Tag: funeral home finance

New & Improved Funeral Home Valuator

Written by Alan Creedy on June 12, 2018. Posted in Money: Getting it and Keeping it, The Creedy Commentary. No Comments on New & Improved Funeral Home Valuator

I have chosen to celebrate the re launch of my new website with an updated and improved funeral home valuation calculator.

This calculator is part of my effort to help practitioners access quick and easy tools that will help them make better choices for their business.

You can use these calculators any time and as often as you would like. I especially like the idea of using them for “what if” modeling. But, hey, I am analyst by nature.

When you use this calculator I receive an anonymous copy. I am not sure why I get it because I can’t tell who it is from. Any way. I noticed with my old calculator that people weren’t entering their data correctly. So, I expanded it and included a brief tutorial to help with it’s use. Notice, I have included several test calculations to help you judge whether you are entering the data correctly.

as always: if you need help call me at 919.926.0688.

Creedy & McQueen Earn Exit Planning Certification

Written by Alan Creedy on August 17, 2015. Posted in General Topics, The Creedy Commentary. 1 Comment on Creedy & McQueen Earn Exit Planning Certification

You’re here…NOW WHAT! There are more ways to transition a business than just selling to a consolidator. You can transition fast and you can transition slow. You can plan to have your kids succeed you or your employees or another funeral home operator. But the one entity you want to protect yourself from is the tax man. Bill and I are now experts in helping you transition your business they way YOU want to and keep more of what you get.

Succession Planning Associates owners Alan Creedy and Bill McQueen are pleased to announce that each has earned the Business Enterprise Institute (BEI) Certified Exit Planner (CExP™) designation for Exit Planning. The BEI CExP designation sets the standard for Exit Planning certification. Achieving the designation requires stringent training, rigorous testing, and in-depth Exit Plan Creation coursework.

“This is another example of the ongoing personal and professional dedication Succession Planning Associates brings to our funeral service clients,” stated Creedy. “We continually strive to increase our ability to better serve the funeral profession by achieving the highest professional and education standards in each of our service areas. In the end, it’s all about acquiring the expertise to employ the strategies that give our clients even more options in transferring their business to family, staff or third parties needed by private owners.”

The CExP requires more than 100 hours of live and online initial training and 30 hours of real-world casework creating exit plans. The program covers all areas of exit planning: the critical elements of a successful exit plan, understanding and identifying owner objectives, quantifying business and personal financial resources, maximizing and protecting business value, ownership transfers to third parties, ownership transfers to insiders (children, key employees, ESOPs), business continuity, family business planning and deferred compensation. BEI Certified Exit Planners are required to complete 30 continuing education hours every two years.

“Receiving this certification will give our clients greater confidence that the service they receive is professional in quality and adheres to ethical and industry standards of practice,” commented McQueen. “And like funeral professionals, we must complete continuing education requirements every two year to retain this designation – and more importantly – stay abreast of the latest changes in industry rules and regulations.”

“By successfully completing the BEI Certified Exit Planner program, Alan Creedy and Bill McQueen are now premiere Exit Planning professionals,” said John Brown, President of Business Enterprise Institute. “Their in-depth knowledge on a wide array of business subjects includes building a business’ value, identifying exit objectives, addressing key employee incentive planning and retention issues, incorporating business continuity planning, and establishing wealth preservation.”

About Creedy and Company: Headquartered in Raleigh, NC, Creedy & Company is a Business Advisory Service founded by Alan Creedy in 2008. His hands-on industry experience enables him to quickly analyze core problems, develop/prioritize solutions and implement strategies for quick turnaround. For more information, visit www.funeralhomeconsulting.org

About McQueen & Siddall: With offices in Florida and Arizona, McQueen & Siddall, LLP is a personal and business legacy law firm. The firm specializes in estate planning & administration, asset protection, business entity formation & succession planning as well as outside general counsel. For more information, visit www.LegacyProtectionLawyers.com.

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Building A Competitive Fortress Through Your Pricing Strategy

Written by Alan Creedy on July 31, 2012. Posted in The Creedy Commentary. 11 Comments on Building A Competitive Fortress Through Your Pricing Strategy

Last week I addressed our broken pricing model referred to as Cost-Led-Pricing. Apropos of everything this article came to my attention

Tough times add hardship to heartache: More families ask for help paying for funerals

underscoring the problem created by our outdated pricing strategy and causing me to wonder if maybe we won’t need to eventually reintroduce Burial Associations.

