Know Your Business, Know Yourself
by Jason Widing
Covid-19 sent shockwaves throughout the funeral industry. The day-to-day policies and practices that comprise “business as usual” may never be the same. For many independent funeral business owners, 2021 is the year to move on—to pass their businesses on to the next generation or put them up for sale.
The key to successful succession planning is to start early. Whether they choose to slow down, retire or sell their businesses, the sooner owners chart their course the more likely they will reach their destinations.
In Business Since 1942
Marc & Janice Brusie of Brusie Funeral Homes and Cemeteries did their home-work. After three generations of funeral home ownership, the Brusies know the importance of planning ahead—especially for the future of their business.
Chico, California-based Brusie Funeral Homes and Cemeteries was founded in 1942 by Warren Pope Brusie and his wife, Helen. Their son, Warren Albert Brusie, took over the firm in 1970 and his son, Marc, and daughter-in-law, Janice Brusie, still manage the business today.
“We have always known we wanted to sell at some point,” Marc said. “We’ve encouraged our children to pursue their own paths and find careers that suit them best, and they haven’t shown interest in the funeral industry. We also know that the business our family built has grown to the point where it is a lot of hard work to manage and we didn’t want to put that on their shoulders.”
Janice agrees that running a business with five locations is a big responsibility and can be stressful. “We knew we wanted to sell early so we could take a big step back,” she said. “We are in our early 50s and could continue working well into the future, but we wanted to start the process early and are so grateful we did. If you want to get the best price, you have to prep your business and build value. It took us about three to four years to prepare and get our EBITDA up. Just like selling a house, you have to get things in order.”
Marc and Janice also became active in trade organizations to build value and talk to other successful business owners. And they visited other cemeteries and funeral homes to see what they were doing operationally.
The Brusies sold the business to Foundation Partners Group in November 2020 and have stayed on to manage the business as part of the Foundation Partners team.
Changes Sparked by a Pandemic
“I talk with funeral business owners every day and it’s clear that the pandemic put
a tremendous strain on resources, staff-ing, and emotions at many independent firms, said Jason Widing, Foundation Partner Group’s vice president of business development.
“As a result, many of these owners are now exploring succession planning much sooner than they had envisioned. I’m also finding that they welcome a larger operator who can provide staffing, legal, IT and other resources to augment their existing operations,” Jason added.
He believes that owners see an advan-tage to selling their businesses this year after “an unprecedented level” of calls resulting in a strong year end. “While the majority of purchase processes and stan-dards held constant through COVID-19, travel restrictions forced us to become even more efficient, using technology to expedite communications and exchange of large volumes of information electronically,” said Jason. “Industry purchase multiples also have remained relatively constant through-out 2020 and 2021.”
Honoring the Family’s Legacy
With a family history of funeral service that spans nearly 90 years, Michelle Farley Williams and her husband, John, thought long and hard about their succession plan. Farley Funeral Homes and Crematory, with locations in Venice and North Port, FL, is a large and thriving business with an out-standing reputation in their community and the profession.
Attending mortuary school right after high school, Michelle has devoted the past 30 years to the family business. When it came time to consider selling, preserving and honoring her family’s legacy was Michelle’s top priority.
“Our family has always talked about how we would approach the funeral home leaving our hands. We want to continue to be present in our community so we looked for a partner that would make us proud for years to come,” Michelle said.
John, who comes from a background in accounting and corporate finance, joined the business when he and Michelle married nearly 25 years ago. He cited a number of factors impacting their decision to sell.
“Florida is a very progressive market and things are changing,” John said. He could see the writing on the wall as they struggled to invest more into the business to get it to the next level. “We bought the business from Michelle’s family 15 years ago, and since that time, our call volume has nearly doubled and we need to expand. Add to this, the increasing complexity of regulations and the need to provide our employees competitive benefits and opportunities for advancement, and we felt it was time to pass the torch to new leadership that can deliver what our community and our team members are looking for.”
Michelle has remained with the business but is stepping away from the day-to-day operations to serve as a brand ambassador in the community. And John has joined the Foundation Partners team as director of cemetery strategy, overseeing cemetery development across the company’s entire portfolio.
The Future of Funeral Service
In the following Q&A, Jason Widing shares additional thoughts on the future of funeral and cemetery care as we make our way through this pandemic and what he sees as a continuation of family businesses opting for early retirement.
Have your conversations with business owners changed since the pandemic?
COVID-19 caused all of us to take a real hard look at ourselves and what we want for our futures. The conversations we’re having with today’s owners about where they see themselves in the future of the firm post-acquisition are much more detailed than they were before. What is their transition goal, and why?
Coupled with this conversation, we really want to know how the firm weathered the COVID storm. Did their call volumes and mix change? What technologies did they leverage to continue serving families? And have they emerged from the crisis a stronger, more resilient business?
These types of questions and others provide us with a 360-degree view of the health of the business, the general culture and their ability to adapt in the face of challenges. We find that owners who proactively managed COVID-related challenges and shifted the paradigm on how to serve families are the types of firms that align well with Foundation Partners.
