A majority of funeral home executives believe the merger of industry heavyweights Service Corporation International and Stewart Enterprises, will have a negative effect on the funeral home industry yet a growing number of them are interested in acquiring another firm or expanding organically, according to a news release reporting the results of an annual survey conducted by Citrin Cooperman.
While 63 percent viewed the merger as a negative development, just 11 percent of those surveyed thought the merger was good for the industry; 26 percent felt it would have no effect at all.
These funeral home executives were almost evenly split of the merger’s effect on privately held funeral homes, but apparently they see the benefits of expansion. The number of funeral home owners and directors who said they are considering expanding or an acquisition doubled – from 14 percent in 2012 to 28 percent in this year’s survey. Those interested in selling dropped slightly from last year.
“The gradually improving economy has emboldened some funeral homes to expand their business,” said Ed Horton, partner in charge of Citrin Cooperman’s funeral home practice. “There is also more awareness that consolidation, even on a local level, may be the future of the profession.”
Funeral homes being courted for acquisition should tread carefully considering that close to 40 percent said they don’t know the present value of their funeral home. And of the 60 percent of respondents who said they know the value of their business, almost half haven’t valued their businesses in more than two years and lack a formula for determining it.
There is a dramatic need for succession planning throughout the industry, as most owners have not created an exit strategy, a buy/sell agreement or any plan to transfer ownership. In light of this need, Citrin Cooperman will be hosting a roundtable discussion on succession planning on Monday, Nov. 4, 11 a.m.-1 p.m., at the firm’s New Jersey office on 290 W. Mt. Pleasant Ave., in Livingston. Horton, along with Joe Stefans, from Investors Savings Bank, and attorney Peter Tanella, of Mandelbaum Salsburg, will lead a discussion on how to identify and develop the skills required for funeral home owners to take their businesses to the next generation.
Citrin Cooperman annually surveys funeral home owners and directors. This year’s responses comprised information from more than 200 respondents representing more than 300 funeral homes primarily in New York, New Jersey, Pennsylvania and Connecticut. The survey asked about a range of issues, including topics such as profitability, pricing, new services, merger and acquisition plans, and the use of technology.
In a new topic introduced into this year’s survey, respondents were asked about higher education requirements for funeral directors. A small majority (56 percent) of respondents favor requiring a bachelor degree for those now entering the funeral home industry, citing benefits such as an increase in professionalism and other skills that would make funeral directors more valuable as employees and capable of providing better service to the families they serve.
As in past years, profitability, the continued growth in cremation and the public's increased desire for non-traditional, low-cost funerals are far and away the top concerns for funeral home owners and directors.
Profit margins are being squeezed as average pricing was virtually unchanged for the second year in row, but other costs – including modest salary increases at all levels within funeral homes – have risen. Many respondents are attempting to cut or control costs to enhance profitability; the most common technique is to delay purchase of new vehicles.
“The shift away from full-service funerals is here to stay, and funeral home owners need to create business strategy around this fact,” said Horton. “As death rates remain low and the trend of smaller, non-traditional funerals persists, it will take more cost-cutting in order to remain profitable. Funeral home owners will need to re-evaluate expanded services and create pricing for knowledge-based services.”
The survey results also showed a continued increase in technology usage among funeral home directors; greater acceptance of funeral celebrants and an increase in perceived value of knowledge-based funeral services.
About Citrin Cooperman
Citrin Cooperman is a full-service accounting and consulting firm, providing a range of attest, assurance, tax, business advisory, valuation and forensic accounting services to clients across the globe. Citrin Cooperman has deep experience in a variety of industries, including funeral homes, entertainment, real estate, staffing and executive search, not for profit, architecture and engineering, auto dealerships, franchising and technology. Founded in 1979, Citrin Cooperman is an independent member firm of Moore Stephens.
Posted Oct. 2, 2013