Before I introduce the alternative to cost-led-pricing some discussion is warranted. This will not be an easy transition for most of you. In fact, it will take sacrifice for many. But it is the right thing to do if you want to preserve your business and not only remain relevant but increase your relevance and dominance in your community.

Where Cost-Led Pricing is a relatively easy approach to pricing ignoring the consumer and the need to seek improved efficiencies and continually contain costs this alternative strategy is complicated and will require discipline. The payoff is simple...especially in an industry so dominated by the old outmoded strategy: Firms that successfully make this transition will survive and ultimately dominate their market for the long term.

To underscore this a story is in order

Recently, I was working as a funeral home consultant with a firm serving in excess of 540 calls. Over some 40+ years the second generation owner had built the firm from something in the neighborhood of 50 calls.

The only remarkable features of this firm were the genuine caring and sincerity of the owner. The adjectives I would use to describe him are humble, quiet, gentle and kind. The facility was nice but only adequate. You would not be embarrassed to use it but it was not the “Taj Mahal” type that has become popular of late. The fleet was also adequate. The staff was well trained and, like the owner, kind and caring. Although actively thinking about it, they were not yet into receptions, dove releases and the like.

OK, you say, so what. Well, the rest of the story is that recently this gentleman’s market had been invaded by one of this country’s most aggressive funeral homes. I know this company well and they never fail. They bought a local facility with the express purpose of putting my client out of business. Several years later my client had quietly handed this firm their hat and run them out of town.

What Happened?

Like you I had to know. So, I started asking. My client didn’t sit on his heels but he didn’t really do anything dramatic either. No big ad campaigns. No aggressive preneed. Just “steady as you go.”

Then one day as I was reviewing his customer contracts I realized how he had become the dominant factor in his community by a factor of 2.5:1 and run this other firm out of town. I had seen his strategy a few times before but not very often and whenever I have seen it I also see a veritable competitive fortress and a financially brick-solid company.

My client and a handful of other firms in the country, without being sophisticated or going to MBA school, practiced the alternative to Cost-Led-Pricing…

Price-Led-Costing.

He set fair prices (note, and this is very important, I said fair not low) and controlled costs to drive a profit. He does not price advertise.

This strategy puts the consumer at the head of the table and somehow they know it intuitively.

While he did not invent it Sam Walton of Walmart popularized this strategy and over the last 40 years most consumer facing industries have successfully deployed it in one form or another.

Price-Led-Costing determines a price first. A price is selected at which the consumer feels the value and the product / service are roughly equivalent. Then costs are controlled in order to drive a profit at that price. The NewComer Funeral Homes are an example of Price-Led-Costing as a formal Strategy. This is not the same as a Discount strategy like a Cremation Society

DANGER

If you are thinking at all you can see that transitioning to this strategy is going to take some pretty dramatic steps. For today simply let me make a few points:

Decide to make the transition a process over time
Begin by focusing on cutting costs
Decide if you have the stomach for it (there will be pain and reward)
DO NOT CONFUSE Price-Led-Costing with discount pricing it is as different as night and day

Next Week:

I will play the heretic in challenging some of your paradigms as you begin thinking about cost containment in an article entitled: Licensing Laws–Barrier To Survival

Expert Opinion: Size Matters: Making the Case for Growth

Written by Alan Creedy on July 2, 2012. Posted in The Creedy Commentary, Practitioner Forum: Insights and Ideas. 14 Comments on Expert Opinion: Size Matters: Making the Case for Growth

Why is bigger better when it comes to creating memorable experiences?

Look at any successful service business, whether it’s a hospital, a hotel, a restaurant or even a funeral home, and you’re bound to come away with one undeniable message: the experience you create for your customers and guests is crucial to the future of your business. It’s what they remember and talk about, long after they’ve forgotten the price or the products. The next time they’re in a position to buy your service, what they remember is what guides their choice.

It’s why you see the leaders in all kinds of service industries making big investments in designing a better customer experience. They’re also making big investments in facilities, technology and training to ensure that the key elements of the experience are delivered consistently – every element, every customer, every time.

Making Memories

For example: Walt Disney World realized that happy family memories were one of the most important “deliverables” that Disney could provide. In response, the company invested in rethinking on-site photography to literally make happy memories a saleable product.

Digital photos have long been an amusement park staple – think of those automatic cameras at the top of the roller coaster that capture full-grown adults screaming in zero-g like little girls. Disney took that opportunity to a whole new level, staffing the park with roving photographers who carry top-notch equipment. They’re stationed near every scenic point in the park and trained to reliably take beautiful, memorable family photos, without that awkward moment where you hand your camera or phone to a total stranger and hope for the best.

