The priority of many owners is to keep their funeral home business in the family; they want to fulfill the family trust that granted them the business and their commitment to their community. Great sentiments and I sincerely wish you well in accomplishing these lofty goals. However, it is very likely that your funeral home business will eventually be sold to a consolidator or a nearby competitor looking to enlarge their footprint. Whether you are selling a funeral home business, your widow, children, or partner is, it is the forces already at play in the industry (such as expensive staffing, decline in traditional services, increasing costs of products, etc.) that will cause the business to be sold. In addition to those factors, the value of larger businesses to consolidators has exceeded anyone’s expectations; the business will be sold. The question you should be asking yourself is whether the proceeds from the sale will be sufficient to meet your future expenses, or the future expenses of your family in your absence. 30 years ago, Tom Johnson told me that most every funeral business would be bought and sold multiple times during the next several decades. Obviously, Tom was correct, but that’s not the point. Mr. Johnson created a mental picture of a business that could take advantage of that information and it made him extremely successful. You, as an owner, can create the business you and/or your family need to sell in the future to create generational wealth. You can do this by taking advantage of the opportunities that occur in every market. The coming recession will create many, possibly thousands, of acquisition opportunities as smaller volume firms are challenged. It is extremely likely that some of these under-performing operations could become successful branches for a firm with a stronger brand, trained staff, and financial resources to upgrade facilities. Many of these firms will sell for not much more than property value. Consolidators, both larger and small, look for firms that have strategically positioned themselves in the market; in other words, they look for businesses that have done the heavy lifting to create the synergies the consolidator will naturally do after they purchase your firm. The investments you make in your business get rewarded financially on the day the business sells. So, what are the investments? As indicated above, the first is growing your business to a citywide, or regional provider. But there are other opportunities: look at what the consolidators have paid premium multiples for to identify their priorities: they are looking for add on profits. Certainly, every firm seeks greater volume, but even more important is greater market share and profitability.
- Nearly every consolidator, from Arbor, Park Lawn, and SCI, has invested in reception rooms. Families appreciate the benefits of an on-site reception service, particularly cremation families. Yes, reception rooms require an investment, but if you continue to have a casket selection room, you can accomplish the same digitally, and convert the room for receptions. Once a caterer(s) is selected, providing a reception is no more difficult than ordering a vault placement and bussers to bus the room, which is included in your reception room charge.
- Cremation businesses, augmented with an ecommerce cremation arrangement website. Large corporations pay a premium for market share as they are confident in their ability to upgrade cremation families; maybe not immediately, but sooner or later the family will want memorials or receptions, and the large consolidators want to be positioned to sell it to them.
- Pet disposition was a questionable business for traditional funeral homes, but many providers have created very profitable secondary businesses that may lead to additional human pre-need and at-need business.
- Cremation niches on funeral home property, or even in the funeral home. Many states allow niches at churches, football stadiums, funeral homes, even small roadside cemeteries. Not legal in every state, which brings us to the issue of antiquated state laws which have been the subject of many previous articles.
- Diversify your clientele. Segregation has a long history in traditional Funeral service. It served a purpose when the nation was ethnically divided, and many firms were founded upon a particular ethnic or religious group’s tradition. And, of course, these ethnic based firms continue to exist, but many of them are smaller volume firms, many of which do a poor job of serving their specific community either through exploitive pricing, poor service, neglected facilities, etc. Again, looking at what the consolidators have paid premium multiples for, many of the largest sales have been to businesses with branches that serve ethnic communities; IE: Hispanic, Italians, Greeks, African American, Jewish, Asian, etc.
- Advertising strategy to position the firm as specialists in serving veterans. Amazingly, few firms located near, or relatively close to national cemeteries, position themselves as the firm specializing in veteran services. Many veterans select cremation even though they would prefer burial, but they or their family are ignorant of the benefits of burial in a national cemetery. Advertising programs exist to position your firm to capture that business.
- An in-house florist display will keep floral orders in your business, and your website can promote your in-house florist.
The most common excuse for not moving a business forward is that it’s all you can do to accomplish your current job, which is likely true. Given the job you have assigned to yourself, it is unlikely you could do more. The objective is to promote yourself to a bigger job by becoming a bigger business. Yes, there is risk, but it is manageable risk. Each of the above listed business building options have proven successful for other businesses. Start with the strategy requiring the least staff and offering the most success with the lowest investment. A cremation arrangement website can generate anywhere from 100 to 1000 cases annually and the only promotion cost is pay per click. As the business grows, you will add one or two first call drivers and a crematory (assuming state law allows) and a crematory operator.
What makes this decision difficult is the lack of commitment to grow your business. It’s much easier to continue keeping the job you have and kid yourself that the business will never sell. Someone in the near future will be selling your funeral home; the only question is who will benefit and will it generate sufficient funds to meet your family’s needs. Have questions or want to learn more? Contact the JCG team today!
Written by: MKJ Marketing