Success Factors When Buying a Funeral Home
After working with funeral home transactions for a long time—on both the buy side and the sell side—some characteristics of successful purchases stand out. If you pay attention to these critical factors you’ll improve the probability of a successful purchase.
Fire in the belly
Not all potential buyers are cut out for business ownership. Buyers who eventually succeed have a detectable enthusiasm, a sparkle. They don’t dwell on challenges and problems. They have a quiet confidence, the right attention to detail, the determination. Only you can answer the question: “Do I have what it takes?”
Package yourself and your financing for maximum effect
You will want to buy the biggest business you can afford for a simple reason. It will give you a bigger base to grow from. Finding a loan with a lower interest rate and a longer term means that with the same payment you can buy a bigger business.
Assume there are skeletons in the closet
Look past the seller's story; they are putting their best foot forward. Dig underneath into the financials and the operation. Fully investigate the business.
It's ok to pay a fair price for a good business
This is no time to gloss over defects and look for bargains. You are going to live with the business for a long time, so buy one that is healthy and thriving. It’s like the proverb says: “If you buy quality, you only cry once.”
Find the right ally to get your financing
The market for funeral home business loans is thin. Banks that are inexperienced with funeral home business loans may not understand your business and structure debt that the business can’t support. Banks or non-bank lenders may take advantage of your inexperience and burden you with above-market rates or terms. In either case, this is a time to have someone sophisticated in lending practices on your side.
You are buying a stream of earnings
Financially, a funeral home is an asset that is capable of generating a stream of earnings and cash. The earnings that the funeral home produces determines the size of your loan and to a great extent the price of the business you will buy.
Manage your attorney's involvement
Your commercial law attorney has an important role in advising and preparing the legal structure of the business purchase and sale transaction. But problems arise if the attorneys see themselves as business negotiators whose goal is to get the “best deal” for their clients. They may forget that the “best deal” is one that both the buyer and the seller can live with, a deal that will enable the business to survive and thrive after the transaction. In their enthusiasm they may not remember that deals are forged in compromise. Keep in mind, if a deal becomes too lopsided, it will likely result in no deal at all.
Closing the deal is hard
It should be easy, but it’s not. After all, the hard work is done—valuations, investigations, and negotiations are complete. Now it's just a matter of getting it all written down in a form that everyone can live with. Closing is the shortest part of the process. But someone will get cold feet when it's time close. Be ready! Anticipate and be prepared with your attorney and consultant to work through the issues in a logical and reasonable way.
Resist the urge to change the business right away
This company has been working successfully, or you wouldn't have purchased it. Get to know the company and how it works before you start making changes.