July 9th, 2018
Acquisitions, mergers, partnerships, regional consolidation and other joint ventures are changing business and have become essential to gaining competitive advantages. These joint business collaborations have multiple benefits from obtaining quality staff and valuable assets to reducing competition and overhead costs. With various financial resources available today, the ability to increase market share and expand your business is more attainable than ever.
Once you merge with or acquire another business, there are multiple considerations which must be taken into account such as: company cultural dynamics, management and employee placement, company-wide communication, strategic business and marketing strategies and of course financial management. Successful financial modeling and management is essential for any business but proves critical especially for mergers and acquisitions. Modeling your financial plan during an acquisition or merger is key in projecting cash flow and profitability.
Positive cash flow is what keeps your business going, it gives you the capacity to meet your financial obligations along with flexibility to explore growth opportunities. Maintaining positive cash flow can be challenging especially in this profession, as multiple variables including seasonality and death rates make it difficult to predict business. An additional challenge this profession faces in regards to managing positive cash flow is customer payment. Traditional methods include cash, check or credit card however, with an average funeral cost of $7,000 and over 63% of Americans without $500 in their savings to cover an emergency (Forbes, 2016), families are looking for alternative options for funeral payment. While it is true that funeral professionals do not have to accept life insurance as a form of payment, most do, because three in five Americans have some form of life insurance. So, if your funeral homes or cemeteries are not accepting life insurance as a form of payment you are eliminating a large portion of potential business. Additionally, for funeral homes accepting life insurance as payment, but processing the life insurance assignments in-house, they often face several challenges from countless administrative tasks to delayed payments.
If you have acquired or merged and now manage multiple businesses, maintaining positive cash flow can prove to be even more challenging as you are now fiscally responsible for more than one entity. You need money to pay your employees, investors, suppliers, overhead expenses and beyond. Owning multiple businesses, adds additional challenges when striving to maximize the efficiency of your resources and employees. You risk maintaining positive cash flow and reducing employee productivity if you are processing life insurance assignments in-house versus using a professional funding company.
How can your businesses maintain positive cash flow, let alone operate when you are waiting 30, 60 and sometimes 90 days and beyond after a funeral service to be paid? There are over 800 insurance companies in the United States and whether you own one location or several locations, they will not discriminate and you will be waiting on payment. Your investors and your bank are not going to accept payment 30, 60 or 90 days later, so as a funeral home owner, why are you? You are not a bank, but every time you process life insurance assignments in-house you are essentially giving away free loans. As an owner of multiple funeral homes, you do not have time to wait on your money. Insurance assignment funding companies will not only obtain the receivables you are waiting on but they can help you maintain positive cash flow. Instead of waiting an extended period of time to get paid on your services, imagine having payment sent straight to your funeral home bank account within the same day. Imagine having money on hand to pay your employees and overhead costs. Imagine freeing your accounts receivables. Imagine getting paid on pending death certificate and coroner cases. Imagine having additional money to take advantage of supplier discounts and promotions. Imagine having additional money for your cash reserves. Imagine being able to invest and acquire another funeral home. Partnering with an insurance assignment funding company can make all of those “imaginations” come to fruition! I often hear funeral directors say, “This sounds great, but what does it cost?” It does not have to cost anything. A small processing fee is taken from the family’s life insurance benefit, so there are no out-of-pocket expenses for the funeral home or cemetery. A typical rebuttal to this I hear is, “I do not want the family to have to pay for this.” While it is the standard to pass the fee along to the family, funding companies do make it possible for the funeral home to absorb the processing fee if they desire to. Funding companies can provide the positive cash flow essential for your businesses and enable you to redirect employee resources to other value-added services.
In this profession, connecting with families and providing services second to none is essential for continued business and is what differentiates you from your competitors. For funeral homes processing insurance in-house, how can you expect your funeral staff to give families the attention they deserve if they have to sit on hold with insurance companies for hours, complete endless amounts of paperwork or have to call families back into the funeral home after a service to complete additional forms? There are costs to these administrative tasks and if you could eliminate those and position your staff to other areas of increased revenue streams, wouldn’t you want to? While all funding companies can improve cash flow, there are different levels of service each provide. While you are seeking a partnership with a funding company it is essential you partner with one that provides the fastest and easiest services and can eliminate the administrative claim paperwork portion of the process.
As a regional consolidator each of your funeral homes are likely paying a salary for someone, we will call her “Sally,” to sit on hold and complete paperwork. However, the landscape of this profession is changing and as funeral directors you are being pushed to your creative limits to expand your services for changing demands. Instead of hiring another employee to manage new revenue opportunities, what if you could utilize Sally and have her manage and explore new service options? Imagine eliminating nonproductive claim administrative time for a “Sally” at each of your locations, now you have an even greater opportunity to increase productivity and revenue.
Every funeral home and cemetery can benefit from using a funding company but for investors and owners of multi-location firms, the benefits are multiplied. In fact, a majority of funeral home groups and corporations require each location to use a funding company, for improved positive cash flow and productivity of staff.
You are an entrepreneur, investor and owner, you are not a life insurance expert and you should not expect your staff to be. Maintaining positive cash flow and effective utilization of resources is crucial for the success of your merger or acquisition. If you partner with a funding company that can provide 360 degrees of support, you will see first hand how essential their services can be for the success of your businesses.