Small volume firms need to know their potential value

October 29, 2025/Business, Finance/

Within the last month Death Care marketing expert Glenn Gould contributed to a Funeral Director Daily article with this comment, “There are too many funeral homes. NFDA estimated 15,500 firms in 2023; 30% do fewer than 100 cases annually’, 68% do fewer than 200. Very small firms should be seeking mergers.”

And then about ten days ago I saw Mr. Gould co-author, with Jake Johnson, an article that appeared in NFDA’s Memorial Business Journal titled, “Why Bundling Devalues Your Exit Strategy“. The article dealt with the realization that for many smaller firms, they may have more to the existing owner value if the real estate was sold separately from the funeral home operating business.

Glenn Gould

Gould and Johnson make several good points including this one, “Many small-volume funeral homes are in highly desirable metro business districts or along main street corridors, making their real estate valuable for various alternate uses.” They also make this point, “. . . small-volume firms might fall below the acquisition thresholds of major consolidators. As a result, these businesses are more likely to be acquired by local competitors or left to wind down. Unfortunately, in these cases, owners often fail to realize the true market value of their business, primarily because the value of the real estate eclipses that of the operation and the two are bundled together in one transaction.”

I think that they are exactly right in their assumptions and it is great advice for selling funeral home operators. They go on to point out that is is also great advice for those funeral business operators buying these businesses. Meaning that the continuing business can, more than likely, increase their profits greatly by consolidating an acquired business into their existing facility rather than operating two separate facilities.

Think about it. . . . you will save by only having one property tax payment instead of two, only one yard and facility to maintain instead of two, only one one utility bill to pay instead of two, having only one receptionist instead of two. . . and on and on. Johnson and Gould also point out that a funeral home’s EBITDA will increase with more calls under one roof and that increase will lead to an increased value of your business. Here’s a chart that they prepared on that based on annual calls under one roof and potential EBITDA and Sale Value:

The two also mention in their article that “The late Tom Johnson (Jake’s father), a pioneer in funeral home consolidation, drove the growth of Pierce Brothers in the 1980s by acquiring funeral businesses without the associated real estate. The goal was simple: Increase case volume without incurring unnecessary capital tied up in property. Between 1980 and 1987, Los Angeles, California, saw a drop in the number of mortuaries from more than 220 to around 180. This model of separating operations from property contributed significantly to the creation of long-term value and scalability.”

Jake Johnson
CEO
Johnson Consulting Group

In a somewhat ironic twist to that statement, Tom Johnson was a mentor of mine and one whom I used as a consultant in my business dealings. In 2006 I had the opportunity to buy out a competitor in my community. When I did the math with two facilities – and the potential acquired facility was on a beautiful stoplight controlled intersection corner in the center of our community – and two staffs, I did not see a great return for the investment I was about to make. However, when I did the pro-forma with buying only the business assets and not the real estate the potential return was enormous. . . . . .if I could continue to do the same numbers for that firm in a different (my existing) location.

Of course, I called Tom Johnson. Tom told me this same Pierce Brothers Los Angeles story. He convinced me that even if I lost some of that firm’s business in a different location the numbers were still very good.

I moved forward only offering to buy the funeral business assets with the caveat that a “deed restriction” prohibiting the use for Death Care purposes, be inserted in the funeral home’s property deed. I never had to deal with the real estate but a beautiful new bank building sits on that piece of property today.

And, you might not believe this, but Gould and Johnson are exactly correct — when I sold seven years later I believe that the investment I put into that acquisition, on its own, returned a 10x increment to me. Going from 225 calls in our existing facility to 325 calls in that same facility overnight greatly increased the EBITDA which in turn greatly increased the business value.

Johnson and Gould also state in their article, “In 2023, NFDA predicted that half of all independent funeral home owners would either sell or retire within five years. Recent years saw acquisitions, but elevated interest rates have cooled activity. With interest rates expected to fall in the coming months, a renewed surge in consolidation is likely.”

So, I would advise, if you are a potential seller make sure you know what the “de-coupled” value of your assets are. . . . . And, if you are a buyer make sure you take a look at how a new acquisition will work out financially in its present facility and how it will work out financially if you only buy the “business assets” and choose to move the business into your existing facility.

And, if you are not a numbers person or simply want some help in figuring this out a call to the good people at Johnson Consulting Group would probably make a lot of sense.

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