When Foundation Partners looks at potential partners, how important is cremation mix?
A firm’s cremation mix continues to be a key factor for Foundation Partners. Nation-ally, cremations make up 87 percent of our business. Many of the firms we meet are the cremation leaders within their markets. COVID-19 marginally increased the cremation rate for some of these firms given the restrictions around gatherings. We explore these trends across multiple historical years to understand whether new developments were a one-time crisis-induced phenomenon or are sustained business trends.
Do most owners come to the table with a definite plan for themselves post-acquisition?
Generally speaking, I work with three types of owners on a regular basis. The first is owners who are ready to exit the business quickly to enjoy retirement or attend to other personal matters and business interests. The pandemic took its toll on some of these owners, and many are experiencing COVID fatigue. No matter the circumstances, most owners want to see a smooth transition for their business, their staff and their community, and they are willing to stay on short term to help with that transition.
The second type of owner is one who has a clear vision for the future and has experienced rapid growth. This type of owner understands the market and knows how to grow it. They are, however, feeling the strain of rapid growth and lack the resources and/or infrastructure to sustain the pace of growth.
The final type of owner, and the group that makes up about 70 percent of the owners I speak with each year, are owners who are looking to slow down. These owners are not ready to leave the business—they love serving families and their community. However, they would like to handoff the 24/7 burden of ownership, and bring in additional resources to help manage human resources, accounting, legal, facility upkeep, and other day-to-day tasks that are necessary for operations but distract from caring for families.
These owners wish to spend the final phase of their careers focused on the joys of funeral service before they officially retire. COVID-19 has prompted all three types of owners to re-evaluate their situations and many have chosen to accelerate their succession timelines.
Are we seeing any different attitudes in multi-generational firms? Are the children of funeral directors less likely to want to take over the family business?
The generational aspect of funeral service had become a challenge well before COVID-19. More and more next-generation owners do not want to step into the shoes of their parents. Though they are immensely grateful for the sacrifices their parents made over the years, many of them either do not want to take on that responsibility or wish to pursue their own passions.
Adding to this is the fact that the indus-try as a whole is experiencing a shortage of qualified staff and leadership. Many owners, who built their succession plans around a family member or long-term employee tak-ing over the reins, have had to re-evaluate their options.
What are any external factors at play that might impact an owner’s decision to sell over the next 12 months?
If you have been in funeral service long enough, you have learned that the future is uncertain. All anyone can do is live their best life and make the best decisions with the information in front of them today. The current political environment and economic uncertainty absolutely are fueling the desire to sell.
Potentially significant changes to the tax code are on the horizon that could materially impact a seller’s net proceeds. While we don’t pretend to be Washington insiders, we are seeing many sellers who are anxious to take advantage of today’s favorable trans-action environment rather than waiting to see how future taxes and interest rates will impact their businesses.
Any advice for navigating family environments, e.g., talking with children and/or siblings about selling and reaching consensus?
First and foremost, owners need to have the conversation early. It’s important to be honest and open to listening. I grew up in a family business and one of the most difficult conversations I had with my father was the one in which I shared that I did not want to join the family business. We each had the other’s best interest at heart and our relationship is better because of it.
Ask each other what is most important, and why it is important. Remember that family is more important than money. If your wants and needs don’t align, that’s OK; there are other succession options available.
In the past year, what have been the keys to your most successful transactions and what factors caused other deals to fall apart?
Interestingly, most people think that the financial and legal aspects of a deal cause negotiations to fall apart. The fact is, we rarely see a financial or legal hiccup stall our discussions. The sale of a business is an emotional journey for an owner, and those well-earned owner’s emotions often surface during this sensitive process.
Funeral service is not a just a job. For most owners, it’s a lifestyle and their identity. And, for many owners, their funeral homes, their staffs and their communities are their “babies.” A tremendous amount of soul-searching and acceptance go into selling your funeral home. Some owners are not quite ready to take that step, and many don’t know that until they are in the thick of hammering out an agreement … and that’s OK, too.
Owners have to come to terms with their own personal journey. Only they can determine when the time is right. And if or when that time comes, we hope that Foundation Partners will be chosen as their preferred succession partner.
What advice would you give owners looking to sell their funeral service businesses?
In my experience, there are several keys to successful succession planning in today’s environment.
Most importantly, know your numbers and how those numbers sync with your valuation expectations. Make sure you have a good understanding of call volume, business mix, and an accurate view of your financials. Develop your succession plan now and be open to changing it as future developments dictate.
Know what type of owner you are. Are you looking to leave quickly, to transition over a period of time, or do you still want to captain the ship? Have open and honest conversations with the stakeholders within your succession plan so that no one is sur-prised when “the day” comes.
It’s important to take time to reflect on your life of funeral service. Remember the highs and lows, the lives you touched and the individuals who shaped your career. Begin the emotional journey today; only you can determine when the time is right for you and your family.