Are you thinking about buying a funeral home? It’s a big decision, full of excitement and new adventures but there can also be complications and unforeseen obstacles. It’s also tricky to determine if the timing is right to enter the funeral market. Some buyers forge ahead quickly to take advantage of the favorable conditions, while others plan carefully and triple-check all the details before making a move. Whether your plan is to own one or ten funeral homes in the future, here are a few things you should consider before you buy a funeral business.
In the current pandemic environment, it’s increasingly clear that certain long-term plans are no longer strategically viable. To weather the economic challenges brought on by COVID-19, many business owners have had to pivot from long-haul strategic plans to short-term goals that are more flexible in nature. As the saying goes, “Change is the only constant in life,” and the funeral profession has experienced significant change over the past few years (even before coronavirus was a thing). So if you are in the market to buy, do your due diligence and research market trends so you can readily adapt your purchase plans if necessary.
Keep Up with Market Trends
Keeping up with market trends is an important task for any business owner. Identifying and understanding the factors that cause market changes can help your funeral home stay relevant and up-to-date with new products and services. Staying in front of trends can also generate brand loyalty and improve profitability in the long run. Some recent business trends funeral home professionals should be following include:
Fewer Full-Service Funerals/Cremations
Starting in March 2020, many families were unable to hold visitations or funeral services for their loved ones due to COVID restrictions on public gatherings and strict social distancing guidelines. Some families postponed their plans for a full-service funeral to a later date, or opted for a graveside service or direct burial/cremation. This “put off until later” trend may be temporary for now, but it’s likely that some families will continue to choose limited arrangements going forward.
The Rise of Technology
Many funeral homes scrambled to provide virtual arrangements, live-streamed funerals and memorial websites to meet customer demand, and firms that were able to offer convenient online service options handily beat the competition. User-friendly technology is simply a “must-have” for funeral and cemetery businesses in today’s market, and making the right tech investment is key to maintaining productivity.
Changing Target Audience Dynamics
The coronavirus health crisis has brought mortality to the forefront. Millennials and younger generations are now more aware that tomorrow is not promised, and this realization may lead to an increase in demand for funeral pre-planning services and preneed arrangements.
Low Interest Rates
Money is cheap thanks to current low interest rates, and this is good for both buyers and sellers. Low interest rates give buyers greater purchasing power as they can obtain loans with favorable terms in a competitive lending market. Sellers also benefit because low rates mean there is a greater pool of potential buyers who can afford to purchase their property.
Is it a Buyer’s Market or a Seller’s Market?
Another important consideration for those getting into the funeral profession is whether it’s a buyer’s market or seller’s market. The answer to this question depends on supply and demand (although sometimes pure luck can be a factor in the equation), but it’s not always easy to figure out how the market moves.
Some experts say it is currently a buyer’s market, as the pandemic crisis has negatively affected profits for certain funeral homes which could mean lower selling prices when put up for sale. Owners in the 55+ age bracket may be more willing to accept a quick sale because they don’t have the energy to face another COVID-like disaster and are not adequately prepared for a transition. “Fewer and fewer owners have the next generation involved in the business which means there is not an automatic succession plan in place,” says Bob Ekins, Director of Business Development at Johnson Consulting Group (JCG).
Ekins notes that the present funeral home market can also be viewed as a seller’s market. “In addition to money being readily available for buyers, today’s sellers are reaping the benefits of the ever-increasing competition amongst the local, regional and national companies all looking to add additional revenue and cash flow.”
Both Markets Reign
Jake Johnson, President & Chief Executive Office of JCG, believes it is both a buyer’s and a seller’s market. “There are investors out there looking to diversify in the funeral profession. So it is a seller’s market if you have your financials in order to show the investor that your business is a smart investment. If you have a succession plan in place and you know how to treat your employees, you’ll sell even better.”
“For the buyer’s the opportunities come from the people,” Johnson continues. “This is an especially good opportunity when the seller isn’t fully educated on the market and the buying and selling process. This is why having a business broker is beneficial. When there isn’t a clear understanding of current financials they often sell for less. As a buyer, you’re in a good place when you have options and many businesses to choose from, and there are plenty of businesses for sale right now.”
Ask the Experts
Johnson Consulting Group specializes in funeral home and cemetery acquisitions. Our experts can help you navigate the market and identify the best options to provide maximum return on your investment. To learn more, please contact us today for a free consultation.