Group Case: Umas Funeral Services Growing up in Rosemary Heights, an upper middle-class suburban neighbourhood, Uma had always had a knack for sales and entrepreneurship. At an early age, she was delivering newspapers to earn extra money for the latest toys. In summers with school off, she sold lemonade at a busy corner a short walk from her house. She even hired her best friend to help out (a 10-cent commission from each glass of lemonade they sold), which boosted her sales.

Unsurprisingly, Uma went on to become a regional sales manager for a soda business in Western Canada. Being an expert negotiator, she accepted an $80,000 salary with a $1,000 bonus for every $10,000 in sales in her region. Under her management, the local soda sales quickly grew from about $40,000 in 2018 to $120,000 three years later. However, Uma has noticed that sales have been showing a changing trend in the past two years. Here are the quarterly sales for Umas region over the past three years:

Quarter 1, 2020 $28,800 Quarter 2, 2020 $31,700 Quarter 3, 2020 $30,100 Quarter 4, 2020 $28,300 Quarter 1, 2021 $29,400 Quarter 2, 2021 $31,600 Quarter 3, 2021 $31,200 Quarter 4, 2021 $29,800 Quarter 1, 2022 $29,900 Quarter 2, 2022 $32,100 Quarter 3, 2022 $31,700 Quarter 4, 2022 $30,000

Uma wants advice on how her income might look in coming years. She has been offered a new contract of $95,000 with incremental raises of 2% a year, but she has been too busy to think about it.

Uma has also noticed something interesting about her living area. Her parents and their friends have grown older and there has been more and more talk about funerals. Uma has noticed that there arent funeral services available in the area and cremations, burials, and memorial services typically happen in a couple of neighbouring cities. To make matters worse, there is almost always a wait to get loved ones the services they need!

Uma has briefly discussed the idea of opening a funeral services business in Rosemary Heights with Bonasera, a childhood friend who works as a mortician in a funeral parlour thirty minutes away. He is excited about the idea and believes there could be major profit in the business in coming years.

Uma believes she can hire Bonasera as a part-time employee for $40,000 (20 work hours a week). Alternatively, she can ask him to be her business partner. She is wondering if him paying $50,000 for a 30% share of the business is fair. Additionally, he would be required to commit at least 20 hours a week to the business for the next five years (Uma assumes if the business is successful, they will be able to hire more staff). She wants a complete analysis on having Bonasera as a business partner, including all pros and cons.

Uma is thinking of buying a plot of land where she could build a cemetery. The 1-acre piece of undeveloped land could be purchased for $400,000. Once developed, 300 plots could be pre-sold for $2,000 each. Alternatively, she could pre-sell half of the plots and sell the remaining half on an asneeded basis for $3,000 each. Uma estimates that it would take an average of 2.75 years to sell each plot at $3,000. Developing the land would cost $100,000 and take six months (the development costs would be spread evenly through the year).

Through her research on the internet, Uma has discovered that memorial headstones can be purchased for $300 on average. Engraving them typically costs another $100. Uma figures she can offer families an engraved headstone for $600. Caskets typically cost $2,000 which Uma would mark up to $2,500. Finally, embalming service could be offered for $700, with the funeral ceremony being an additional $500. To start, Bonasera would take care of both the embalming and ceremonies.

Uma has discovered that there is a small woodworking factory for sale for $450,000. If she were to buy this factory, she could manufacture coffins and engrave headstones in-house. The factory would need about $75,000 of modifications and new equipment to make it all work, but could pay off nicely once it was set up. The costs/needs for building a casket would work out as follows:

Wood needed 10 kg Wood cost $4 per kg Manufacturing time 4.25 hours Manufacturer rate $40 per hour Other materials $20 per casket Additional time (clean-up) 1 hour Additional time rate $20 per hour Allocated machine costs $50 per casket

Headstones could be purchased in bulk for $200 each and engraving would cost $50 in-house. Uma would need to spend $10,000 a year on the factory to keep it in working order.

After the cemetery is developed, Uma plans to start marketing her new business. She believes that if she spends $500 a month on flyers, she would book 50 funerals in the first year. However, if she added on TV and radio advertising for an additional $2,000 a month, she could double the first-year projection. With continuation of the same marketing strategies, Uma expects 25% growth in the second year, followed by another 10% in the third year (flat sales after that). Uma wants advice on the optimal marketing strategy, ensuring it is ethical and tasteful.

Uma has asked around and found that she can borrow up to $1,000,000 via a business loan. She has an option between a five-year fixed rate of 5.45% or a five-year variable rate (currently 4.85%). Uma isnt sure about the risks and rewards of selecting each option. She currently has $100,000 put aside for a business venture and an additional $30,000 to cover personal expenses for about a year.

Uma wants a detailed budget and advice on how to evaluate performance using a budget. She is open to learning more about why budgeting is important, even though she believes she is quite organized with numbers. She is not only curious about big picture budgeting but also keeping records for each funeral service. In particular, she wants to make sure she is not losing money on a whole lot of services and not realizing her mistake until the end of the year (or even later).

Uma has heard about cost-volume-profit analysis and wants to know how it applies to her business. The cost accountant at the soda factory is constantly rambling about break-even and margin of safety. Uma wants comprehensive analysis and recommendations on how her business can be run as effectively as possible.

Finally, Uma has heard that businesses are accepting crypto-currency payments from customers. She wants advice on if she should also do this. She has never invested in anything like it, but has grown more interested in Bitcoin after seeing a few news stories.

Advise Uma on her career path and the outlook of his proposed business. Produce a business report, including comprehensive analysis, recommendations, and any questions you may need to ask Uma.