Are you ready for 2021. . . ready, set, Buy!

Foundation Partners why I partnered

Over the years I’ve moved from really long-range planning about my business to a method where I plan for shorter durations.  I think my move has coincided with many who have went from developing long range “strategic” plans to plans that are shorter in duration, less set in stone, and allow a business to be more flexible and nimble as situations change.

I think that trend has come to business in just the last several years, simply because “change’ in business happens so fast now days.  I think we were starkly reminded of this with the coronavirus pandemic this year.  I’m guessing that while some businesses had “Black Swan” type planning for a disaster and technology recovery planning for a disaster, not many strategic plans had a pandemic situation built into it.

I also think it has been fairly remarkable that businesses, including death care, have pivoted to a method where they can be profitable by being nimble and moving to a method that their customer base can use.  Death care has moved into outdoor services, drive by visitations, and technology driven services to maximize revenue.

I was at our local Papa Murphy’s ‘take and bake’ pizza the other night.  The manager was at the cash register when I ordered and upon asking he told me sales in 2020 were up 30% over last year. . . .being flexible and pivoting to a drive thru made a big difference.   Or, our local Dairy Queen which added a 2nd drive thru.  Service was faster than ever, sales were through the roof, and I’m now guessing they may never open up the interior seating area again.

So, while your long-term plan may be to own five funeral homes over the next twenty years, what do you want to get accomplished next year.  Certainly, we have seen some changes in this pandemic year. . .which will stay, which will go. . . . how has this affected my competition or my own profitabilty?  Those are questions that you should be thinking about, not for the long strategic term, but right now for the short-term.

Are there things that have changed?  Is it the time to pivot from a longer range idea to make it a shorter term goal? What has happened in the economy that I can take advantage of?  These are things good funeral home operators are asking themselves right now and then contemplating how to take advantage of the situation to their own advantage.

From my point of view, here are some trends I would look at:

  1. Client families will continue to have less full service funerals or cremations
  2. Technology will continue to evolve and play a bigger role in death care choices and arrangements
  3. Interest rates will continue to be low
  4. Increased revenue per case may be hard to come by
  5. The pandemic has made younger aged people think about their mortality

So, we don’t know if those things will continue to happen, but if I believe that they were going to, what might I look at doing?

My business thinking point of view, instinctively, tells me two items of the above are really important and would drive my thinking.  First off, if

Tom Anderson
Funeral Director Daily

my client families are going to continue to have less full service funeral or cremations, that probably means that revenue per service will continue to be difficult to increase.  That tells me, that I need to wring more margin out of less revenue and the best way to do that, from my perspective, is to get a better economy of scale.. . . . . . and, I think that leads to needing to serve a larger number of families. . . .which would lead to an acquisition, a second location being developed, or highly increased marketing.

The second trend that I see, actually fits right into this thinking, and that is the idea that interest rates will continue to be low.  Two things give me confidence in this fact for the foreseeable future.  First of all, the amount of debt that the United States has taken on to fight the coronavirus pandemic.  If our country has to pay anything but rock bottom rates on that debt, budgets for everything from military spending to school lunches will have to be reduced. . . and I don’t see the will to allow that.  And secondly, many North American companies are now financing in Europe because of their negative interest rates to savers.  That fact will require North American lenders to hold rates low simply to compete with the Euro market in rates.  Take a look at this article (click on the “X” and you should get by the pay wall).  I learned about this phenomena last year from a friend of mine who sits on the Medtronics Board of Directors. . . . he told me they had re-financed $8 billion in Europe because of the low rates.

I draw the conclusion, that if I want to be in an expansion mode during my ownership career, pivoting to doing an acquisition in the next 12 months may be a good idea, regardless if it is not the schedule I was looking at.  Those who just stop and put their feet up after scrambling to get through the COVID dominated year of 2020 may miss the boat.

One final thought. . . .it may just be a good year for purchasing from a price point of view also.  Two reasons, anecdotally, I have heard that some in our profession, especially those in the over 55 age bracket, may not have the energy to face a COVID-like dilemma again and secondly, because of COVID some operators will likely show lower profits which would cause their businesses to probably command less when put for sale on the market. . . i.e. it may be buyer’s market.

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