It’s not just the big guys making acquisitions

March 17, 2023/Business, Finance/

As small town funeral home operators we many times look at the acquisitions of the big public companies or the regional consolidators with a little envy about being able to do that ourselves. We look at how they get faster growth and more revenue and in many instances we know that we would like to have those attributes in our business too.

However, most of the time, small operators sit on the sidelines and watch those consolidators come in and scoop up potential acquisitions of ours. . . many times before us small operators even know the firm might be on the market. Many times that problem of not having that “potential purchase knowledge” is simply a consequence of taking care of business in our own neighborhood and not getting out and around to know what is happening.

I know because I was one of those operators and only really knew about acquisitions if somebody told me about them. Over the years I missed a couple of potential “bolt-on” additions in our geographic neighborhood that would have been good for us. One of my friends who has purchased about five or six geographically proximate funeral homes in the past several years has gotten a leg up on the bigger consolidators by taking a day a month and driving around to just visit with those potential acquisition firms. He becomes friends with the owners and lets them know if they ever think about selling. . . he would be interested in buying.

That’s something that you can probably be able to fit in your schedule and it will help in making the connections for when those funeral homes do hit the market. And, I’m of the belief that, more and more, family funeral homes will be hitting the sales market as time moves forward.

Tom Anderson
Funeral Director Daily

I also think that moving forward in the death care business by getting larger via acquisitions may not only be a luxury, but it may become a necessity. As traditional funeral homes become increasingly less reliant on traditional funerals they will move into a cremation and service model where revenue per case may be less than it is today.

One avenue for combating lower revenue per service and raising gross revenue is simply to do more services. And, that is most easily accomplished by acquiring another facility and then being able to use economies of scale to build better margins per service.

Another sometimes not as apparent result of acquisition and economies of scale is the ability to get more funeral directors on your payroll, especially if the funeral homes can serve the same death call geographic area. For instance if you have three directors at your firm those directors are probably on night call every third night — that just makes sense.

However, if you purchase a funeral home in your area with two funeral directors employed there you may be able to combine “on-call” hours between both funeral homes. That would allow you to have your funeral directors on call every fifth night instead of every third night. I guarantee you that if you can do something like that with your personnel they will be very happy and do every thing in their power to make sure you get enough calls to keep the schedule that way.

Quite frankly, I found that keeping funeral directors happy because of better scheduling was a big plus in an acquisition. Many times they were willing to be more time efficient during the scheduled day time if they were rewarded with less “on-call” time.

Here’s a couple of news items I recently found that gives proof to some of these smaller operators making “bolt-on” additions that I’m guessing will give them more efficiencies. . . and profits. . . in the future.