5 Issues to Consider When Buying Another Funeral Home

In last week’s newsletter, I discussed my take on acquisitions in the funeral industry and then provided three tips for selling your funeral home. If you missed that newsletter, here’s the link.

This week, I’ll discuss some issues to keep in mind if you are considering acquiring other funeral homes. First, a little background…

Most of my clients have multiple locations. In almost every case, they’ve expanded beyond their first location by acquiring another funeral home.

Some of the acquisitions were a great strategic move, and the newly combined funeral home business thrived.

Some of the acquisitions turned out to be complete disasters. My clients felt like they’d bought a used car that someone had beat the heck out of, rolled back the speedometer, and suckered them into the deal.

If you are a funeral business builder interested in acquiring another funeral home, here are five issues you should consider before closing the deal.

Issue #1 – Consider distances

My first funeral home client had two locations in the same county, roughly 15 miles apart. But they also had two other funeral homes in neighboring communities sixty miles from their main office. That turned out to be one of the complete disasters I mentioned above.

Like most funeral home owners, my client struggled to retain good staff. Finding good office staff in a small town was hard, and Funeral Directors would last about six months and then move on.

As a result, the owners had to take turns driving back and forth to their remote locations, working visitations, meeting with families, and running funerals. A sixty-mile drive home after working an evening visitation and returning the next morning to run the funeral was exhausting. It wasn’t long before they sold those locations at a loss.

Always consider the distance from your main location when acquiring another funeral home. Managing the operation, sharing staff, or taking advantage of centralizing administration and body preparation will only be possible if it’s a reasonable commute.

2 – Don’t overpay for a wounded brand

A common practice in the funeral industry is to acquire another funeral home and then combine the names. For example, if Smith Funeral Home buys Jones Funeral Home, they might decide to rename the Jones Funeral Home to Jones-Smith or Smith-Jones.

That makes sense if the Jones brand had a lot of loyal families and you are hoping to retain their business. But in most cases, the Jones family hasn’t owned the funeral home for years, and their number of loyal families has been declining for a long time.

It’s important to understand that the Silent and GI generations were loyal to local businesses, and a family name was the best brand you could have. But Baby Boomers have very little brand loyalty unless you’re looking at a huge brand like Disney or Costco.

In today’s market, paying for a wounded brand with a declining number of loyal families can be a costly mistake.

3 – Have a marketing campaign ready to roll out on day one

At least once a year, I get a call from a funeral home owner who recently acquired another location and needs help bringing in more calls. In most cases, they have a tiny budget because they spent all their cash reserves on the acquisition and facility upgrades. Unfortunately, there’s not much I can do to help someone who has no money.

The budget for a marketing campaign has two components, design and implementation. The design is typically in the $10k to $20k range, whereas the implementation can cost a lot more depending on what media companies charge in your market.

I recommend designing your marketing campaign before the acquisition goes through and then bundling the implementation budget into the acquisition financing. For example, if your purchase price is $1M and the marketing campaign implementation will cost $100k, then finance the total amount of $1.1M.

4 – There’s value in the list

A customer list is one of the most important assets any business can have these days. You should have the names, mailing addresses, and email addresses of every family you’ve ever served. You should also collect the contact information of every call you didn’t win.

Why? Because it’s far cheaper to market to someone when you have a list.

If you’re considering acquiring another funeral home, ask if they have a list. If they do, you can use direct mail or an email campaign to connect with past families.

Remember, family loyalty is in decline. But if you have a list, you can contact them and start building new relationships.

If the firm you’re considering acquiring doesn’t have a list and instead points you to a stack of old case files, you may want to factor that into your purchase price.

5 – Consider starting fresh rather than acquiring

My final point for you to consider is whether or not an acquisition is the right decision in the first place. In many situations, you would be better off bringing your current brand into a new community and starting fresh as a new funeral home.

Do the local competitors have excellent customer loyalty? In most cases, the answer is no.

Do the local funeral homes have all the amenities you would want in a funeral home? In most cases, the answer is no.

Rather than spending over $1M acquiring a funeral home business that is in decline, a fresh start is often a better idea.

Lease a one-story building with ample parking, create a better funeral experience for families, and invest in good marketing. You can have a 100-call/year location in no time.

Those are five points to consider if you want to acquire another funeral home.

Just be careful in the acquisition process because there are a lot of funeral home businesses that are similar to used cars. You think you’re buying something dependable, but you’re actually getting a lemon.

Until next time


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