Preplanning for Next-Gen Success
How a proactive preneed program is a competitive advantage, better serves your community, and builds lasting enterprise value
BY Tyler Anderson
Every new leader experiences a learning curve. Even when you’re well prepared to take on the mantle of owning and operating a funeral home, you shoulder so much responsibility from day one. The buck stops with you, and that takes some getting used to.
But for tomorrow’s leaders, that learning curve may be even steeper. They face a consumer landscape where the pace of change is faster than ever. In a study released by Pew Research earlier this year, it was found that the religious unaffiliated—28% of the population—are now the single largest cohort in the U.S., larger even than evangelical Protestants (24%) or Catholics (23%). 1
When you also factor in advancing technology and demographic changes like the fact that 6 in 10 people no longer live in their hometowns, one thing becomes clear: Not only do next-gen leaders need support, but they also need to be equipped to hit the ground running. Thankfully, there’s a proven way to make the transition smoother and maintain your competitive edge.
At some point, every leader asks the question, “What kind of legacy will I leave behind?” Most funeral home owners are dedicated to serving their communities and creating meaningful experiences that make an impact. This is what you might call a social legacy, but of course, you also have the business side of things to consider.
This brings us to the next question every leader asks: Did I build a sustainable business? You want to be able to pass the torch with confidence, and new leaders hope they can step in with confidence as well. What’s needed is a strategy for building enterprise value—the overall value of the whole company, including capital, debt, and equity—and one of the most effective ways to do this is through preneed.
You probably know about the long-term value of a proactive preneed program. It addresses the biggest challenges facing the profession today, it allows you to attract new families you may not have served otherwise, and it’s as close to guaranteed future business as you can get.
In fact, whenever a potential purchaser - whether a current employee, a next-generation family member, or a larger organization - is determining the value of a firm, one of the key line items they’ll be looking at is preneed volume. The performance of your program is intertwined with the financial health of your funeral home.
For a new leader on the brink of owning and operating a funeral home, a thriving preneed program is a huge relief. It’s robust future market share you can count on, and because it’s already up and running, you don’t have to worry about losing momentum.
You can continue adding incremental business and widening the moat that separates you from your competitors.
When I moved back to Ohio to lead the Outlook Group, it turned out I had a lot of questions. I obviously had experience with the company, and I thought I had a decent idea of what would be expected of me.
But like many business owners, my father - outgoing CEO Charles Anderson - had focused on a single day on his calendar for quite some time: transition day. It’s not unusual for an outgoing leader to focus on the transition point – the day they hand over the reins to a new owner or their descendants. But what helped me most as I stepped into the leadership role at Outlook was that Charles was available after he stepped away. He took my calls as I encountered small problems, and continued to provide support as we grew and eventually merged with Precoa.
If you want your brand to continue providing value even when you’re not at the helm, there is so much to be done in the weeks and months after that initial transition. Now, I’m not saying you need to hold the hand of the new leadership. But people don't know what they don't know. There are countless tasks and responsibilities that new leaders won't be able to anticipate until they're sitting in the leadership seat.
The great news is you can make the transition easier. By getting your next-gen leaders connected with your preneed partner now, they'll know who to ask for insights about performance and who to hold accountable so your firm can continue its forward momentum.
It goes without saying that funeral home owners have a lot of responsibilities to juggle. In talking with owners across the country, I’ve heard time and again how quickly you can get pulled in a million different directions while attempting to manage dozens of tasks at once.
Obviously, this comes with the territory of owning a business. But you can set new leaders up for success by trying to streamline as much as possible. With preneed, this means building a self-sustaining program or working with a trusted partner so that it all runs smoothly in the background.
This may sound easier said than done. It’s true that it takes a lot of ongoing effort, and many programs struggle to maintain consistency, which is why a lot of funeral homes choose to outsource preneed.
But the payoff is twofold. There are the advantages I already mentioned about adding enterprise value. You’re essentially handing over the keys to a preneed engine that is revved up and ready to keep running.
There’s also the advantage of having one less thing to worry about. When you have confidence in your program and it basically runs itself, you can focus more of your attention on the day-to-day responsibilities of running your funeral home.
Setting up a successful preneed program – on your own or with a trusted preneed partner – ahead of a transition has both immediate and long-term practical benefits.
In the short term, you’re setting up a block of guaranteed business for yourself and your successor. You’re also freeing up your bandwidth to focus on your core business.
But equally as important is continuing the value tied to your brand. In “Good to Great,” Jim Collins presents the idea of the flywheel. “No matter how dramatic the end result, a good-to-great transformation never happens in one fell swoop,” Collins writes. “The process resembles relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough, and beyond.”
By kickstarting your preneed program before you transition away from running the business, you’re setting up your brand to succeed and getting that flywheel moving. That way, all your successor needs to do is feed the momentum, not start from scratch.
While there are a lot of ways you can support the next generation of leaders, here are three things you can start doing today to build enterprise value through preneed.
Checking your program’s performance is always a good practice. The best place to start is with your preneed-to-at-need ratio. The standard metric for a growing program is a ratio of 55% and above. In other words, if you’re serving 400 families, you would have prearranged and prefunded 220 of those families.
But the positive impact of an active preneed program goes far beyond just the prearranged and prefunded results. At an average 40% close rate, 220 prearranged families equates to 550 families you’ve met with in advance.
This is the biggest reason this metric is so important. By tracking active versus passive sales, you can see that you’re progressively adding to your book of business and attracting new families who may not have otherwise had a relationship with your funeral home.
Another closely related metric to pay attention to is your replacement ratio. In a given year, how many new policies have you written compared to previously written policies that have matured to at-need? A positive ratio shows that you’re growing, and this is an effective leading indicator for looking at the overall strength of your program.
When you are looking at average funeral values through the lens of preneed, you’re looking to answer two questions:
If the answer to the first question is no, the second question becomes the most important. By providing an exceptional experience in educating your community on the importance of ceremony and gathering at your funeral home, you’re going to increase the value of the preneed contracts you sell.
If all of these numbers make your head spin, you’re not alone. Many funeral home owners find it valuable to outsource their preneed program. By working with a trusted partner like Precoa, you can spend less time worrying about your program while being more informed about it than ever.
Have a preneed question? Please reach out to me at preneedprotips@precoa.com and I’d be happy to answer.
Tyler Anderson is senior vice president of business development at Precoa, a preneed company that helps hundreds of funeral homes prearrange more families and grow their markets. Born and raised in the funeral profession, Tyler appreciated the importance of ceremony, ritual, and gathering from an early age. He is passionate about sharing a new vision for preneed that helps more families across the country experience a meaningful funeral service.