Does owning a funeral home excite you?  Most good owners don’t wake up one day and just decide they want to own a business.  It takes discipline, thoughtfulness and thorough planning to become an owner.  From the first time you dreamt of ownership to the moment you achieve your dream, the process can take several months or even years.  In either case, being well prepared is critical.
You can differentiate yourself by applying five key success factors in preparation for your future funeral home ownership.
The first factor for success is all about saving.  There are multiple ways to enter into ownership.  Some owners purchase the firm where they’ve worked.  Others purchase another funeral home in an entirely different town or city.  There are many second and third generation owners who inherit the business from their families.  In all situations, it is important to save money.  If ownership is your dream, you might have to sacrifice luxuries in your life such as a new house or new car.  Purchasing these items instead of saving could hinder your ability to afford the funeral home.
Regardless of which loan program is used to finance the funeral home purchase, a down payment will likely be required.  Much like buying a home, financing that requires no out-of-pocket expenses is extremely rare.  An average funeral home could sell for $1,000,000.  The more savings you have accumulated on your personal balance sheet, the more qualified a buyer you become.
Lending institutions certainly understand the trade nature of the business.  As a funeral home, your ability to save will look different than a neurosurgeon’s, but don’t miss the point that savings are important.  Having only $1,000 in your checking or saving account, but owning a $35,000 brand new car with a monthly payment of $775 does not make you an appealing borrower.  Have a futuristic mindset.  Don’t be stuck in the now.  Save that money so you’ll be a better future owner.
Good Credit
Saving money goes hand-in-hand with your personal credit score, thus the second success factor for funeral home ownership is earning good credit.  When looking to purchase a funeral home, it is important that you pay close attention to your personal credit.  Don’t forget to make monthly payments on existing debt.  The decisions you make today will impact your credit score.
Collections, bankruptcies, foreclosures and short sales are all negative signs in a potential owner.  Look at your credit score at least every six months.  Be diligent to check for any collection items that have hit your credit report and take time to resolve the matter.  Medical collections commonly sneak up on people and can be a huge hit to your score.  The typical minimum score is 650, but don’t aim for the minimum.  Get your score in the 700s by making monthly payments, preventing any collection items or judgments and keeping your credit card usage to a minimum.  Don’t overextend yourself.  Try to pay off your credit card each month.  Living outside of your means will begin to catch up to you, and your credit report will indicate as such.
Networks and Mentors
As you begin to contemplate ownership, a third success factor is to learn about the demands and rewards of the funeral home business by speaking to current funeral home owners.  Reach out to an independent funeral home owner and take him or her to lunch.  Be prepared with a list of questions you might have.  What is the biggest difference between being an owner and being an employee?  What keeps you awake at night?  What has been the biggest reward for you?  Biggest regret?  What do you wish you knew your first year of ownership?  Would you do anything differently?
Meet with them again for lunch or coffee.  Ideally, find someone who is willing to mentor you.  Allow them to give you constructive input on how to improve yourself professionally.  Develop a rapport with them.  They could be a future potential seller to you when the time comes. This business network is one of your greatest assets.
Perfect Your Trade
In conjunction with finding a mentor, a fourth success factor is to become exceptional at your trade.  Continue to educate yourself on industry best practices.  Try to find a position that allows you to participate in all aspects of the funeral director role.  If you’re not already, become dual-licensed.  Fine-tuning your embalming skills and interpersonal skills goes a long way not only with your employer, but also with your future customers.  It tells the lender that you are serious and that you are invested in your long-term success.  Excel at what you do!
Managing Your Financials
The fifth success factor, and one of the biggest differences between being the owner versus a funeral home employee, is having the skill and responsibility of managing the financials.  As a funeral home owner, understanding your financials is critical to your success.  No one needs a degree in finance or accounting to understand a profit and loss statement or a balance sheet.  Using skilled professional help is a great start.
Your CPA should be knowledgeable in the funeral home space and understand the different nuances of this industry.  Sit down with him or her quarterly and review the financials.  Can you save money by reducing your expenses?  Do you need to adjust your pricing?  Is your Cost of Goods Sold within the industry average?  Have a budget and take the time to review if you have hit that budget.  Understand where you are out of sync and adjust accordingly.
You cannot rely on your past performance alone to sustain your future success.  As you begin to plan for ownership, understanding that you will need a financial budget and strategy will start you on the right path from inception.
Lastly, and above all else – ASK, ASK, ASK! Don’t be afraid to ask questions.  It’s ok to not have all the answers.  Don’t let pride get in the way of learning more about making your dream a reality.  This reality will likely require patience and perseverance, but don’t be discouraged.  If you follow these five steps, you will be well on your way to successful ownership.  FBA

Sarah Andrews joined Live Oak Bank in 2012 as a Finance Specialist before moving into production as an Underwriter. As a Loan Officer, Sarah evaluates loan applications for cash flow, credit and competency of the borrower in order to originate new loans. Prior to joining Live Oak Bank, she worked as an accountant for a tax consultant and forensic accounting firm, as well as in finance at a property management firm in the southeast. Sarah can be reached at (910) 550-2302 or [email protected]