seen too many owners expand to new locations before establishing a solid foundation at their current funeral home.
Step 2 – Envision where you want to be in the future
Here are some questions you should consider.
What kind of funeral home business do you want to build? A traditional funeral home? A Celebration of Life provider? A discount cremation company?
How big of a territory do you want to cover? If your locations are too far apart, you will have a hard time managing them.
Do you want each location to offer the same services and experiences? That means the facilities need to be similar.
Do you want to acquire existing funeral homes or start new ones? Starting a new funeral home may sound like a daunting task, but it’s often better than acquiring a business that is in decline.
Step 3 – Develop a plan & move!
The details of a plan will differ dramatically based on how you answer the above questions. However, in general, your plan should include the following sections.
- Market Assessment – Is the death market growing? If so, what segments?
- Marketing Strategy – What is your unique message, and how will you get it out there?
- Services/Packages – What will you offer families, especially those who do not want a traditional funeral?
- Facility – Will you lease or buy the facility, and what kind of remodeling will be required?
- Staffing – How are you going to staff the new location? Do you have enough licenses to go around?
- Cash Preservation – Cash is king in business! How will you minimize your upfront costs so that you can afford to market the funeral home?
- Financial Projections – Think like an investor (because you are). Conservatively, how long will it take to break even?
As you can see, a lot of work is involved in growing your funeral home business. You could just buy a competitor for whatever they’re asking and assume it will all work out, but that’s often a recipe for disaster.
Buying a new home is often an emotional decision. But buying or creating another funeral home location should never be an emotional decision. You may have coveted a competitor’s facility for years but that doesn’t mean it’s a good investment.
The number of funeral homes that are for sale is rising every day simply because so many owners are ready to retire. That creates a tremendous opportunity for funeral business builders looking to take their business to the next level.
Just be sure to treat your expansion as an investor. The purchase price is important, but the return on investment (ROI) is what really matters.
Until next time
John
