Business

Is your firm “Fit” for this new economic environment?

Foundation Partners why I partnered

If you follow the stock markets and study them, you might have seen an “Open Letter” that Brad Gerstner, a principal at Altimeter Capital, and stockholder in Meta (formerly Facebook) sent to Meta founder and CEO Mark Zuckerberg this week.  You can read the letter here.

Gerstner is still a stockholder and apparent fan of Meta.  However, he reminds Zuckerberg that Facebook – now Meta – has existed in a period where we have only had a low interest rate environment and capital for all kinds of things came, in a relative scale, cheaply.

In the letter, Gerstner reminds Zuckerberg that with higher priced capital, things may not be as easy as they once were for the company.   He says that when things are going easy, we don’t always look at all the levers a business has at its control.  Sometimes, these levers then get out of control.   Gerstner suggests four things that the very profitable Meta should get under control as they move forward in what may be a tougher business environment.

Here’s what Gerstner suggests to Zuckerberg:

  1. Expense Control
  2. Capital Expenditure Spending
  3. Focus
  4. Be leaner, faster, and more successful

Gerstner has suggestions in each of those categories for Zuckerberg and Meta.  Quite frankly, for our discussion of death care businesses, predominantly funeral homes, those individual suggestions are not real relative.  However, the four category ideas should be looked at in your business to make sure that your business is “Fit” for the current business environment.

Let’s look at them from a death care / funeral home perspective.

Expense Control —  As the cost of money has been low and your funeral home is doing very well, have you let some expenses get away from you?  Are you spending too much, more than really necessary in some category?  It’s something you don’t always think about but I can remember at one time I was astounded on what our funeral home was paying a national operator for our waste (garbage) and recycling collection.  It was something I didn’t look at too often, however, when I called around for quotes I cut the price in half by using a local operation.

Capital Expenditures — If the cost of money is going up, does it pay to wait to add that new visitation room on?  Does it pay to operate your paid off  hearse one more year before purchasing new? Or, looking at it from another direction, if you have adjustable rates on your loans, is now a good time to use capital to pay off a portion or all of the principal instead of paying that extra interest.  These items need to be looked at against the curtain of marketability also.  There are certainly no right or wrong answers here, but every business person should take a look at the options.

Tom Anderson
Funeral Director Daily

Focus— What is that “profit maker” at your funeral home?  Is it your professional services charge, your merchandise margins, or your preneed sales.  More than likely you profit from all three. . . however, also more than likely, one of them is your “profit center”.  As costs are rising, it is probably smart to make sure that your “profit center” is where your focus is on before you look at the ancillary services for extra income.  It’s a simple fact that in the times of rising expenses, you cannot have your “profit center” in a downward trend.

Be leaner and faster — I think by using expense control, limiting the amount of interest that you pay by watching capital expenditures, and focus on your profit center you will probably create a better cash position which will allow you to have the ability to make changes when you have to.  Many times, in business, the ability to move fast and be adaptable may trump the marketing aspects of having a new addition or new fleet.  Again, no concrete answers but something that each funeral home owner should take into consideration.

And, talk to your employees about these issues. . . . where would they save money?  Does driving a 5-year old hearse give us a bad impression with the consumer?  Is it imperative that we add that room now?  Your employees might have an answer to those questions.

I always talked to my funeral directors about these things.  Over the years their advice and suggestions both saved me expenses and made me extra profits.   They probably hear things from client families that the owner will not. . . letting them share those comments with you can only improve the business.

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