Selling your funeral home or cemetery is a monumental decision. The timing must be optimal to ensure maximum value. This means taking a closer look at the market, examining the financial outlook of your business, and planning the finer points of your exit strategy.
While each of these aspects fluctuates over time, keeping track of their statuses will position you for a favorable sale. Start by asking yourself the following questions.
What Does the Market Look Like?
When looking to sell your funeral business, your first consideration should be the overall state of the market and economy. For example, during the pandemic, some considered selling their funeral home or cemetery and exit the industry altogether; however, in some cases, selling a business during a period in which profits may have been unstable or difficult to determine, could cause a business owner to accept a price that was less than they could have yielded under a different environment.
Currently, with the American economy rebounding and in-person gatherings once again being safe, the market has been very favorable to those looking to sell a business.
Examine Your Position in the Market
Unless you’re the sole funeral home in the region, your position in the market in relation to your competition will also play a role in determining the value of your business. If your market share and stability in the market is better and holds other advantages such as on-site cremation facilities, staffing, etc…–then your business will garner a better price.
Conclusion: A big part of selling your funeral home will be to demonstrate how it is positioned to thrive against other funeral homes. The more opportunity and less risk, the better the value.
Are Your Valuations Where You Want Them to Be?
Ultimately, the market conditions will weigh heavily into the value of your funeral home. While the value of your business can fluctuate–both from internal workings and outside conditions–by learning the current value of your funeral home, you’ll get a rough idea of how much it may sell for today.
One of the most common challenges of selling a funeral business is when you are confronted with the reality of a low value that does not satisfy your retirement. This is why it’s important to obtain a valuation long before you plan to sell. While a low valuation immediately before your exit leaves you little room to adapt, one conducted long before your planned exit gives you the chance to correct course and increase the value of your business.
What Do Taxes Look Like?
To determine the ideal time to sell your funeral home, you’ll also want to look at the broader picture in terms of taxation. While we’re all familiar with yearly income taxes, many are surprised by the taxation surrounding the sale of a business, that is, capital gains taxes.
When selling a funeral home, you’ll encounter three primary tax-related issues:
- If proceeds from your sale are taxed as income or capital gains
- Whether your sale is an all-cash deal or one that requires payment installations
- What is the impact of the depreciation recapture tax
Making matters more complicated, the tax code is always subject to change. There are always fluctuations and considered changes to the long-term capital gains and income tax rate. Because funeral homes tend to be longstanding institutions, the entailed capital gains can be huge, therefore, it would behoove any funeral director approaching retirement to consider the impact of these taxes.
Naturally, rising taxes do not mean every funeral director should jump ship; rather, it indicates the importance of considering taxes when exploring a sale. Doing so can help you determine the ideal time to put your funeral home on the market. After all, we like to say that we not only specialize in maximizing what you get, BUT also what you keep!
Life After the Deal?
Whether you are passing down the business to a family member/key employee or selling it to an outside buyer, you’ll want to train them in the inner workings of your funeral operations and market. In some cases, these transition periods can last for months, and they usually require the prior owner to stay on in some sort of capacity. While the particulars of this agreement will vary by the buyer, you’ll want to consider the broad strokes of your exit strategy. Make sure to consider:
- If and how you’ll continue to make money after your departure.
- What will happen to the business once you’ve left.
- How long you will ideally assist the new owner.
- What benefits would you like to still have if possible.
Get the Answers You Need
For all of these questions, it’s important to have solid answers to truly know if it’s the right time to put your funeral home or cemetery up for sale. But the answers to these questions can be hard to pin down. Planning to sell your funeral business is a tough topic to tackle alone, and it requires an in-depth understanding of succession planning, valuation, and deal negotiating. In all cases, it’s best to have the support of experts.
The team at Johnson Consulting Group has all the skills and experience needed to help you decide if selling your funeral home or cemetery now is the right move. From consulting to valuation and financial management, our varied professionals will help your business prepare for an eventual sale and plan for your future.
Additionally, our in-house brokerage team will maximize the your value, negotiate the terms of a sale, and assist in minimizing the taxes you will have to pay.The team at Johnson Consulting Group specializes in the death care profession, meaning we understand the intricacies of your funeral business and exactly what it takes to sell it successfully.
Get all the Answers