Selling a Funeral Business: Keys to Your Success
While you likely know the process of running your funeral home like the back of your hand, the decision to put it on the market should not be made lightly or hastily. You’ll want to consider market conditions, the value of your business, and how long you’re willing to wait before sealing the deal with a buyer.
Once you’ve finally made the decision to sell your business, you’ll want to make sure you’ve got all your ducks in a row. Funeral homes––when sold for a price you like––require careful planning and execution.
Here’s what you need to consider.
The first thing to remember is to give yourself the proper time to prepare. When it comes to funeral businesses, the best time to entertain exit solutions is when it is not imminent. Fire sales, while possible, rarely bode well for the seller, often resulting in getting lower offers than you’d desire. So once you decide you want to sell your funeral business, you should take at least a year or two to build up your business in preparation for the sale.
Market Conditions Play a Role
Let’s assume that your funeral home is running optimally. You have a stellar team, year-over-year growth, and you’ve even got an extensive backlog of pre-need sales; however, if the market isn’t conducive to a sale, you could still lose out. This is why you need to understand the current market conditions.
You’ll need to know who is buying, what they’re willing to spend, and what financing options are available to them. For example, due to low tax implications and people getting a higher value for their business, now is a great time to consider exiting your business.
Covid-19 has negatively impacted the bottom lines of most death care businesses. While it would be tempting to exit during this time, doing so would leave you vulnerable to accepting low valuations. If possible, it’s better to wait until the market recovers, allowing both your business and buyers to recover.
To demonstrate the value of your business to a potential buyer, you’ll need lengthy and detailed accounting records. Remember that buyers and lenders will likely require up to three years of tax returns and audited financial statements. This ensures that the price you put on your business is backed up with detailed numbers.
Remember, cash payments may seem good now, but they make it tricky when trying to sell a business, as they’re difficult to prove during due diligence.
If you haven’t kept detailed records of your expenditures and revenue, it’s time to start. Even if you’re sure that your business is performing well, you’ll need verifiable proof of this to demonstrate this value to a potential buyer. No reputable buyer will make an offer on a funeral business with an unproven track record.
In addition to the revenue generated by at-need services––that is, cremations, burials, and memorial services––you should also take a close look at your pre-need services. Not only can an extensive backlog of pre-need sales demonstrate a diversified revenue stream, but it can also indicate the future potential of your business. This can pay dividends when it comes time to transfer ownership.
No one wants to pay top dollar for a business that needs a ton of repairs upon taking ownership of its facilities. In the same way that selling a home often requires some renovations to outdated furnishings, before you put your funeral business up for sale, you’ll want to make sure your facilities are in tip-top shape–unless you’re willing to accept lower offers.
Lobbies, chapels, offices, and bathrooms should all be up to date and kept in good condition. Additionally, you’ll want to consider any costly features such as the plumbing, cremation implements, and even the funeral home grounds. If you can verifiably assure a buyer that your business and its facilities are turnkey, then you’ll increase the odds of a sale at a price that you like.
The key to selling your funeral business is to tell your story with accurate financial data. Call volume, revenue, and expenses all need to be reported in as much detail as possible. Beyond this, you can also consider telling your story with testimonials from former families. They’ll be able to accurately depict the loyalty to your business and future prospects for a new owner. In most cases, it pays off to seek expert help in these instances.
A company like Johnson Consulting Group can help enhance the way that your funeral business communicates with the families you serve. Not only can they help paint a picture of what your funeral business looks like, but they can also help you figure out which improvements and adjustments need to be made before a sale.
No matter the industry, selling a business is a complex process that can take years. With their team of funeral consultants, accountants, and industry experts, Johnson Consulting Group can guide you through every stage.SELL AT TOP DOLLAR