An important ingredient in Disney’s program is a wireless system where families carry a bar-coded “PhotoPass” that can be scanned by any photographer throughout the vast resort network. That system tags every photo as it’s taken and automatically uploads it to a website where it’s available for purchase by the family, even weeks after they’ve gone back home. A short vacation can produce dozens or even hundreds of high-quality photos, and an average add-on sale of nearly $100 per family.

Funeral Service Opportunities

In funeral service the situation is even more critical, because most people actually host or arrange funerals just once or twice in their lives. Like any other event business, marketing in funeral service depends on the impression you make on the guests. When they attend services (at your firm and at your competition), they’re unconsciously comparison-shopping. As funeral guests they’re getting a free sample of your service that will guide them when it’s their turn to be funeral hosts.

The unhappy reality for most funeral providers is that the free sample isn’t very inspiring.

Having spent a lifetime attending traditional funerals, about 40% of the country has opted out of traditional burial services, choosing cremation instead. In market research, when consumers explain why they choose cremation they often complain about outdated traditions, outdated facilities and outdated content in traditional funeral homes. Since most consumers have never actually purchased or arranged a funeral before, their complaints must be based on your free sample – their experiences as guests.

Why Are We Still Talking About This?

The formula for success in the experience economy isn’t a secret – some magical mystery that only the select few may know. It’s a straightforward matter of investing, first in designing an experience that sets you apart, and then in the People, Place and Process to deliver it consistently. Businesses around the world have mastered it to create a competitive advantage they can count on to help them grow.

Overdependence On An Unreliable Partner

If the answer is that simple, then why are funeral businesses so slow to embrace it? Of course, tradition is part of the answer. Funeral homes have a long tradition of out-sourcing the job of creating event “content” to one of the least predicable partners – the clergy. Driven by the rules of their own denominations and their unique styles as individual ministers, the clergy keep funeral directors guessing about the quality and content of every service right up to the end. Some funeral directors have begun to take over the content-creation themselves, but this usually requires an investment in people and technology. They need celebrants, digital media wizards and audio-visual hardware to build a better service.

Another obstacle to change is the fact that funeral and memorial services are a once-in-a-lifetime event. For each family, this is a never-to-be-repeated, last-ever chance to say good-bye to someone they love. For funeral homes there are no do-overs – just one (and only one) chance to get everything right. There are dozens of details to be managed, and just a day or two to pull everything together. Since most funeral directors work from handwritten notes on the back of the case folder, consistency and reliability are always issues. The fear of getting something wrong can make funeral directors even more conservative and undercut creativity before it starts. The quality of the experience is usually what suffers.

Information systems have real promise as a way to make execution more consistent and reliable in funeral homes. By coupling automatic task lists with mobile web access via smartphones and tablets, we can do a lot to make execution idiot proof. Staff can be reminded wherever they go, and managers can keep tabs on everything that is due (or overdue). Systems are beginning to emerge with these kinds of capabilities, but funeral homes have been slow to adopt them.

The Real Issue & A Better Solution

The biggest reason that funeral homes haven’t joined the Experience Economy is also the simplest – economics. Most funeral homes are just too small to afford the tools they need – better facilities, better technology and better people – to consistently create a better experience and grow the business. A business doing 150 funerals a year can only use its tools about 3 times a week. It’s not going to throw off enough cash to self-finance the improvements that it takes to stay competitive.

Fortunately, better access to working capital can help overcome those limitations. A $200,000 SBA loan at 5% can have payments as low as $1,100 per month. This opens the door to a couple of interesting possibilities.

First and simplest is to invest in those facility and technology improvements now, while they can still create a competitive advantage instead of just helping you catch up with your competitors. Using the industry average funeral of $6,560 and a 20% dynamic profit margin on new cases, it would take just one or two new families per month to fund that investment. To look at it another way, if your New and Improved experience lets you generate a 4% average upsell on your services, you would fund the investment with room to spare.

A final opportunity is the tried and true approach – buying out one of your less capable competitors. Assuming you can negotiate a realistic purchase price (always a big ‘if’ with funeral directors) the economic advantages can be huge. You grow your market share immediately and have more case volume to absorb (and profit from) that New and Improved Funeral Experience you worked so hard to create. The savings from consolidating back-office functions like accounting, transportation and the prep-room will often fund the financing cost and leave profit to spare.

