Quick, substantial volume growth? Acquire your competitor

Funeral Director Daily published an article last Friday about the number of, or lack of,  funeral directors in the field and one of our thought processes during that article was that it is apparent that many rural funeral homes have a difficult time in acquiring the professional help necessary to operate their businesses.  Part of the reasoning behind that is that it appears that younger funeral directors are somewhat more  reluctant to have a heavy “on call” schedule than older and more experienced funeral directors have been in the past.

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It was also suggested that consolidation of the rural operating funeral homes may help with that situation.

One of the growing trends that I have seen over the past couple of years is that one funeral home in a rural community acquires its competitor when that competitor wants to retire.  To be fair, I’ve also seen two funeral homes simply merge into one funeral home or at least announce that situation while not elaborating on the ownership of the “new” company.

This recent article from the Merrill Foto News of Wisconsin is the latest article that I’ve seen announcing two local funeral homes joining forces.  It provides news of Waid Funeral and Cremation Service and Taylor-Stine Funeral & Cremation uniting under a regional ownership group and being rebranded as Taylor-Stine-Waid Funeral & Cremation.

In this case, according to the article, the company will operate from both current facilities giving consumers a choice of where they prefer to be served.  According to the news article, “The combined staff will work across both locations, ensuring continuity and support for families at every step. This collaborative approach enhances service options while upholding the personal and compassionate care that has defined both businesses for many years”.

Here is the website for Taylor-Stine-Waid Funeral & Cremation

Tom Anderson
Funeral Director Daily

Funeral Director Daily take:  According to data from the National Funeral Directors Association (NFDA) this article from the Carolina News & Reporter states that more than 60% of current United States funeral home owners have plans to retire by 2029.  If that is truly the case there is a window for these types of “same market” acquisitions to be consummated.

Some times competitor acquisitions are tough to approach because of the competitive nature that some funeral home owners have about their business.  However, if you can look by that competitive nature to have a discussion with a competitor it could work out best for both of you.

For the acquiring owner you now have two facilities and more staff to cover nights and weekends. . . meaning that each staff member probably has to do that duty less.  i.e. if the two funeral homes had 3 funeral directors each they were each on call every 3rd night.  After an acquisition, if you kept the same number of staff they would be on call, theoretically. only every 6th night.  That should help in retaining staff.

Or, it could be that one director leaves or retires and you have only five directors — which you deem acceptable to cover the business of the combined firms.  The directors come out better with being on every 5th night instead of every 3rd night and the new ownership is now paying salary and benefits for 5 funeral directors instead of 6 funeral directors. . . . bringing the additional salary to the bottom line which can help with acquisition costs.

Finally, the selling or retiring owner may come out better as well because a “same market” buyer has the ability to make use of the economies-of -scale as suggested in the salary savings from the preceding paragraph.  Dependent on the situation, the acquiring funeral home may be able to get economies-of-scale savings on facilities, auto fleet, contracted services such as accounting, and clerical help as well.  That potential savings may allow the acquiring funeral director to offer a higher price to the selling owner than an out-of-market buyer could pay.

I made a “same-market” acquisition at one time that worked out very well for me and I believe it worked out very well for the seller as well.  I was competitive back in my funeral home days and over the years when I approached the potential seller it did not get very far.  However, a 3rd party eventually approached him also and then brought the deal to me which got worked out with the seller’s blessing.

If you are in this type of acquisition mode and don’t think you can approach your competitor, do you have a 3rd party that might be able to do it for you?

Here’s another acquisition report — “Olney, Foust purchase Switzer Funeral Home”.  The Bradford Era (PA)

Olney-Foust Funeral Homes & Crematory website

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