Selling your funeral home can be emotional, scary, intense, and stressful; however, if you’re looking to retire or simply exit the death care industry, now is a great time to do so. To help you think through the process and come to terms with selling your funeral home, we’ve compiled the five most common questions from owners about selling their funeral businesses.
Is now the right time to sell my funeral home?
When selling a business, you should always consider the current market conditions and whether or not it’s best to sell now or at a later date. Luckily, now is a great time to sell your business, funeral or otherwise.
The House Ways and Means Committee may shortly release a $3.5 trillion social policy bill, one that will likely raise taxes on the wealthy and beneficiaries of capital gains. While the exact specifics remain a mystery, some experts predict that the tax rate on capital gains could nearly double to 39.6%. Regardless, an increase is likely imminent, making it a prudent idea for potential sellers to begin the process immediately.
What are the multiples being paid?
Before selling your funeral home, you should consider the multiples, not only those of your business but also those of businesses that have recently sold. Multiples, a metric of a company’s financial wellbeing, can give you an idea of what similar businesses are currently selling for. While there are several different ways of calculating this metric, funeral businesses are generally calculated by dividing the enterprise value of the business by its earnings before interest, taxes, depreciation, and amortization (EBITDA).
Currently, funeral home multiples are very competitive and fairly high, meaning you should expect some decent offers when selling your business. With that said, multiples will vary based on the dynamics and circumstances.
Are there a lot of buyers out there?
If you’re wondering who might want to buy your funeral home, rest assured that there is always a market for these types of businesses, including corporations, regional buyers, and even private buyers. In 2020, even in the wake of a pandemic, the funeral home industry earned $16.1 billion in revenue.
If, however, you’re concerned about differentiating your funeral business from others, consider the following:
- Get a professional valuation: Obtaining a professional third-party valuation of your funeral business can help impart to a buyer the objective value of your business. Consider making small updates to your facilities to help increase the numbers in this valuation.
- Review your financial statements: Even with a valuation, a potential buyer will want to see years of financial statements related to profits, losses, and operating expenses. Be sure to consult with your accountant so that you’ll have these documents readily accessible in sales talks.
- Increase your preneed sales: One of the best ways to demonstrate the longevity and potential of your funeral business is with a fleshed-out portfolio of preneed sales. Before putting your business up for sale, consider focusing on this aspect of your business to show buyers that they would already be set up with future business.
Did you know: JCG has the largest buyers list in the profession? Contact us to learn more about it.
Is it difficult for buyers to get financing?
Buyers will rarely purchase a funeral home with cash, making it important to consider the ease with which they can obtain financing to purchase your funeral business. Luckily, financing is currently favorable for buyers. Generally speaking, interest rates are low, and financing terms are favorable for buyers, though naturally, this will all depend upon the strength of the buyer and the profitability of your business.
Small Business Administration (SBA) loans are one of the most common ways with which people purchase funeral businesses––SBA 7(a) loans being a particularly ideal way. Currently, with SBA’s new business acquisition policy, those looking to purchase a funeral home can be eligible for financing with 5% down, up to 90% financing, and a 5% seller note.
Would the new owner want the existing owner to stay on?
In most cases, a new owner will want a prior owner to assist with a transition and integration period post-closing. When contemplating which type of arrangements to offer, consider how much or little involvement you’d like to have. The goal here is to create a transition plan that meets your needs while ensuring the success of the new owner.
You can start by sharing the news of the acquisition with your team, ideally introducing them to the new owner to begin establishing connections. Take some time to meet with key staff members and answer any questions beforehand, stressing that their jobs are safe, and it’s important for them to work with their new boss.
For the new owner, you’ll want to introduce them to key people such as vendors, suppliers, and even any important clients. Additionally, you’ll want to train them on all processes of the funeral home, allowing them to get a clear picture of how to run the business before they take the reins and make changes to these processes.
Always Have Your Questions Answered
Managing the sale of a funeral home can be an incredibly strenuous process. Not only do you have to keep your business strong, but you also must set aside the time to communicate with potential buyers. One of the best resources to turn to is a firm that specializes in these sorts of transactions––particularly as they relate to the death care industry.
With over $2 billion in closed transactions, Johnson Consulting Group has the financial experience and expertise to help sell your business for the best possible terms. Normally, accounting, loans, valuations, and connecting with buyers all require separate teams; however, Johnson Consulting Group offers all of these services under one roof. What’s more, they specialize in the funeral industry, allowing them to better assess and meet the needs of funeral directors.
If you’re looking to sell your funeral business or to start exploring the process, Johnson Consulting Group can help you get it done.
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