The Common Ingredients

All these strategies have two common ingredients: Vision and Leverage. As a business owner you have a vision of what you want your business to be – a powerful vision of a compelling experience for customers that will give you a lasting competitive advantage. At Live Oak Bank, it’s our job to help provide the final ingredient – the leverage you need to grow your business and make your vision a reality now.

Be sure to attend the session: Size Matters: Why Growing Your Business is Key to Your Future, and How Small Firms Can Make It Happen at The NFDA convention in Charlotte Sunday, October 7 from 3-5PM

About the Authors

Doug Gober is a Senior Loan Officer with Live Oak Bank. A CPA by training, Doug joined Live Oak after working with some of the leading companies in the funeral industry for more than 30 years, including Batesville, York Casket, Matthews International and Carriage Services.

Paul Seyler is President of Competitive Resources, Inc., a New Orleans-based firm providing research, strategy and execution support to companies both inside and outside the funeral industry.

Book Review: When Growth Stalls

Written by Alan Creedy on March 5, 2012. Posted in The Creedy Commentary, Practitioner Forum: Insights and Ideas. No Comments on Book Review: When Growth Stalls

When Growth Stalls, How it happens, why you’re stuck and what to do about it.

By Steve McKee, Jossey-Bass 2009

“when growth stalls, everything begins to break down. Confidence wanes, and it can be difficult to tell which problems are cause and which are effect.” This simple statement hits too close to home in an industry where stalled growth has become the rule rather than the exception.

Based on research involving 5,696 businesses across a wide variety of industries and spanning several years, the author identifies 3 external factors that catch us all off guard and 4 internal factors that make things worse. He found that stalled companies were more likely to have high turnover, lower margins and weaker customer loyalty. Compounding this is a correlation with unhealthy internal dynamics including: issues involving trust and respect, inability to make lasting decisions, a tendency to overthink things and, in a strange dichotomy, a propensity to either resist change or switch directions frequently.

But wait, it gets worse. Stalled companies also “unintentionally build mediocrity into the system by losing the best people, hiring “C” people and hiring on the cheap.”

External Factors

Economic factors include both price resistance and increased cost of doing business. These occur over time and aren’t always noticeable until long after the trend is set. McKee warns us about cutting expenses: “You can cut your way to survival but not success.”

Aggressive Competition introducing new ideas or factors into the market place. In our case, examples might include cremationists and low-price providers. McKee offers this advice: “Keep close tabs on your competition…outthink rather than outspend them…and consistently look for ways to enhance and protect your differentiation.”

Changing industry dynamics: “The marketplace has changed and [players] no longer know their place in it.”

McKee offers this interesting insight: “When there is change there is a ‘misunderstanding’ that can be capitalized on.”

Internal Factors

Lack of consensus: “When growth stalls…people choose sides, challenge each other…and begin to doubt…” The focus shifts from “what do we need to do” to how can we all get along.

Loss of focus: “McDonalds stalled out when they became too intent on adding restaurants to customers rather than adding customers to restaurants.” Loss of focus leads to the wasting of limited resources rather than optimizing them. Things are always changing. So, “either a company moves or the market moves.”

Loss of nerve: Leadership is especially difficult when a company is adrift. Self confidence wanes because it is confusing, discouraging, contagious, paralyzing and wearying. It challenges a leaders whole notion of self worth. The risk of change seems greater than the risk of standing still.

Marketing inconsistency: leaders begin to be reactive with emotional hot spots and use advertising in a point-counterpoint fashion with competitors instead of consistently staying on message. People trust brands that have consistent approaches to their message. Companies don’t know who they are if they keep changing their message in a fruitless search for a silver bullet that will solve its problems.

The Take Away

Know you are not alone
Knowing the seven factors that lead to failure gives us focus and courage to pick up and move forward
The “Top Box” concept gives you an excellent template for follow-through
It will require focus, discipline and perseverance
Find a way to “Mean something to your market and it will reward you.”

I strongly recommend this book to DeathCare professionals who really want to build a thriving business. It will take discipline and focus, strength and leadership but McKee’s advice will give you a very strong backdrop to make it happen.

Video Interview

Click here for a video interview of Author Steve McKee focused on the application of his concepts to funeral homes.

If Lee Iacocca Owned a Funeral Home

Written by Alan Creedy on February 28, 2011. Posted in The Creedy Commentary. 4 Comments on If Lee Iacocca Owned a Funeral Home

There is an apocryphal story in accountant circles about Lee Iacocca’s first day as CEO of Chrysler. As the story goes, Mr. Iacocca’s very first act was to call in the Chief Financial Officer and ask how many day’s cash was on hand. The CFO responded that the company had 3 day’s cash available. Mr. Iacocca responded, “Where shall we spend it?”

Last week’s commentary “A Horrifying Revelation About Price” addressed more than one concern I have about our profession and touched off a flurry of comments. All of the responses were well thought out and worthy of reading. But they made me aware that I need to drill down a little deeper on my points.

The Iacocca Lesson

In a limited resource environment Mr. Iacocca understood the vital importance of optimizing his resources. Like most funeral homes, he knew the answer involved livelihoods. It was no abstract theoretical question. His query of the CFO understood principles I think are largely misunderstood in funeral service.

With so many funeral homes struggling to maintain the same profitability year over year (assuming they are profitable at all) it is vital that limited resources be used in ways that shorten and optimize returns. You can bet that there was a lot of demand for that cash among vendors and creditors. Iacoca knew they would rather get $1 than the ten cents they would get in bankruptcy court. So, he just blew right past them and wanted to know where he could get the fastest and highest return. He needed to make his dollars generate more dollars and quick. As John Horan observed in his comments to last week’s commentary, Iacocca knew he could not afford to: “Step over dollars to pick up nickels.”

Opportunity Cost

The need to generate more dollars from limited resources brings us to the central point of Mr. Iacocca’s strategy and one of my two points in last week’s article: this week I will address Opportunity Cost. This concept means that there is always more than one opportunity and what may seem like a good opportunity because “everyone is doing it” may not actually be the best opportunity. In my response to Colleen Ellis’ comments I observed that Pet Care might be a viable strategy for some practitioners (if, and only if, it generates more human calls). For others struggling to survive it could in fact be a fatal strategy. Fatal because it overstretches limited resources with insufficient returns to make the risk worthwhile.

Opportunity Cost recognizes that if you choose to invest resources in an option so that another option cannot be pursued because you have exhausted your resources then the difference in return of the lost opportunity must be added to the cost of the option you chose. An example might be that you have 3 different options for investing in ways that will improve your business as follows:

                         Option A     Option B     Option C

Investment               $50,000      $150,000     $200,000

Payback period            7 years     10 years      4 years

Annual cash return        $7,000      $15,000      $50,000

You choose Option B because everyone is doing it and it is less expensive and less boring. The actual cost of Option B would be as follows:

Investment:                          $150,000

Unrealized cash from Option C         $35,000

Payback period for option B          10 years

Opportunity cost  (10 yrs x $35k)    $350,000

Investment                           $150,000
less: incremental cost of option c  ($ 50,000)

Actual cost of Option B              $450,000

My apologies to accountants and economists. In order to simplify this illustration I have purposely ignored a number of other variables like the time value of money and risk.

To summarize this point:

Warren Buffet and Lee Iacocca would demand that for every dollar invested an additional dollar be earned
All options and opportunities should be weighed against other opportunities no matter how unsexy or boring they might be.

To illustrate further: During the 90’s it was common for funeral homes to invest in the neighborhood of $50,000 in upgrades to selection rooms anticipating significant increases in sales revenues. Interestingly, at the time, no one was investing even a fraction of that amount in staff training (an alternative investment option). Here is how I would have looked at that scenario.

                Before   Select rm upgrde   Staff Training

Calls              200           200               205

Avge svce chge  $2,500        $2,500             $2,750

Avge cskt sle   $2,000        $2,500             $2,500

Total Sales   $900,000     $1,000,000         $1,076,250

C.O.S @ 17%  ($153,000)    ($170,000)        ($174,250)

Margin        $747,000      $830,000          $902,000

Incr                       $  83,000          $155,000 

Investment                 $  50,000         $  50,000

Opportunity cost:$155,000-$83,000)           $  72,000
Less:Incremental cost of Option C           ($    -0- )

Total Cost of Selection room upgrade          $152,000

ROI                    54% first year   310% first year

I think I know what Warren Buffet and Lee Iacocca would have done.

Post Script:

It was not my purpose to bash Pet Care but it stands as a good example of what might seem like a good idea but may not be the best idea. Investing $150,000 to generate unit margins of $125 or less on a stand-alone basis is one thing. But when you consider that investing $30,000 to $75,000 in a program that will train your staff in ways that will improve yield on existing customers whose margins are already in excess of $5,000 and improve services that will generate even more of those customers makes more sense to me.